I recently had a chat with Ben Miller, the big boss at Fundrise, about their Innovation Fund’s latest investments in private AI companies. Since they started this venture capital fund in the second half of 2022, they’ve been making some exciting AI investments that I was itching to know more about. The timing was perfect for investing in private AI companies in 2022.
But here’s the thing: investing in private AI companies isn’t a walk in the park. You need two things: enough money to meet the minimum investment amount and a personal connection that can get you in the door. Not everyone has both of these at the same time.
Take me, for example. I wanted to invest in Anthropic’s latest funding round, which closed in February 2024, but the minimum investment was a whopping $100,000. I didn’t have that kind of money just lying around, especially after buying a house in cash in October 2023. With all the new expenses, unexpected capital calls, and taxes, I could only afford to invest up to $50,000, and ideally only $25,000.
My goal is to build up $500,000 of exposure to private AI companies over the next three years. But putting $100,000 in just one company? That’s too risky for me. What if Anthropic ends up being the Lyft of ridesharing, while OpenAI becomes the Uber, the top dog?
I knew about the $100,000 minimum because a fellow parent told me he invested and could introduce me to a partner at Menlo Ventures, the VC leading the round. So, I had the connections, but not the capital. Talk about frustrating!
But then I realized there was an easier way to invest in Anthropic and other AI companies, without the hefty fees that traditional VCs charge. The Innovation Fund, with its diverse AI investments and lower fees, was the answer.
I’ve used Anthropic’s AI to help edit my posts, including this one, which has really boosted my productivity. Now my usual editors – my dad and wife – are kind of out of a job! But that’s okay. My dad was struggling to keep up with my posting schedule, and my wife is busy finishing up my second book, which is set to be published by Portfolio Penguin in Spring 2025.
Plus, investing in a venture capital fund is better than investing in individual private companies, based on my 20+ years of experience. It offers more diversification, better upside, and stronger downside protection. And I don’t have to deal with another K-1 at tax time.
When I talked to Ben Miller, I found out that over 90% of the Innovation Fund’s portfolio is invested in AI to some degree. This includes investments in large language models, data infrastructure companies, and firms using AI to improve their products.
Looking at the Innovation Fund’s holdings, I think several of the investments will eventually go public, which would be great for shareholders. Companies like Canva, Databricks, and ServiceTitan seem ready to go public within the next year or two.
Being able to see what a fund is holding and make predictions about the future of these holdings is a big advantage.
When you invest in a traditional closed-end venture capital fund, you usually have to commit at least $100,000 – $250,000, without knowing the specific investments the fund will make. You’re basically putting all your trust in the fund’s ability to find good deals, if you can even get into the fund in the first place. The Innovation Fund is different. Investors can review most of its private company investments before deciding how much to invest.
This more transparent model gives individuals more information before they commit their money. And if the existing holdings are valued at levels since the last fund raise, but there’s a good chance these companies could raise a new round of funding or go public at a higher valuation, then that’s even better for investors and future capital distributions.
Being able to see most of the Innovation Fund’s holdings gave me more insight. For example, my tennis rival, who I beat in last year’s 40+ 4.5 playoffs after he rejected me from joining his team, recently joined Canva.
Canva is an online design and visual communication platform that started in Sydney in 2013. They launched Magic Design, an AI-powered design tool where you write a prompt and the tool creates the design for you.
In November 2023, he became Canva’s Head of SOX (Sarbanes-Oxley Act) compliance. SOX compliance is necessary for meeting the financial reporting, information security, and auditing requirements of the SOX Act, which aims to prevent corporate fraud. The main reason a company would need someone in this role is to prepare for going public in the United States.
So, if my detective skills are correct, I think Canva will go public by the end of 2024 with 60% certainty, even though guidance is for 2025 or 2026. And if the company doesn’t go public in 2024, then I think it will by the end of 2025 with an 80% certainty.
I also think the public markets are eager for more AI companies besides the big ones like Microsoft and NVIDIA. So, I think investing before Canva goes public is a smart financial decision.
Plus, I think the market is eager for fast-growing design companies other than Adobe. Adobe tried to buy Figma for $20 billion and failed due to antitrust issues.
Of course, there are no guarantees with investing in risk assets, especially private AI companies. That’s why every investor has to decide on an appropriate asset allocation. Personally, I’m willing to allocate between 10% – 20% of my investable capital in alternative investments, including private investments.
I encourage you to listen to our podcast episode, where I ask Ben about how the fund values its portfolio holdings, where he sees AI going, and more. Maybe you can connect some investment dots too.
If you want to invest in private AI companies, you can explore the Innovation Fund here. Fundrise is a sponsor of Financial Samurai and Financial Samurai is an investor in Fundrise.
