Fundrise Targets Tech Startups with $1B VC Fund

Fundrise, the crowdfunded real estate platform, is launching a new $1 billion venture capital growth equity fund that will invest in late-stage tech startups, including proptech. 

Unlike typical VC funds, Fundrise’s new initiative will have a 1.85% flat management fee—VC funds usually require a 2% management fee and a 20% performance fee on profits generated—and it will be an evergreen fund with an indefinite life, allowing investors to come and go as they please, according to a report in TechCrunch. 

Fundrise CEO Ben Miller told TechCrunch that the new growth equity fund will be structured like the company’s real estate investment platform, which allows investments as small as $10. 

The ultra-low investment threshold is much more inclusive than other crowdfunding sites with VC exposure that require investment minimum of $500 or are only available to accredited investors.

According to Miller, the low cost of Fundrise’s offerings is made possible by the platform’s automation of processes including shareholder record-keeping. The crowdsourced real estate investment platform has delivered returns of up to 5% this year, he said.

Washington DC-based Fundrise said all investment decisions for the new VC fund will go through approval by a three-person investment committee composed of Miller, the company’s chief strategy officer and the chief operating officer. Miller told TechCrunch that Fundrise will raise equity for its new $1 billion fund by targeting customers already on the platform as well as new users.

Miller expressed confidence that now is an “ideal” time to launch the new Fundrise VC equity fund because many startups are “desperately in need of capital” as VC dealmaking has slowed in anticipation of a recession.

Several large players in the VC sector, including Sequoia Capital and Y Combinator have been signaling companies that an economic slowdown may tighten the spigot on the flow of venture capital to tech startups.

“I do feel fortunate that the lapse in the tech market is going to create a better starting place for us. This is a once-in-a-generation opportunity to come in [to the VC market}. If we had been trying to do this in 2021, we couldn’t have broken in,” Miller told TechCrunch.

However, the overall VC funding slowdown has yet to materialize in the proptech space, according to a report this month from the Center for Real Estate Technology & Innovation (CRETI), which said proptech startups grabbed about a quarter of global funding the in the first half of this year, GlobeSt.com reported.

The CRETI report showed proptech companies outperforming other startups in the global venture capital market, garnering more than $13 billion in investments in H1 2022, up 5.65% from H1 2021.

Proptech startups aimed at the residential and industrial sectors received the lion’s share of funding in H1 2022, each getting about a quarter of the total investments, CRETI reported.

An early adopter in the crowdfunding space that debuted in 2012, Fundrise now manages more than $2.8 billion worth of real estate equity on behalf of 300,000 investors. Earlier this year, the platform invested $130 million in Saltbox, a flexible warehousing startup.