Now anyone can invest in a venture capital fund. Or at least anyone who’s an accredited investor.
NIN Ventures is a venture capital fund being raised and managed online. Its minimum threshold for investment is $100,000, which is significantly lower than traditional VC funds.
“I have been working in the private equity and venture capital industry for almost a decade, and during that time I noticed venture capital funds were only accepting investments of at least $5 million, which traditionally came from entities such as endowment funds, large institutions, pension funds, and wealthy individuals,” said founder Nin Desai. “Given the recession, these firms and individuals who were normally willing to write big checks had become increasingly rare.”
NIN Ventures is taking advantage of the JOBS Act rule 506(c) rule that permits businesses and investment vehicles to publicize their fundraising efforts. Any accredited investor can sign up and invest through the site, and the firm will invest in financial services, education software, Internet and digital media, mobile communication, and cloud computing startups. Investors can log in to the site to check quarterly reports.
Desai started her career at Merrill Lynch and went on to work at Alpha Capital Partners. She chairs a Harvard Business School venture capital group in Chicago, where NIN Ventures is based, and is a member of the Illinois Venture Capital Association.
She said her goal is to “lift the curtain” that hid the exclusive venture capital world to the masses and make it easier for people to include venture capital in part of their overall financial portfolio.
NIN is going so far as to promote its firm on billboards and in taxi cab commercials in Chicago.
ff Venture Capital is another firm that decided to take the general solicitation approach and announced in October 2013 that it was taking advantage of the JOBS Act to raise its third fund. ff, however, has a track record and existing portfolio that potential investors can reference to make their decision, unlike NIN.
Venture capital is a highly risky area of investment — the odds make it unlikely you’ll see a return. VC funds have taken some flak over the past decade for underperforming and failing to generate returns for their limited partners. There is a hierarchy within the industry and a majority of VC firms don’t survive past their first fund. Anyone interested in investing in venture capital, or startups for that matter, should be very careful about where they invest their money.
It could be a tough sell getting people to give $100,000 online to an untested VC firm.
However, this is an example of how technology and the JOBS Act have the potential to move venture capital away from being an insidery, old boy’s club industry. Angel investing is becoming more open and transparent through platforms like AngelList and FundersClub. NIN and ff are two of the first examples of how this trend could impact the venture capital world.