At the end of 2022, Fundrise unveiled its venture capital product, aimed at investing in mid-to-late-stage private tech companies. This move taps into sectors with strong potential like machine learning and artificial intelligence, betting on trends that are expected to grow over the next few decades.
Originally, Fundrise carved its niche in real estate, particularly in Sunbelt single-family and multi-family properties. Their venture into the venture capital space was unexpected given their real estate roots, but after learning more about their strategy, it seems they’re onto something promising.
David Packard of Hewlett-Packard fame once said that companies are more likely to fail from indigestion from too much acquisition than from starvation. This wisdom suggests that over-expanding could dilute a company’s focus, yet Fundrise seems keen on managing this as they step into the venture capital arena.
Here’s why their timing might just be right: After the tech valuation drop in 2022, entering at lower prices could position them well for potential rebounds. This strategic timing aligns with their plan to invest in standout companies at more reasonable valuations—a prudent move in the fluctuating tech market.
Historically, the most successful venture capitalists were builders themselves, bringing a practical perspective to their investments. Fundrise’s CEO Ben Miller argues that this builder’s insight gives them an edge, as they operate both as entrepreneurs and investors. This dual insight could be particularly beneficial in a field where many venture capitalists might lack hands-on building experience.
Another notable advantage for Fundrise is their substantial product engineering department. With about 100 engineers, they aren’t just a real estate platform but a tech-savvy operator too. This depth in technology could give them a unique perspective and advantage over traditional venture capital firms that might not have as much direct tech experience.
Their venture product, an evergreen fund, is designed to be a continuous capital pool, avoiding the traditional venture cycle of raising and closing funds within set periods. This model might allow them to make more sustained investments in tech over time without the pressure of short investment cycles.
Fundrise also aims to democratize access to venture capital investments. Typically, such investments might require significant initial capital and connections. However, Fundrise offers entry at a minimum of $10, opening up opportunities to a broader audience without the usual barriers.
In conclusion, while Fundrise is diversifying from its real estate roots into tech venture capital, they bring a builder’s insight and a robust tech infrastructure to their new venture. This could well position them to capitalize on emerging tech trends more effectively than traditional venture funds.
