Redefining the VC Landscape: How the Fundrise Innovation Fund Empowers Individual Investors

Venture capital and tech investments can often feel intimidating to everyday investors. The success stories of early investments in companies like Apple and Uber draw people in, but venture capital traditionally seems like an exclusive club for elite firms investing in private companies before they go public. Fundrise is looking to shake things up with its “Innovation Fund,” a more accessible fintech model.

In a podcast by Fundrise called “Onward,” CEO Ben Miller explained that venture investors usually gather money from institutions like endowments, pension funds, and family offices. With Fundrise being the largest U.S. asset manager focused on regular consumers, they’ve launched this new fund with a fresh approach. Miller shared that no other venture fund has been backed by thousands or even tens of thousands of individuals, but Fundrise is hoping to change that and open venture investing to a broader audience.

Miller discussed the Innovation Fund on the podcast, exploring the history of venture capital, its current state, and how the Innovation Fund differs from the usual approach to tech investments.

**What is the Fundrise Innovation Fund?**

The Fundrise Innovation Fund is a venture fund designed for private investors, concentrating mainly on fast-growing private tech firms. Sectors like artificial intelligence and machine learning have generally been out of reach for regular investors, mostly benefiting venture capitalists and growth equity firms. Miller believes the Innovation Fund will level the playing field by giving all investors a chance to invest in top private tech firms before they go public.

While the fund focuses on late-stage, pre-IPO companies, it also plans to invest in early-stage startups and some public stocks. Its current portfolio includes well-known names like Uber, along with private software companies like ServiceTitan, Inspectify, and Vanta.

This initiative comes in response to a shift in the behavior of tech firms. Unlike companies like Amazon and Google that went public relatively quickly in past decades, today’s fast-growing tech firms tend to stay private longer—often about ten years. This means individual investors, typically limited to public markets, might miss out on future gains from leading companies in trending fields like AI, data infrastructure, and fintech.

**The Long-term Strategy**

According to Miller, the fund’s long-term strategy is “evergreen,” focusing on consistent growth instead of the short-term risks typically taken by large venture capital firms influenced by their institutional backers. Miller believes in achieving steady returns over time, rather than chasing quick, high profits. He highlights the compounding benefits of sustained returns as more favorable.

**Flipping the Script: The ‘Product-First’ Investment**

The Innovation Fund targets pre-IPO companies with strong growth potential, without being swept up in the industry’s move away from focusing on products. Instead of following the trend where large venture capital firms compete to invest in hot companies—often backed by well-known investors, which inflates valuations and risks investment bubbles—Fundrise takes a different approach. As a tech company itself, Fundrise places importance on product development, using this lens to find and partner with promising tech firms.

**A Democratized Structure and Incentives**

Moving away from the typical venture capital “2 and 20” fee structure, which includes a 2% annual asset management fee plus a 20% take of investor profits, Fundrise’s Innovation Fund doesn’t take a 20% share of profits. Miller argues that if you’re entitled to 20% of the profits, you should also absorb 20% of the losses—anything less encourages risky behaviors without accountability.

Miller points out that having some 350,000 investors and 1.6 million users distinguishes the Fundrise model from traditional venture funds that might have just 20 institutional investors. The focus remains on creating incentives aligned with long-term goals for individual investors, a notable departure from the conventional venture capital framework.