Exploring FundersClub. The New Age of VC?

the-crowd-cafeWhat is FundersClub?

FundersClub is an accredited crowdfunding platform live today. The company avoids the term “crowdfunding,” preferring the verbiage, “online venture capital firm.” Or, the new age of VC per say. But hey, let’s not argue semantics. In a nutshell: it’s an online funding platform that allows accredited investors to invest as little as $1,000 in pre-screened tech startups. Investors do not invest directly in the companies, but rather a separately spun off venture fund that’s managed by FundersClub, the only shareholder of record in the transaction. This structure gives investors exposure to the financial upside without inviting the whole party to the company’s cap table.

A couple notables here. (1) Curation. Companies are heavily pre-screened. FundersClub expounds on this, noting it sources deal flow largely from its network of partners, as well as referrals from existing FC companies. (A Y Combinator graduate, most of its early deals have come from this network.) (2) Access. FC’s online platform dramatically reduces the geographic and financial barriers to investing in “silicon valley esque” deal flow. Geographically, investors anywhere in the world can participate. Financially, the price of entry is slashed 80-90% relative to alternative sources startup deal flow, i.e. Angel Groups or VCs where minimum commitments are typically in the range of $25k.  While a moot point for some angels, reducing the minimum financial commitment, in time, could motivate a swath of dormant accredited investors off the sidelines. (The jury’s out on the potential adverse consequences of this.)

Angellist Invest (in beta) also allows accredited investors to invest as little as $1k. CircleUp’s minimum is currently $5k.

Read more at The Crowd Cafe

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