March 24, 2017

Future of Venture Capital: Crowdfunding

3/24/2017

Venture capital provides financing to early stage emerging companies with high growth potential in exchange for equity / an ownership stake. The risks VCs take investing in disruptive technologies or business models yield higher returns their limited partners (or investors) require. Since beginning of the 20th century, venture capital has been the domain of wealthy individuals and families. A typical LP based in a venture fund would be institutions, pension funds, endowments, family offices, etc. 

However, the 2008 Financial Meltdown led to a liquidity crises for entrepreneurs, companies, LPs, & VCs. Fewer IPOs in the market means no exits for VCs, no returns for LPs, and as a result venture funds were on a decline. No new funds means less startup funding, low employment, and slow economic growth. Thus on April 5, 2012 The Jumpstart Our Business Startups Act (the JOBS Act) was introduced which enables crowdfunding for all Americans and that's how NIN Ventures (or NIN.VC) came into existence. 

Crowdfunding is a practice of funding a project or venture by raising contributions from a large number of people, typically via the Internet. Since 2014 the crowdfunding industry has grown from $16 billion to an estimated $34 billion in 2015 and is doubling or more every year, and according to the World Bank estimates, crowdfunding will have a global market of $96 billion by 2025 - 1.8 times today’s global venture capital industry.

Crowdfunding is spread across several types of funding models including rewards, donation, equity, and debt / lending. The two most popular types of crowdfunding methods are Reward and Equity. For rewards based crowdfunding, entrepreneurs pre-sell a product or service to launch a business, and some times even in return for gifts or thank you notes. For equity crowdfunding, the backer receives share of a company, usually in exchange of the money pledged. For NIN Ventures (or NIN.VC), it would be limited partner interest in the NIN Ventures Technology (QP) Fund. To learn more about various crowdfunding models, read Crowdfunding Matrix

However, there is a major flaw with crowdfunding in general and that is what NIN.VC is solving. I come from an entrepreneurial family so I can speak on their behalf. Entrepreneurs are brave and courageous bunch that are determined to change the way an existing industry functions. On that journey they need lot more than just financing. They need guidance or domain expertise, help with PR/marketing, recruiting, viable exit strategy, more often follow up financing, etc., which crowdfunding portals are not able to support.

On the other hand crowdfunding exposed investors to a whole new asset class, which the normal population never had the knowledge or expertise to invest in. About 99% of startups fail, on top of that low minimum investments like $1,000 does not give them a say or a board seat, putting investors at high degree of risk.

At NIN.VC we solved all of those issues. NIN.VC provides diversification, we take board seat on all our investments and lend the necessary support that an entrepreneur needs to build a business, like they would get at a traditional venture capital fund. And are also in a position to gauge and be a part of the valuation process when it comes to addressing dilution and follow up financing rounds. However, the most IMPORTANT part that investors cares about is the ability to direct invest and enjoy direct returns, which is not the case with a traditional venture capital fund.

NIN.VC has the best of both worlds. We’re a hybrid between a traditional venture capital fund and a crowdfunding portal. Another feature that is unique to NIN.VC is transparency. Investors can attend our monthly calls, check our Facebook, Twitter, LinkedIn, NIN Ventures TV, etc. for more recent activities at NIN.VC. 

NIN Ventures is a unique and first of its kind crowdfunded technology venture capital fund to be marketed, raised, managed, and reported online. The General Solicitation and general advertising, under the JOBS act and rule 506 (c) of the US Securities Act made it possible for us to raise this fund. This rule came into effect Sep 23, 2013 and we were the first ones to go live with a website and videos about our fund. NIN Ventures also became the first venture fund to be seen on a billboard, which was followed by in taxi ads and other social media facilitated marketing. 

NIN Ventures Technology (QP) Fund is currently available to "accredited" individuals / firms for a minimum amount of $100,000 using multiple investment options like self-directed IRAs, defined benefit plan, digital currencies (E.g. Bitcoin, Litecoin, Dogecoin), or a regular checking / savings account. NIN Ventures invests in series A & B rounds of 3D printing, the 4th industrial revolution, cloud computing, education software, and other disruptive technology companies.

* An accredited investor is an individual with an income of more than $200,000 per year, or a joint income of $300,000, in each of the last two years and expect to reasonably maintain the same level of income OR have a net worth exceeding $1 million, either individually or jointly with his or her spouse, excluding the primary residence. For an Entity, any trust, with total assets in excess of $5 million qualifies.