May 4, 2017

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Alternative Crowdfunding with NIN.VC


Alternative Assets are non-traditional investments that would typically not be a part of a standard investment portfolio. Alternatives encompasses a wide range of assets including real estate, commodities, luxury goods such as art & wine, and also includes private equity and venture capital funds. Due to their unconventional nature and valuation of some of these assets, alternatives have been the domain of the wealthy individuals and institutions. The global alternative asset market is approximately $8 trillion and expected to be $14 trillion by 2020, according to PwC. 

However, the alternative industry is reshaping, and with this new sources of capital are emerging. E.g. 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 base 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 2, 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.

NIN.VC is a crowdfunded technology venture capital firm that invests in series A & B rounds of 3D printing, the 4th industrial revolution, cloud computing, financial services, education software, and other disruptive technology companies. NIN.VC is offering membership interests under the JOBS Act & Regulation D of the US Securities Act of 1933. NIN.VC is a unique and first of its kind attempt to bring venture capital retail and give people the freedom to directly invest in a fund with an amount of their choice, which also leads to a better financial reward system. 

This offering is being made via general solicitation and general advertising, which is permitted by Rule 506(c) as contemplated by Title II of the JOBS Act. 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. Learn more about us on Facebook, Twitter, LinkedIn, NIN Ventures TV, etc. 

Crowdfunding is a practice of 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.

Alternatives are high-risk long-term illiquid investments, which are often hard to value, but they tend to generate higher returns, and also have low correlation with other asset class, which helps with portfolio diversification.

01.  Diversification
The market is flooded with number of investment vehicles, including stocks, bonds, mutual funds, IRAs, real estate; and alternatives like private equity and venture capital among others. Most people are short sighted and have a traditional portfolio (i.e. stocks, bonds, and money market) vs. taking a long-term approach and investing in alternatives like venture capital like institutions or sophisticated investors do, which leads to true diversification. 

02.  High Risk – High Reward
Yale is currently the best performing endowment fund in the United States. Since 2008 to 2015, Yale has increased its asset allocation in Private Equity / Venture Capital from 20.2% to 33.0%, out of which 16.3% is venture capital compared to 13.7% in 2014 and just 10% the previous year. Historically, if you look at USVC Index and S&P 500, USVC Index tends to outperform S&P 500 and they also have an inverse relationship, which allows true diversification and also helps mitigate the risk involved in having only a stock-bond portfolio.

03.  Tax & Other Benefits
There are wide range of options when it comes to investing in alternatives. 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.

a. Self-Directed IRA: “Self-Directed” is a descriptive term that is used to describe how some IRA providers administer the assets they hold. With a self-directed IRA, an individual controls what their IRA invests in. Self-directed IRAs allow investors to hold alternative assets within their tax-deferred retirement plan, such as private placements in venture capital. Like any IRA investment, a self-directed IRA has built-in tax-deferred growth, and thus an individual will not pay capital gains tax on the growth of the investment. The return will flow back to the self-directed IRA, and will not be taxable to the account holder. A self-directed IRA allows for true diversification that is otherwise not achievable in a standard IRA portfolio.

b. A Defined Benefit Plan is a retirement plan that can invest in a wide range of securities and investment products, including venture funds.  Some of the advantage of investing from a defined benefit plans are: all contributions made to the plan and subsequently invested are a top-line tax deduction to the business, whether the business structure is a sole-proprietorship, an LLC, an LLP, a P.C., a C-corp., or an S-corp.  The investment growth is tax-deferred under the umbrella of the Defined Benefit Plan. The contributions might be significantly greater than that of a 401(k) Profit Sharing plan to help increase the retirement savings account for the business owner.

c. Digital Currencies are emerging as a new form of alternative payment and a global currency. We understand the significance of this change and thus allow digitial currency owners like Bitcoin, Litecoin & Dogecoin attain liquidity and tap into venture capital by investing in the NIN Ventures Technology (QP) Fund. There are many vendors that accept digital currencies and various places to spend it, but NIN.VC is an opportunity to invest and attain liquidity for digital currency owners that are concerned about currency instability.

 * 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.



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