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 these innovative technologies with business models yield higher returns their limited partners (or investors) require. As these companies grow, they create employment / jobs and the economy prospers. A typical LP base in a venture fund would be institutions, pension funds, endowments, family offices, etc. Alternatively, Crowdfunding allows “accredited investors” to invest in a Venture Fund. However, let’s visualize a future where if Crowdfunding was made available to all and understand the importance for this change?
There are four main pieces in the Venture business: The Fund, the Investors, the GP (or fund manager), and the Entrepreneurs (or Companies). In an ideal scenario where a Crowdfunded Venture Capital Fund is available to all, anyone can invest in a fund with any amount. This gives investors genuine freedom – the ability to pick a fund and also the fund manager(s) of their choice based on their personal investment strategies. This transformative approach will not only prove to be a fair process, but it will also give the investors an opportunity to eliminate the middlemen (E.g. the pension fund managers and their management fees, etc.), which will not only generate higher returns, but also help in taking control of their financial decisions. Direct investing also works in the favor of the GP(s), as it not only provides them with ease of doing business, but also gives them more time to focus on identifying, evaluating, financing, monitoring investments, and maneuvering exits strategies among other things.
Currently, in order to raise a Crowdfunded Venture Capital Fund using general solicitation and general advertising, which is permitted by Rule 506(c) as contemplated by Title II of the JOBS Act & Regulation D of the U.S. Securities Act of 1933, one is restricted to 250 accredited investors and a maximum fund size of $12 million. Other alternative is raising a parallel fund, which doubles cost and the time spent managing multiple funds. E.g. NIN Ventures Technology (QP) Fund. Not only that, the GP is also responsible to make sure, all investors are verified by the issuer who must take reasonable steps to confirm purchasers accredited (SEC.gov | Accredited Investors) investor status. However, an investment in a venture fund is diversified, which makes it less averse compared to other crowdfunding options available in the market currently?
Given the current restrictions, most Crowdfunded Venture Funds are capped at a size where they are restricted to invest in certain sectors that require smaller checks in order for them to maintain a board seat. This also does not align with the current investment trends in the market for 2026, E.g. AI, 3D Printing, Industry 4.0, Robotics, Space Technology, etc., which are high capital-intensive businesses that are reshaping the technological landscape. Restricting innovation and access of good quality deal flow to only traditional venture capital funds, may be in a way doing disservice to the general public or Crowdfunding investors.
When a similar crisis was experienced in 2013, and the JOBS Act was introduced to increase startup funding and employment for better economic growth. However, given the current market sentiments and technological landscape, the flaws, concerns, and red flags raised by Ms. Desai have become more obvious. Follow Ms. Nin Desai on X: "Last time we saw a dip in venture fund raising activity was in 2013. No new funds means less startup funding, low employment, and slow economic growth." / X and stay updated. According to PitchBook, only $45.7 billion was raised by 376 venture funds in Q1-Q3 2025 in the U.S. Read Democratizing VC: Is Now the Time for Crowdfunding 2.0? for more on this topic. Perhaps it’s time to revisit the JOBS Act, its investor eligibility without a minimum investment amount or number of investors to truly democratize venture capital and avoid another financial meltdown in the Economy at the same time?
In a world where 99% of startups fail and in order to save the everyday investor from making more poor investment choices, the laws for the Crowdfunding industry needs to be reevaluated. Freedom comes with a price, but why should only investors pay that price every time? May be its time to put the right kind of pressure on the GPs, by making sure they have the right background or licenses to enter the industry, more skin in the game, increased transparency with frequent audited reports, valuation expectations, and risk assessment. The last piece of this puzzle are the Entrepreneurs. While crowdfunding portals allow direct investment in companies, they often lose out on a qualified candidate when it comes to a board seat, which is one of the key elements when it comes to corporate governance. A larger check can solve this issue and give people a say and confidence they need in order back the right management along with access to good quality deal flow.
While the concerns SEC and other members of the government share still hold valid, it is high time to give Crowdfunding another look. A hybrid model of a Crowdfunded Venture Capital Fund works best in this current economic environment, which gives people the freedom to invest in a fund of their choice with minimum restrictions.
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