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. As these companies grow, they create employment/jobs, and the economy prospers.
The roots of venture capital trace back to the 18th and 19th centuries, when whaling was the ultimate high-risk, high-reward venture. A single voyage could last three to five years, cost enormous sums to outfit a ship, and face the constant threat of storms, mutiny, or simply returning empty-handed. Tom Nicholas, in his book, VC: An American History, highlights how whaling syndicates operated like today's VC funds, a managing owner (or whaling agent) oversaw operations while passive investors provided the bulk of the capital. Returns could be extraordinary, E.g. Gideon Allen & Son successfully agented, the Milwood, realized a profit in excess of 3,000% from whale oil and bone lighting lamps, and corseting fashion across the world. On the other end, failures were common and catastrophic. This era also established core VC principles of asymmetric risk, portfolio diversification (backing multiple ships), and active involvement in governance.
By the mid-1800s, whaling had peaked and as America's industrial revolution accelerated, informal venture investing evolved. Wealthy families and syndicates funded inventors and entrepreneurs. More players emerged, including J.H. Whitney & Company and the Rockefeller family's Venrock. The true birth of modern venture capital occurred after World War II, when in 1946, Georges Doriot, a Harvard Business School professor and French immigrant, founded the American Research and Development Corporation (ARD).
The 1950s saw further support through the Small Business Investment Act, which encouraged investment in small businesses. California's fertile ground proved especially receptive in what became the Silicon Valley. The late 1970s and 1980s marked a pivotal acceleration. The ERISA “prudent man” rule change allowed pension funds to allocate funds to venture capital, unlocking vast institutional capital. Between 1978 and 1979, the share of pension fund commitments to venture capital more than doubled. Firms like Sequoia Capital, Kleiner Perkins, etc. professionalized the industry, backing breakthroughs in personal computing, software, and biotech. The 1990s dot-com boom brought explosive valuations and eventual correction, but survivors emerged stronger with disciplined approaches emphasizing unit economics and staged financing.
The Venture Capital landscape has been constantly evolving; however, venture capital remained the domain of wealthy individuals and families until April 5, 2012, when President Obama signed, The Jumpstart Our Business Startups Act (the JOBS Act), which enabled Crowdfunding for Americans. Crowdfunding is a practice of funding a project or venture fund by raising contributions from a large number of people, typically via the Internet. Crowdfunding is an evolution in its truest form; it gives investors genuine freedom, the ability to pick a company, or a fund and a the fund manager(s) of their choice based on their personal investment strategies. This transformative approach not only prove to be a fair process, but it also gives the investors an opportunity to eliminate the middlemen and their management fees, which not only generate higher returns, but also help in taking control of their financial decisions.
Crowdfunding has been around since 2013, however what went wrong last time around and why is there a need for 2.0? Last time majority of people crowdfunded their money in companies directly. In a world where 99% of startups fail and in order to save the everyday investor from making poor investment choices, more emphasis needs to be made on investing in Crowdfunded Venture Capital Funds. Also, the importance of a board seat and having some skin in the game for GP(s) should not be underestimated. Another key limitation of many crowdfunding portals is access to high-quality deal flow given their fee structure. This leads to less rigorous due diligence, potentially exposing investors to inflated valuations, unfavorable terms, excessive dilution, or inadequate risk assessment.
Crowdfunded Venture Capital Fund mitigates these issues through a disciplined and professional approach. Entrepreneurs get guidance and domain expertise, help with PR and marketing, recruiting, a viable exit strategy, and more often follow up financing, which crowdfunding portals are not able to support. Investors get a board seat and transparency about the investment. Crowdfunded Venture Capital has the best of both worlds given it's a hybrid between a traditional venture capital fund and a crowdfunding portal. But is that all?
Venture Capital operates in cycles, although no two cycles are identical, historical trends indicate that shifts in fundraising tend to follow a familiar pattern. Only $66.1 billion was raised across 537 funds in 2025, extending the decline that followed the pandemic-era peak of $222.9 billion raised by 1,777 funds in 2022, as per PitchBook. The last time we saw this type of dip in venture fund raising activity was in 2012, that’s when the JOBS Act was introduced. So what does this tell us about the future of startup funding? Is it time to give another look at Crowdfunded Venture Capital or Crowdfunding 2.0?
As per PitchBook & NVCA, there is a record $311.2 billion of dry powder in 2025. One-third of today’s dry powder stems from funds raised during the pandemic-era boom, and GPs have continued to reserve more capital for follow-ons and portfolio support. In 2024, 30 firms raised 75% of all capital raised by VC funds in the US with the majority of them investing in AI. The current trend in the market is AI; sectors like AI in Robotics or Fintech are gaining momentum. However, these are capital-intensive businesses. So, if you are an AI founder looking to raise $10-50 million in capital, you are more inclined to lean towards a fund. VCs generally tend to do deals in syndicates and that also helps. While the JOBS Act did its magic in 2013, there needs to be a refinement in order for it to work in the 2026 funding environment, which means lowering the barriers to entry for Investors and larger fund amount for VCs. Venture Capital has continued to evolve as an industry since the turn of the 18th century until modern times, perhaps it's time for another change?
Sources:
1. Forbes Business Council Article
2. PitchBook-NVCA Venture Monitor report
PitchBook & National Venture Capital Association. (2026, January). Q4 2025 PitchBook-NVCA Venture Monitor. National Venture Capital Association. https://nvca.org/wp-content/uploads/2026/01/q4-2025-pitchbook-nvca-venture-monitor.pdf
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