Why are Venture Capitalists sharing their profits with the crowd?

  • reduces risk to the VC and crowd
  • provides $ to recruit better VC team talent
  • creates more LPs (a Limited Partner is an investor in the VC private fund)
  • and help startups succeed

The $100 (or $1K) investor isn’t investing in the VC’s Private Fund. Let me break this down.

Credit: https://nvca.org/about-us/what-is-vc/
  • The LPs / Venture Capital Private Fund Investors still works the same as they have (though there are additional ways to recruit them…more on this later).
  • The GP still receives Carry and if applicable, Management Fees.
  • The VC is still run by a Fund Manager and their team via the GP. This Investment Advisor role to the VC Private Fund doesn’t change.

Why in the world would a VC take a $100 check?

  • The VC’s GP doesn’t have a scrape by with a limited staff (e.g. $200K/yr assuming 2% management fee on a $10M fund). Backstage raised $5M in ~2 weeks into the GP and her private fund is co-funded by Sequoia and other well known VCs. Others VC’s we’re finding are following suite.
  • The Crowd can help make the startups successful that the VC Private Fund’s accredited investors fund! Don’t take my word for it. Follow the data that the Investment Crowdfunding industry publishes. Crowds hundreds and thousands help become channel partners, sales agents, make intros, etc.. This can help increase the success rates of startups.
  • The VC can use the Regulation Crowdfunding (Reg CF) raise to identify new LPs or build up online investor syndicates that invest deal by deal. (more below)
  • The playing field is leveled. Many of the VC Fund Managers I speak with couldn’t even invest in their own funds before the accredited investor definition was updated in 2020. Talk about irony.

Accredited investor (“LP recruitment” or Syndicate Investor Recruitment) via a #CommunityVCFund

How does this change the operations of a traditional VC?

At the end of the day, I hope a moral society who doesn’t exist purely for the sake of financial gains and at the detriment of their community will win out!

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William McGuire

William McGuire

2x Acquisitions, Husband, Father, Brother. Investor in 80+ Startups, Advisor. Building Incolo.io for communities to grow & fund the democratized #FutureEconomy