Early Stage Multi-Company Fund
Dear Startup Investor,
Not all funds that invest in startups are created equal…
I’ve tracked dozens of them over the past few years.
I found that the truly outstanding ones are run by managers with a knack for identifying winners.
And that’s why I’m so excited about our new fund partnership with MicroVentures. It’s another exclusive for Startup Investor members.
I expect the first one will fill up fast. We’re targeting early-stage companies this time, and there are excellent opportunities in this market right now. See my latest article here to get an idea of the types of companies this fund will target.
The deal: You’ll be investing in a fund that will buy shares in approximately 10 top-tier startup companies. The minimum investment is just $10,000.
Here’s what else you need to know…
We’re making this fund available to you, our current members, first. In a few weeks we’ll open it up to new members.
You’re first in line, and we expect demand for this deal to be high. So if you’re interested, I’d advise you to act as soon as possible. Each individual fund is limited to 99 investors.
MicroVentures, our partner for this deal, is an industry pioneer with an impressive record of attracting high-caliber deals that pay off.
It’s why we were elated when the company agreed (once again) to create a fund to our specifications. One exclusively available to members of Startup Investor.
This fund will feature eight to 10 outstanding startups. Young companies like…
- Loom – It stores your pictures and videos in the cloud. Loom was bought by Dropbox for an undisclosed amount. My sources tell me that early investors did extremely well.
- SendHub – Its app instantly gives businesses the ability to send text messages, send voice messages and set up conference calls, with no hardware or contract required. The company is paying off nicely for early investors. It has achieved double-digit month-over-month growth in the last year and has thousands of customers.
- Visual.ly – It connects designers with clients to create “visual content,” a category that also includes videos and interactive graphics. Its talent pool has attracted thousands of freelancers. The startup says it has grown 10X since it launched its project center in 2013.
Besides their strong early traction and high upsides, these companies have another thing in common.
They have all been part of funds offered by MicroVentures.
We have been hard at work with MicroVentures to carefully select top-notch startups for this deal.
Fund Facts
Our first fund with MicroVentures was a pre-IPO late-stage fund. Mature companies on the cusp of an IPO.
This one is different.
It’s an early-stage fund. You’ll be investing in young companies set to disrupt whole industries… offering cutting-edge tech products… solving big unmet problems.
The profit potential is substantial. However, there is more risk at this stage compared to our pre-IPO deal.
That’s why we think this fund structure is perfect for early-stage investments. You’ll get exposure to approximately 10 outstanding startups, with a total minimum investment of $10,000.
This fund will target startups in the seed through Series A stages. These companies have usually been around for no longer than three years. They’re often in their first, second or third round of funding.
Timeline: The waiting period to cash out on potential gains is expected to be anywhere from two to eight years. Early startups take some time to grow. That said, we live in a world where “secondary” markets are developing at a fast pace. So there may be exit opportunities sooner than expected.
The risk-benefit equation is also different.
This fund has a vastly higher upside. This type of ground-floor investing can be extremely lucrative; one winner has the ability to return the investment into an entire fund many times over. But there’s more risk at this stage (which is why we recommend a diverse portfolio of at least 15 to 20 startups).
The fee structure is the same…
Four percent upfront (a 20% discount for Startup Investor members), a 0.5% management fee for first two years and a small administrative/legal fee to be shared by the total number of Startup Investor members (up to 99 per fund).
MicroVentures will also take a 10% “carried interest,” similar to the pre-IPO fund. In other words, it will receive 10% of total gains realized. This does not affect your initial investment, only any profits. You get paid back before MicroVentures receives any carry.
Everyone’s interests are aligned to make the fund succeed.
By the way, 10% carried interest is about half what VCs typically charge. The management fee of 0.5% is one-fourth of what VCs charge (usually 2% per year).
The minimum investment is $10,000. By way of comparison, the typical VC fund requires a minimum investment of $100,000.
The Best Way to Reduce Risk Is Through Funds
Early-stage investing is a numbers game. Even top VCs like Andreessen Horowitz expect 50% of its portfolio companies to lose money.
This is where a concept called “power-law distribution” comes into play. In almost any early-stage fund, returns are driven by a portfolio’s standout investments.
Roughly 20% of startups will achieve a big payday via a successful exit, according to recent research by CB Insights and Seedchange Institute.
Always remember: The more high quality companies in your portfolio, the more likely it is that the odds will work in your favor.
By participating in this fund, you immediately get a piece of approximately eight to 10 startup companies.
But not just any startups. These companies are meticulously vetted and selected for their outstanding potential.
Every single one will go through an extensive due diligence process. Product testing, channel checks, intellectual property rights, etc.
How to Invest
For starters,
- If you haven’t signed up with MicroVentures yet, you can do so by clicking right here and filling out your contact information so the company can call you.
- If you’re already a MicroVentures member (if you invested in the pre-IPO deal, you are) simply log into your account on Microventures.com and click here. Then proceed with your investment online. You can also call the company directly at 1.800.283.9903. You should also be receiving an email directly from MicroVentures as well.
If you haven’t registered with MicroVentures as an accredited investor, this is when it’ll ask you to.
You’ll need at least $10,000 to invest. Remember, with that small amount, you’ll get a piece of eight to 10 great young startups. If you invest more, your ownership percentage in the fund will increase accordingly.
If you’re new to MicroVentures, when you make your investment, you will be required to provide some documentation regarding your “accredited” status. Sorry, we don’t make the rules… the SEC does. It shouldn’t take more than a few minutes to complete.
A licensed MicroVentures broker will contact you to discuss all the details of your investment.
Then there will be a couple of forms to sign. This can be done easily online (no need to mail bulky forms).
Once you complete all these steps, you can make your investment through the MicroVentures’ secure website.
Exit Scenarios
If and when a company is sold (for profit or loss), your proceeds will be distributed as soon as possible.
In the case of an IPO, you will have the choice of how to proceed. You can sell once the standard “lock-up period” expires. However, you will also have the option of staying invested via public shares for as long as you want.
And you will be able to go to the website we’ve set up for your deal to track what’s going on with your investments whenever you want.
This is a wonderful opportunity. So I hope you take advantage of it. As a reminder, we take no compensation from the companies we work with, including MicroVentures. Our research service is 100% independent.
Deal Summary:
Minimum investment: $10,000
Amount being raised: Open-ended
Number of holdings: Eight to 10 (depending on fund size)
Maximum number of investors in each fund: 99
Liquidity: Cash out only after liquidity event like an IPO or buyout
Post-IPO waiting period: 180 days
Good investing,
Adam Sharp