Last year, it began applying a similar approach to tech investments, launching an “Innovation Fund” that enables individuals to access venture capital-type investments in tech companies before they go public. Now just over a year old, the fund is focusing on investments in the data infrastructure, artificial intelligence, and property technology sectors. 

“We created something new, which is a venture fund that the public can invest in,” said Fundrise CEO Ben Miller on the “Financial Samurai” podcast with Sam Dogen. 

Investors can buy into the fund for as little as $10, a far cry from the usual six-figure minimum requirements to buy into traditional VC funds. It currently has a total of 19 assets ranging from early--, mid-, and late-stage private companies to a few public companies.

“We launched the Innovation Fund to democratize investing in these companies because they're not public. OpenAI is not a public company. Databricks was not a public company. Canva is not a public company. I think that everybody needs to be able to invest in these companies,” said Miller on his company’s “Onward” podcast. 

“And then, just to get a little bit into the weeds, we are not taking a 20% carried interest. We're not charging this very massive toll, 20% toll to enable it. I think that’s one of the reasons why we started our tech fund. That’s a practical thing I’m trying to do.”

Fundrise on AI: ‘Our Job Is To Get in the Middle of It’

Miller told Dogen that he’s extremely optimistic about the future of AI and that Fundrise’s Innovation Fund will invest accordingly. He compared the current boom in generative AI to the advent of the internet in terms of creating value, noting that a recent Goldman Sachs study projected that AI could double gross domestic product growth and account for 500 times the productivity gains that resulted from the invention of the personal computer. 

“So the amount of value created and captured here is going to be astronomical,” Miller said. “And that has nothing to do with us. We just happened on the scene when that’s happening. And our job is just to get in the middle of it as much as possible because that’s what’s happening today and that’s the opportunity. It’s unbelievable.”

While there are still relatively few private companies developing large language models — the foundation of generative AI applications — Miller sees an opportunity to invest in companies that provide the necessary data infrastructure for this new technology to thrive. 

“We can play AI at different places in the stack. The data infrastructure is sort of the platform level underneath AI,” he explained.

“You could also think of it as if there’s a gold rush, you can try to find gold or you can sell picks and shovels. The data infrastructures are the picks and shovels. Everybody needs these technologies to be able to do the stuff that is the application. And we’ve been investing like crazy into the picks and shovels because that’s clear and yes, and pricing the [large language models].” 

The fund is also backing companies that stand to benefit from improvements in AI technology. For example, in September, it invested $6.2 million in Canva, an online design and visual communication platform that enables users to create social media-friendly images and text using LLMs. 

Data Infrastructure Investments

The Innovation Fund’s largest position is its investment in Databricks, a data infrastructure provider with a valuation of $43 billion. Fundrise has invested $25 million, a quarter of the Innovation Fund’s holdings, into the company. 

Databricks’ software is used by over 10,000 organizations worldwide. It has raised roughly $500 million from investors such as Andreessen Horowitz, Baillie Gifford, ClearBridge Investments, and NVIDIA. It recently crossed a $1.5 billion revenue run rate at over 50% revenue year-over-year growth and acquired MosiacML, a leading generative AI platform. 

“They are one of the great companies in the world right now. Everybody who's in the tech space knows Snowflake's been absolutely on a tear. Databricks is comparable to Snowflake in terms of opportunity and excellence, in my opinion, many ways better,” Miller told Dogen. 

“To be able to get Databricks now and own a chunk of that company is just so exciting and they are integral. It's a different risk profile. You're not taking a ‘Is this company going to be successful?’ risk. You're taking a ‘how much are they going to grow?’ risk. And I think they're going to grow a lot.” 

The Innovation Fund has also made smaller investments in other data infrastructure companies, including Immuta and Vanta. 

Proptech Expertise

As a company that started in the real estate space, Fundrise has an inside perspective on the proptech sector, and its Innovation Fund has targeted several companies in the space that it uses to help manage its properties. 

Its first proptech investment was in the property inspection software platform Inspectify. The fund invested $4 million in the early-stage company, which is currently valued at $47 million. 

The fund followed this up with a $2 million investment in Jetty, a mid-stage company that provides a unified financial services platform for renters and property owners with four features: security deposit replacement, renter's insurance, flexible rent payments, and rent reporting. 

Miller noted that these investments in technologies that are adjacent to its platform mean that the fund can add value to these companies. 

“When we sent out our email to our investors saying, ‘Hey, we invested in Inspectify,’ Inspectify’s web traffic doubled," he told Dogen. “They got a hundred sales leads, which in B2B business is a lot. If we can get more investors, we’re more valuable to the companies we invest in. And so our long-term play is that we bring something to the table that's different. Sequoia brings all sorts of things to the table. They don’t bring 2 million investors. So there's a potential network effect.” 

‘You Have To Get Access’

The Innovation Fund is still in its early stages, and it’s too early to assess how this unique approach to venture investing will play out. It’s clear, however, that the fund is doing something different than the standard VC and providing unprecedented access to retail investors who don’t necessarily have thousands of dollars to invest.

“If you have money you say, ‘I want to buy Nvidia, Google,’ you can do that, but if you want to buy the best tech companies in the private markets, you can’t,” said Miller. “You have to get access.”