There’s an element of crowd sourcing behind most investing. Venture capital and private equity firms find limited partners—the few obscenely rich individuals or institutions worldwide that have millions or billions to spread among countless investments—to contribute a few hundred thousand dollars each to finance early stage startups or mature companies. Chunks of investor money is pooled together and dedicated to specific investments.
MicroVentures, based in Austin, TX, follows the same methodology. As its name implies, though, it does it on a micro level. The company allows accredited investors, especially those who might not have access to traditional venture capital deals, to sign up and directly invest in various startups through its website.
A hybrid investment bank and VC firm, MicroVentures does due diligence on various early stage startups, from those seeking seed financing to those that are looking for follow-on funding, and then tries to raise financing capital from its pooled money of individual angel investors .
As a broker-dealer, it provides the offerings to investors who register on its website. The company aims its service at people who may not have access to startups, and who want to put a small amount of their wealth in high-risk, and potentially high-reward, equity deals, says founder and CEO Bill Clark.
“We look at ourselves as more of a full-service equity crowd-funding platform,” Clark said in an interview at his office in Austin. “We try to give (investors) fewer deals, but ones that we’re more comfortable with listing.”
Founded in 2009, MicroVentures is still young in comparison to the veritable titans of venture capital. Yet it has a notable presence during a transformative time for venture capital in Austin, after Austin’s longest-standing firm, Austin Ventures, recently announced it won’t raise any new funds.
Many in the city’s startup scene said they AV’s departure wouldn’t adversely affect entrepreneurs seeking cash to build their companies. Other venture capital firms such as Silverton Partners, S3 Ventures, and LiveOak Venture Partners, for example, are providing plenty of capital both locally and nationally. A half-dozen or so accelerator programs also have sprung up in recent years, wrote Joshua Baer, the founder and executive director of one of those accelerators, Capital Factory, after the Austin Ventures news.
MicroVentures is yet another local outlet for startups in Austin and nationally, Clark says.
“It’s easier than ever to raise early stage venture capital in Austin, evident in the proliferation of entrepreneurs and the extensive depth of startups,” Clark said. “We feel it is our job to introduce investors globally to that diversity and opportunity.”
At MicroVentures, investing is done truly on a smaller scale. It seeks investors who want to contribute $3,000 to $5,000 in individual funds—a fraction of a typical investment size, which can be 10 times as large—and piles together anywhere between 20 to 90 of those to take a single stake in a startup, Clark says. The firm has raised about $60 million since its founding, contributing investments of about $200,000 to $500,000 to more than 130 early and late-stage companies, he adds.
MicroVentures requires most investors to be accredited by SEC standards, such as having a net worth of more than $1 million (with restrictions) or certain income minimums. People that don’t qualify can get the approval to invest as “sophisticated” investors, if MicroVentures’ team of brokers can determine that the investor has something like adequate investing experience, Clark says.
The firm typically lists around three to five startups at any given time on its investor-only website. That is where people can read MicroVentures’ due diligence on a company—anything from renewable energy producer Bloom Energy to Facebook—and select an investment, Clark says.
“We don’t want someone to come in and invest $50,000 and leave, and just make that one investment,” he says. “We would rather have them invest $5,000 in 10 companies and diversify.”
Startups that may not have access to venture capital can also apply to be listed on MicroVentures marketplace, Clark says.
“The goal of the business had two sides: One is helping startups raise capital—really new entrepreneurs who didn’t have access to capital and didn’t have a network to go out and raise the first $100,000 to develop or build a new prototype,” Clark says. “Two is for people like myself, who wanted to invest in startups, but I didn’t have good deal flow, didn’t have a good network, and didn’t have $200,000 that I could go out and write checks for $25,000 to $50,000 a pop.”
Start Houston, a co-working space, sought out MicroVentures as the platform for its Start Investment Network which it launched in December. The network, which contains about 100 investors, will provide first dibs on Houston technology investments that have been vetted by Start Houston’s founders, Gaurav Khandelwal and Apurva Sanghavi.
Clark developed the idea for MicroVentures while working in credit-risk management at Dell, helping small businesses get financing to buy computers and equipment. He later did similar work for PayPal, working with merchants.
Now, MicroVentures is seeking to broaden the range of companies it invests. It announced in February a plan to invest in three funds managed by 500 Startups, a seed financier and accelerator program founded by Dave McClure that invests nationally. It is based in Mountain View, CA.
MicroVentures is taking investments of $10,000 or more to put into the three funds. Of the three, 40 percent will go to a fund of seed investments, while the rest will be split between a fund for growing companies that have previously been financed by 500 Startups, and a third focused on companies in Latin America, Clark says.
About 15 percent of MicroVentures 25,000 investors are from international markets, an area of focus that the company is hoping to boost, says Paul O’Brien, the chief marketing officer. That group has grown from about 5 percent in 2013, and may rise up to 20 percent by the end of this year, Clark says.
MicroVentures is also expanding its investing focus beyond just venture capital, adding asset classes such as real estate.
“The plan isn’t to be just a VC,” Clark says. “As a broker-dealer, we can diversify into other asset classes, we can do other private transactions. We can do M&A. We’re not, but we can if we wanted to.”
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