FundersClub is a pioneer in online startup investing, and remains an attractive choice for low-cost access to high-profile startups and sector-specific funds
- Long track record (was among the first online startup investing platforms)
- Auto-invest feature (with opt-out)
- Exceptional reporting interface to track investment performance
- Publishes historic returns data
- Company Description: Invest in the world's most promising startups. Diversify your investment portfolio with insider access to highly vetted startups from Silicon Valley and beyond in just minutes.
- Website: https://fundersclub.com
- Alexa Rank: 243,604 (updated weekly)
- Founded: 2012
- FundersClub on Twitter (@fundersclub)
- FundersClub on Crunchbase
- FundersClub (or their affiliated partner) on the SEC's Advisor Search
FundersClub is an important early player in the investment crowdfunding ecosystem as a result of receiving what's known as a "no action letter" from the SEC back in 2013 (AngelList received a similar letter soon after) helping them to pave the way ahead of subsequent updates to SEC rules and regulations following the 2012 JOBS Act.
FundersClub comes out of vaunted startup accelerator YCombinator, and boasts in impressive portfolio including stakes in Slack, Instacart, and Coinbase.
(You can read more about my own investments via FundersClub in A Look Inside My Crowdfunding Porfolio.)
Types of investments FundersClub offers
FundersClub offers investments in single companies as well as multi-company funds, typically targeting a particular market or sector. From the FundersClub website:
What do you get when investing with FundersClub?
The specific security offered by the company can vary by investment. As with many other Reg D investment crowdfunding platforms, investors are actually investing in a special-purpose vehicle (SPV), usually an LLC, which in turn holds the actual underlying securities (and simplifying the raising company's cap table).
FundersClub fee structure
FundersClub does not charge investors any direct fees, though does collect carried interest on any returns above the original investment amount (the carried interest amount can vary by fund, but is typically 20%). FundersClub also sets aside a portion (usually 10%) of the capital raised to cover ongoing administrative costs. From their FAQ for founders:
Potential returns and cashflow
Investments via FundersClub are high-risk investments in startups. Most of the investments have no explicit expectation of payments, dividends, or other cash flow. Most startup investments lose some or all of their value. While some investors achieve excellent returns from startup investing, that is a rare outcome and requires substantial diversification over time combined with very careful investment selection.
FundersClub is unique in that they publish detailed return data from their investments, available on their website. For example, across all of their 2012 investments, they report a 21% IRR (though prospective investors should note those returns include unrealized gains).
Breadth of offerings on FundersClub
FundersClub clearly takes a curatorial approach, advertising that they accept fewer than 2% of the startups that apply to raise funds. Unfortunately that also means that there are often no investments available (including at the time of this writing).
Regulatory framework and due diligence expectations
FundersClub itself is what's known as an "Exempt Reporting Advisor" which is variant of a Registered Investment Advisor. Investments are offered under SEC Reg D, and are only available to accredited investors.
FundersClub curates their offerings, accepting fewer than 2% of applications.