I would like to create a fund to finance and invest 'micro-amounts' in startups and organizations that are under-represented and underserved. Sometimes a little boost can go a long way for boosting an idea or validation. How should I go about setting this up? Any advice is appreciated.
Bindia, for others to better answer your question it would be helpful to know if you already have a equity source for your fund already or you will be attempting to raise the funds. As indicated this will make a big difference in the answers you are seeking. If you already have a equity source then it is more about managing the funds and opportunities/vetting. If you are hoping to raise funds then that is a separate issue. About two years ago I worked with a startup setup to do crowdfunding/micro-investments and learned a lot about the process and laws.
It's sounds like quite a few of us have been working in the same area of idea. Let's do it! The key will be combing through our combined networks to move it to the next level. Thank you all.
KIVA is the model for this. While the platform itself is what is needed to get started, you really need the infrastructure to aggregate the business opportunities and those that might want to invest, micro or otherwise. That is where the biggest issue is, as that is a B2C business where building a brand and attracting an audience is tough and expensive. You also need someone with the background in micro-financing and someone that understands the legal implications of what you are involved in.
Taken alone, starting a VC firm is neither difficult nor is it a regulatory challenge. If it is your own money, the requirement reduces fundamentally to you being a qualified investor. If you are forming a legal entity instead of doing this under your own name as personal private investments, the hurdle is higher as far as funds required. When we started our firm years ago, we did all of our own documents.
The complexity is in having the business and financial acumen as well as experience in managing money and investments.
Any attorney who practices in private equity can help you form the fund, assuming a formal entity is right for what you want to do. When you say micro-amounts, I'm not sure why you would want a fund versus simply making the investments under your own name.
Hope that is helpful, Tom
I wrote an article on this subject a year ago. These were my thoughts at the time. http://laweconomicscapital.com/2016/03/making-the-new-capitalism-efficient/
In the beginning I want to start local (domestic US) and help build confidence in the 'manufacturing' and 'creative' muscle of US based 'mom and pop shops' and 'garage' opportunities. I need help to create this sort of fund/VC with the help of CPA and a legal contact who can help develop the agreements for investments. Any good referrals?
It is very cumbersome to set up a fund. You must comply with Security & Exchange Commission rules for not only raising capital, but also managing funds for investments. First step would be speak with an SEC educated attorney!
Bindia, I highly recommend researching Arlan Hamilton. She is an inspiring VC who invests specifically in diversity-rich cofounded startups. She is the founder of BackStage Capital and has a super podcast called the bootstrapped VC also worth a listen. I am interested in creating a fund and researching a Canadian firm CrowdMatrix.co which has the opportunity for syndicate funding . There are lots of good books to read on venture capital.. this one is often listed. The Entrepreneurial Bible To Venture Capital:
Inside Secrets from the Leaders in the Startup Game by Andrew Romans (Author) Wishing you well, Idas
Hello Blinda, I've been thinking of your great question ... a sort of self-issued finance that would be acceptable to many many in the economy since it grows and benefits society. Do you know Sardex? (mutual credit). it is powered by Cyclos which is free so let's get going !
Hi, I had the same idea and would be very happy to have a discussion with you. Where are you based ? I am based on London.