Yup. You, too, can be a fat cat. In the 1990s Americans moved trillions of dollars out of traditional pension funds and into ever-smaller and more risky investment schemes, even quitting jobs to become day traders. Until recently, though, it was virtually impossible for the little guy to join venture-capital partnerships, which buy into start-ups before they go public. Depression-era laws limit these partnerships to big institutions or individuals who can afford to lose big. You don’t exactly have to be a Rockefeller, but you do need regular yearly income of $200,000, assets of $1 million or (in some cases) a cash ante of $5 million. “This was a closed, clubby world, limited both by law and the industry culture,” says Harvard business professor Josh Lerner.
Not anymore. Last year meVC teamed up with the San Francisco VC firm of Draper Fisher Jurvetson to figure out a legal way to create the first major venture-capital mutual fund–no proof of wealth required. It took just three weeks to sell out the $330 million meVC Draper Fisher Jurvetson I fund to 20,000 investors. The minimum stake: $2,000. meVC will invest the money in high-tech start-ups, and plans to go public June 26. “We’ve gone from [minimum stakes of] $5 million to $2,000. You can’t get much more Main Street than that,” says Richard Shaffer, publisher of VentureWire, a VC newsletter. “Even the name ‘meVC’ is downmarket. It’s the Wal-Mart of venture capital.”
“Precisely,” says Tim Draper, founder of Draper Fisher Jurvetson, who takes a certain pride in having establishment VC firms “look down their noses” at DFJ, which was the first VC firm to advertise. He sees himself as a pioneer in the spirit of his grandfather, Gen. William Draper Jr., who became the first venture capitalist on the West Coast in the 1950s. “We’re trying to democratize venture capital. Why should only the rich be allowed to take risks to become superrich?” Draper asks. “It’s un-American.”
It’s too late to fret over the risks, anyway. Andy Singer, the CEO of meVC, sees his venture as an “egalitarian throwback” to the first VC firm, started by Harvard professor Georges Doriot in 1946. Big institutions largely shunned Doriot’s venture as too risky, so he turned to rich individuals, who would provide the bulk of VC funds until the late 1970s. In the 1980s big pension funds came to dominate the game, and today almost everyone with a savings plan at work has some money riding on VC bets. “We’re all venture capitalists now, though we may not know it,” says Shaffer, who has watched VentureWire zoom in one year from no readers to 70,000. “It’s more evidence that venture capital is becoming a spectator sport for the Main Street investor.”
But not a safe one. Singer figures that if individuals put 2 percent of their money in VC mutual funds, the $50 billion that went into VC last year could jump to $350 billion. Even meVC backers wouldn’t recommend larger bets. “Our message is, ‘Think of the money you’ve invested as gone’,” says Draper. “And if you get any distribution, think of it as your birthday.” That doesn’t unsettle Mike Carlson, who says he’s well aware he could lose big on any investment. That includes his real estate in a California earthquake zone. So beware, Wal-Mart investors.
