Banks Allocated $5M for Venture Capital Fund Access

Venture Capital Access: Introducing Allocate

The venture capital landscape is characterized by strong relationships and a limited network. Family offices and accredited investors are actively seeking opportunities in promising funds, yet often encounter obstacles in reaching fund managers.

Allocate's Solution

Allocate, launched in February 2021 by Samir Kaji and Hana Yang, is pioneering a new approach to venture capital fund investment. The company aims to facilitate participation for investors regardless of their investment scale.

Seed Funding Announcement

Recently, the San Francisco-based firm announced a $5 million seed funding round. Investors included Urban Innovation Fund, Tusk Venture Partners, Basis Set Ventures, Liquid2 Ventures, Fika Ventures, Ulu Ventures, Anthemis Group, and Broadhaven Ventures.

The Founders' Background

Kaji and Yang initially connected as Kauffman Fellows, both possessing experience in the financial sector. Yang’s prior work in the nonprofit sector sparked discussions regarding the disconnect between the nonprofit and venture capital spheres.

Subsequently, Yang joined Kaji at First Republic Bank to further explore these ideas and collaborate on a solution.

Market Opportunity

According to a Boston Consulting Group report cited by Kaji, there are an estimated 8,000 to 11,000 family offices globally. These, alongside nearly 17 million accredited investors, collectively manage approximately $42 trillion in assets.

Supply and Demand Imbalance

The core issue lies in a supply and demand mismatch. The number of institutional investors is limited, and their investment schedules are often fully committed, as Kaji explained to TechCrunch.

Fund managers are keen to access capital from non-traditional sources, such as family offices, but locating these investors presents a significant challenge.

Challenges for Family Offices

Conversely, family offices struggle to gain access to venture capital firms. They often lack the resources to identify suitable managers, dedicate time to relationship building, or meet the typical $1 million investment minimum.

Allocate's Core Functionality

Recognizing this gap, Kaji and Yang established Allocate to usher in a new phase of venture capital. Their platform connects retail investors of all sizes and backgrounds with investment funds, while simultaneously helping managers identify and engage with family offices.

Platform Features

Allocate’s platform provides curated venture fund offerings to wealth advisors, family offices, and qualified individual investors. Investment decisions are guided by individual objectives.

All pre- and post-investment processes, including transactions and reporting, are managed directly through the platform.

Investment Structure and Fees

The company establishes its own feeder vehicles to pool investor capital, enabling lower minimum investment amounts and streamlined capital management for fund managers.

Allocate generates revenue by charging an annual fee based on the total investments made.

Future Product Development

Currently, investors directly select the funds they wish to invest in. However, Kaji indicated that Allocate plans to introduce fund-of-funds products in the future, where investments are allocated by a fund manager.

Current Status and Future Plans

Allocate is currently pre-revenue and intends to utilize the seed funding to enhance its product and expand its team over the next year. A formal software launch is scheduled for the end of the year.

The company has already garnered a waitlist comprising several hundred fund managers and investors.

Market Growth Projections

Kaji projects a 50% increase in the number of accredited investors by 2025, highlighting a substantial opportunity to broaden market participation.

Industry Validation

Jordan Nof, co-founder and managing partner at Tusk Ventures, shares this perspective. He observes significant economic expansion occurring outside of the public markets, creating opportunities for innovation.

Bridging the Investment Gap

Nof emphasized that trillions of dollars remain untapped due to the access barriers between fund managers and potential investors. He believes Allocate provides the necessary tools to connect these parties and foster informed decision-making, ultimately advancing the venture capital ecosystem.

Vision for the Future

“I have known Samir for quite some time, and he and his team understand this problem set and they have a vision of what the venture capital future looks like,” Nof stated. “This is a cottage industry even though VC is responsible for impacting the largest of technology companies, which have taken VC, yet it is a still super fragmented industry that has no transparency. Allocate is the next transition of a true platform that enables family offices and high-net worth individuals access.”