End of 2020, a group of Stanford students have banded together to create Stanford 2020, a venture capital fund solely to invest in their classmates’ businesses. Given the school’s track record of building successful startup founders, it unsurprisingly had no trouble raising $1.5 million for the first investment vehicle – waitlist not included .
Now, two years later, the leader of this club, Steph Mui, tries to replicate this playbook as a corporate-backed startup and solo entrepreneurship. PIN, which stands for Power in Numbers, recently raised $5.6 million in seed funding led by Initialized Capital, with investments from GSR, NEA and Canaan.
PIN wants to replicate the Stanford 2020 story for other community businesses. The company says it provides interested clubs with the back-office framework, legal and tax support and has a platform where leaders can research fundraising opportunities, meet other members and manage relationships. wallets. It makes money through SaaS fees, which Mui says hopes to stay below 2% of a club’s total assets under management.
“Anyone who has started an investment vehicle, whether it is an investment club or a traditional fund, knows how difficult it is because of all the administrative obligations to ensure that the fund is properly configured and compliant,” Mui explained. “Community investment clubs are made even more difficult due to the sheer number of investors (a club can typically have hundreds of members), which introduces even more friction during the fundraising process and ongoing operations. “
The startup isn’t too far off from companies like AngelList, which breaks down the founder experience, and Republic, which tries to make it easier for anyone to invest in startups.
A newly funded startup that aims to help people break into the world of venture capital investing and land coveted cap table spots feels very 2020. In downturns, the playing field looks riskier. For example, as founders enter a period of uncertainty, the lure of having a dedicated investor may take precedence over a series of advisors with different owners, VSC Ventures’ Jay Kapoor told TechCrunch last week. “The problem with these party tours is that when it came time for someone to step in and really support the business, they weren’t there,” Kapoor said.
Founders always want to protect their equity, but in an unstable market, can an investment club win deals? PIN is working on different products that would incentivize club members to support founders beyond capital. Like, a hiring bonus system.
Mui explains how hiring founders can forward a job description they promote to all their community club members, who will then receive it through the PIN platform. Every action is tied to a specific reward, so if a member refers someone who gets hired, they could get a cash prize or a place on the leaderboard that identifies them as someone who goes above and beyond to help the start-up.
Product developments are still ongoing, but largely in an effort to work around some of the issues with party rounds. Mui added that the majority of people at Stanford 2020 were first-time check writers, which means their focus and personal connection to an investment is “significantly higher and more powerful than, arguably, a round of checks.” general party” where an investor can have hundreds of startups.
This is not a feature she or the startup can rely on indefinitely.
“The unfortunate moment we’re building with right now is that we’re getting a lot of interest from mainstream groups, unsurprising people like other schools, tech start-ups, accelerators, and [those] who would want to use this product anyway,” Mui said. “It’s a much tougher battle to attract more non-traditional investors – which is something we care about.[but] took a step back.
She added: “If you are already less familiar with how technology works and you have started investing and you are in this downturn, you are impacted and you lose your job and you have less disposable income to invest. Naturally, it becomes less of a priority… so it just disappointed me personally.
While market dynamics have impacted PIN’s ability to attract a diverse set of early adopters, Mui is optimistic about the future. She attributed the growing mindshare around crypto-native DAOs (decentralized autonomous organization) to why investment clubs are more interesting these days. DAOs are all about collective decision-making frameworks, a concept that other fintechs and crypto companies can easily bring to a world like investing. This week alone, OrangeDAO — designed to bring 1,000 YC alumni together in one place to invest in startups together — raised $80 million. Earlier this year, Tribevest snagged millions for a collaborative investing tool.
“When the [TechCrunch] article came out on Stanford 2020, my co-founder and I thought about doing this as a full time business, and actually one of the main reasons we didn’t do it at the time was that we were convinced that this Stanford class may be a corner case because of the fair criticisms that some readers have made,” Mui said.
“What changed this divide for me was talking to over 100 groups…and realizing that this is absolutely not the case,” she said. “Now that I’m a founder, I realize that all startups have very different needs…all of these groups benefit from having community clubs of all kinds on their capitalization table because of the expertise they need.”