Venture capital has changed the Internet, and now the Net is about to change venture capital.
For as little as $1,000, small investors may soon be able to join a new venture capital fund from Technology Funding, an established firm that invests in high-tech start-ups. It hopes to raise $100 million for the pool, called Technology Funding Ventures Capital Fund VI, an average sum for such funds. Federal regulators must still approve the plan.
Most venture capital funds cater to institutional investors and wealthy individuals, and minimum investments can run into millions of dollars, effectively closing them to average investors.
"Technology Funding is taking advantage of the last five years of good public relations and good returns in the venture capital industry," said Kelly McGough, manager for a research services Venture Economics, a firm that tracks investments.
Technology Funding plans to let investors sign up through its Web site, the preliminary prospectus indicates, and will use the Web site and email to distribute required annual and quarterly reports to investors.
"The fund has been organized to provide investors with the opportunity to participate with a modest amount in venture capital investments that are generally not available to the public and require substantially larger financial commitments," according to the prospectus.
Fund managers expect to invest in 30 to 40 new companies in telecommunications, chip manufacturing, and equipment, health care, advanced materials, environmental technologies, and industrial technologies such as factory automation and process control.
Technology Funding executives declined to be interviewed for this story, citing the "quiet period" imposed by the Securities and Exchange Commission for such offerings.
Technology Funding, founded in 1979, has in the past marketed its venture funds through stock brokers with minimum investments of $2,500. Its Web page claims that its past funds have raised $315 million from more than 42,000 individuals and invested in more than 240 emerging growth companies in technology and health care.
Two somewhat similar investment vehicles for small investors interested in companies that have not gone public yet are offered through Allied Capital. It runs several investment pools that offer "mezzanine," or late-stage, venture investments in companies that are close to selling shares on the public market. Those funds are Allied Capital Corporation (ALLC) and Allied Capital Corporation II (ALII).