Draper Fisher Jurvetson, one of the leading venture capital firms in Silicon Valley, said Wednesday it is forming a $500-million fund, the first that would enable small investors to participate in venture capital.
"Something that has always bothered me is that venture capital [investing] is not available to the individual," said Tim Draper, founder of Redwood City, Calif.-based Draper Fisher Jurvetson.
The firm, which invests in companies well before they ever have a chance of going public, is working with a start-up company called MeVC.com to set up the MeVC Draper Fisher Jurvetson Fund I, intended as the first in a series of such portfolios. The fund, expected to open in several months, will invest in U.S. Internet start-up.
Investors can start with a minimum investment of $5,000, Draper said, but the individual must either have a net worth of $150,000 or a net worth of $50,000 and make $50,000 a year.
And, he added, the investors "should not invest more than 10% of their money."
The fund, which will be offered initially at $25 a share and then trade a closed-end mutual fund on the New York Stock Exchange, will be very high-risk. "You can lose all your money," Draper said bluntly.
The fund will enable individuals to get in on the ground floor of start-up Internet companies. Draper Fisher's Net-related investments include Third Voice, which lets people post notes on any Web page; past investments include Preview Travel Inc. Draper Fisher has invested $4.5 million in MeVC.com, which will manage "the consumer end and the infrastructure" of the fund.
"Typically, venture capital is limited to accredited investors with $200,000 annual income or $1 million in net worth," noted Andy Singer, co-founder of MeVC.
A few publicly traded firms such as CMGI Inc. already function largely as investors in Net start-ups. But this is the first time a major venture firm has offered this type of fund. Closed-end funds trade at a premium or discount to their underlying asset value, based on investor sentiment.
"It's a new animal," Draper said.
Washington Post was used in compiling this report.