Fundrise CEO Benjamin Miller on listing VCX on NYSE — a public venture fund with 100K investors up 85% in three years

Speaker 1: Lambda is the superintelligence cloud building AI supercomputers for training and inference that scale from one GPU to hundreds of thousands. And that brings us into the Lambda lightning round, and we are kicking it off with Benjamin Miller from Fundrise. But first, will pivot that camera around, show you the entire TBPN UltraDome, and we will show you the Lambda cloud because we are in the Lambda lightning round right now. And I believe we have Benjamin Miller from Fundrise in the restream waiting room, so we will bring him in to the TBPN UltraDome. We'll try that again to bring him into the TBPN UltraDome. How are doing?

Speaker 2: What's going on? Hey, guys.

Speaker 1: Thank you so much for taking the time to come chat with us. This is the first time on the show. Why don't you introduce yourself and the company?

Speaker 7: Alright. Alright. So my name is Ben Miller. I'm cofounder and CEO of Fundrise.

Speaker 1: Yeah.

Speaker 7: We are an alternative investment platform. I think the largest direct to investor platform of the country. Been around fifteen years. We've democratized investing into real estate.

Speaker 1: Tonight's success.

Speaker 7: Yeah. Real estate, tech tech and private credit. We have 2,000,000 customers. We just took our our fund VCX public last week on the New York Stock Exchange.

Speaker 1: It's amazing.

Speaker 2: Very, very cool.

Speaker 1: We love NIC.

Speaker 2: How doing. As long as long as as as long as I've been following Yeah. Like tech closely. Yeah. So so it's very very cool to have you on the show. Yeah. Let let's get into the recent launch because we've obviously seen it all over our timeline. I had a friend of ours messaged John and I yesterday seeing something. He was like pissed off. He was like, did did did

Speaker 4: So we all miss

Speaker 2: anyways Oh, yeah. How long has it been in the works? Come together because it's not spin up and, you know, there's a lot of moving pieces.

Speaker 7: Yeah. I mean, it's it's so funny because when we started out, everyone told us a bad idea, which was we were we democratized investing into real estate. This is about 2021. 2021, everything was hot, hot, hot. Real estate was hot, tech was hot, And we were foolish enough to think about, like, well, what else could we do that would be really painful and hard and new? And so we we came up with the concept of why don't we try to expand into democratizing investing into private tech and to venture capital? And we're different than the normal approach. We we usually start by going in the front door of the SEC. So we go into the SEC and say, this is what we want to do. We can we create a public venture capital fund? And no one had ever done that before. It took us about two years going back and forth with the staff, and we created the first, you know, the first it's a venture fund, just like any other venture fund, except anyone can invest in it. And we launched at the end of I think in about the 2022, and then and then stock market collapsed, everything in tech became negative. So we were super lucky because we we started investing at the bottom of the cycle. Yeah. And so and so that's how we got access. I mean, you know, when we got access to Androle and Anthropic and Canva, like, people were were, like, very bearish on tech. Yeah. And and that's like so people are like, how did you get these great names? I was like, well, it's you know, we we picked good names, but it was also there's a lot of luck there. Time. So anyways, I I I I've given you the story, but I don't wanna keep I you know, if you wanna

Speaker 2: ask Yeah. Keep yeah. Continue continue because yeah. So so so two years working with the SEC, you you you actually create the fund, but it's not publicly listed at that time, it's just available in in your in your product? To the public. Yeah.

Speaker 7: Yeah. Yeah. This is something that people in tech weren't familiar with, but you can be public and not be publicly traded.

Speaker 4: Yeah. Yeah.

Speaker 7: And so we were it's a public venture fund. It was, you know, we're filing, know, public reporting on the SEC's web EDGAR. And and so we ended up, you know, raising about half $1,000,000,000 across a 100,000 investors. We have a 100,000 investors. The fund had had a lot of good returns, like within three years, it had been up like 85% or something. It was especially in the last year, it was up 65% the last twelve months.

Speaker 2: And that's and NAV. NAV is NAV being up 65%.

Speaker 7: Yeah. Well, mean, it's just the mark of typically, it's just the last round, you know, what was Anthropic's last round? What was what was, you know, Vanta's last round or Canva or whomever. So we we, you know, we typically mark to the last round valuation. And, you know, we invested in, like, OpenAI and Databricks and all these companies, like, three years ago. So it ended up doing pretty well.

Speaker 1: It's really good.

Speaker 7: And then so then we when we said

Speaker 2: You're like, I'm

Speaker 1: in the

Speaker 2: wrong business. I should've just been a fund manager.

Speaker 7: I was in the wrong business. Real estate is so much more brutal than tech. Let me tell you. It's a it's a lot nicer to be an investor than a builder. Yeah.

Speaker 1: What

Speaker 2: what do you guys look for on the actual asset side? I'm assuming some of the positions are direct, some are, you know, you've you've bought into SPVs, like, how do you how do you qualify on the on the asset side?

Speaker 7: Yeah. I mean, our check size grew over time, so now it's like it wants to be like 20 to 50 to 100,000,000. And the way that we did it is that we and we have Fundrise is 200 people. We have a 100 software engineers. We built, you know, a fintech platform with millions of customers and payment processing, and then we built a real estate AI product called Real AI. And so we have, like, a whole AI, like, initiative. And so that's how we really, like, got comfortable with the different products. How we got to Anthropic, I think, early, is that we were building with it, and we're like, oh my god. This is such a better enterprise product than anything else. Go down the list. Like, it it was it was almost 80% other than Andoril, which I don't have any killer drones, we were, you know, we really it's every time I see a company come to me, like, I got I got sort of saw some flow for deal and and replet. And I said, like, I just don't know. We don't use the software, so I can't I can underwrite it with by paper, like an MBA underwriting. Mhmm. But it like, without being grounded in the as a as a true user. Like, I just it's so that was that's our process is a combination of being using it, building with it, and then if we build with it and we love it, we usually hunt it down. We usually, like we we're not reactive typically. We we are, okay. This is a great company. How do we get this? How do we get into this company? How do I harass the the CEO and the executives and It's

Speaker 1: Matt Grimm's worst nightmare. Yeah.

Speaker 4: Well, I'm going

Speaker 7: direct with Andrew all.

Speaker 1: Yeah. Yeah. That's good. I mean, that that's

Speaker 9: the right

Speaker 1: way to do it. And I think that that's something that is like underrated and I think a lot of investors don't necessarily know how far you can be away from the cap table.

Speaker 2: Yeah. What yeah. What what is your pitch to companies? Is it is it that, hey, we have, you know, a 100,000 people in this fund. They they're excited about your company, they want exposure, this is a better way for them to get it than investing in the third or fourth layer of some random SPV and and or or or how do those conversations typically go?

Speaker 7: Yeah. I mean, you know, if you've you've you're around, like, half the time it's just relationship. It's just like, you know somebody, they get to know you, they get comfortable. I mean, at least half the time, it's just pure relationship driven. Sometimes it's like more of a hard pitch. And so, like, Ramp, for example, which we invested in and has done done really well, that took a couple of, like, turns of the wheel. And but but Ramp is sort of very marketing minded. If you probably have any sense of Ramp, they're very, like, aggressive and thoughtful and

Speaker 2: We know. We know a little bit about it.

Speaker 7: Yeah. Right. Right. So, this is like their part of their DNA is product marketing. So, we said to them, we know we have 2,000,000 customers. Like, 2,000,000 people. Like, why don't we work together at Invest in Ramp and see if you guys can see if we can be helpful. And and we went out to half our customer base to a million people and we were the most successful partnership they've ever done. Wow. Like hundreds hundreds of customers.

Speaker 2: We know it's Yeah. Your your customer base is like, I don't I don't know. I I I imagine your minimums are quite quite low, but in general, if people are investing in alternative assets like

Speaker 1: Business leaders. Yeah. Like, they're business people.

Speaker 7: Yeah. I mean, it's it's I thought we did it with Canva too and it and it's just like Canva was so big, it didn't move the needle for them. Mhmm. And I've done it with smaller companies where we were like we drove 25% of their revenue growth in a That's single great. So so That's

Speaker 1: great value add. Yeah.

Speaker 7: Yeah. It's a huge value add. I mean, I think it's like we're we're not we're one of our products we love is intercom, which is Fin.

Speaker 1: Oh, yeah. Yeah. We love it. We're sponsored by Fin.

Speaker 7: Okay. Well, we're an adopter. We adopted Fin like Yeah. Eighteen months ago. It's and we're and we basically the guy we invested in Intercom and I think we're investing more.

Speaker 1: Yeah.

Speaker 7: And I I think that like, our customer base is so big. I mean, millions of people. We know where they work, we know what their job is, we know where they live, and we have so much data about them. So you said, like, I only want to we did this with ServiceTitan also, because we invested in ServiceTitan before they went public. So I only want small business owners in the Midwest. Okay, great. You know what? We can target, and then we can, like, because they're investors. We're not a marketing platform.

Speaker 4: Mhmm.

Speaker 7: So I think that, like, the the idea that I I mean, it's true, but it's novel, is that the people are your it's like a you can have an army of people, like, driving Mhmm. Sales, marketing, brand. I mean, when we listed VCX and when public it last week, huge part of the reason it was successful, like, very successful, was the massive broad based investor group who is very excited, supportive. We call it network investing. You know, the social network and then there's, like, it's actually investor networks. Like, we we think that like people are a value separate from their money.

Speaker 1: Mhmm.

Speaker 2: So so you you become publicly traded quite recently. Mhmm. It immediately trades way way way way way above NAV and that creates a problem which is that I, as an investor, could be very interested in the underlying assets. Think you have a fantastic portfolio, but maybe I don't wanna pay way above NAV. Even if I'm bullish on the companies, how how do you think how do you think this kind of like broad based exposure to privates can evolve over time? Are you thinking about, you know, future products that would, kind of solve some of these you know, clearly, there's a massive amount of demand. Investors are excited to to be invested in VCX, but, there's clearly there maybe is, like, more evolved solutions to come.

Speaker 7: Yeah. Yeah. I mean, it's so so funny how these things like, anybody who's ever had any success, like, knows that before that, everybody told you it was not gonna work. Yeah. And so when we when we conceived of this this idea of taking it public, listing it, every single expert told us it would trade as a at a discount to NAV. They said it was you know, don't and I and we put it to a shareholder vote. I had thousands of people telling me not to do it. It's going to trade down. And our view was, like, you know, every phase of this process, people have a reason to basically be negative. And so, originally, it was, like, so novel, like, can should you democratize investing? And then it was, can you get access to the companies? And then it was, well, now you have access and you've democratized it, but, you know, these investors need liquidity. Mhmm. You know? They they're not they can't handle liquidity, which, by the way, even big institutions can't either. I've been through I went through two thousand eight financial crisis and I watched like Harvard endowment have to dump like stuff and so I've I so anyways, so I thought of it as like, okay, they've had great performance. Average client performance was 40% a year. Right? So I was like, great. Like, delivered. So let's just give them like clean liquidity and it may trade at a premium. I thought it would, but I

Speaker 2: there was some precedent that it would that it would have traded some premium like Destiny. Yeah. I I I remember at least at times has traded, you know, way above Yeah.

Speaker 7: But but, you know, Robinhood's didn't. So so it unclear. My view you know, I I did a whole, like, Investor Day presentation where I said to people, like, here's why it might trade up, here's why it might trade down, and why it might trade up is that, you know, you can't get shares of Anthropic

Speaker 1: Mhmm.

Speaker 7: At par in a liquid wrapper, you know, with no carried interest. Like, you can't get Andoril or go down your list. OpenAI and and and Ramp and Databricks. Like, the idea that you can get these companies in a in a a perfectly liquid wrapper and a low cost regulated vehicle, like, that makes sense to me they would trade a premium. And that's what I I said that's what could happen. It could also be that, like, sentiment gets negative. There's a war in The Middle East. Yeah. You know, anything could happen. And so, it traded at a massive premium. I mean, massive. It's it's it's been blockbuster success. Yeah. Validated all of our of our aims and hopes. And now, I'm getting the other side, know, oh, yeah, with trades too much of your premium. I said, well, it's been eight days. Right? Yeah. It's been eight days. Like, we have more wood to shop. Right? We have more things we're doing. We have just announced a partnership with Kraken to tokenize it. Oh, interesting. Tokenization, I think, is going to be really, like, part of financial innovations. We've been doing this for financial innovation is key to democratization and key to lowering the cost of intermediation. Mhmm. So, I mean, this is we're super early days here.

Speaker 2: Yeah.

Speaker 1: Mhmm. How have been processing the private credit stories over the last couple months?

Speaker 7: Yeah. I mean, I've been doing this for fifteen years. Right? So, like, this is like how it always goes. Already happened in real estate where institutional money, they raise a lot of money, it's successful, they raise more money, it's successful. And they just it's you just go until it dies. Like, that's just like how how institutional money works.

Speaker 1: Yeah.

Speaker 7: I mean, like and so they just did. I mean, it's just there's a cycle. There's a every single sector has a cycle. And when this and and if you don't basically, if you don't have a lot of restraint before you need to, you just always end up in this problem every single time. Every single time. Mhmm. And so that's what's happening with private credit. I don't think it's as bad as everybody says

Speaker 1: Mhmm.

Speaker 7: But it's you know, the problem is that you end up with this vicious cycle where once you get negative sentiment, it actually becomes self fulfilling.

Speaker 1: Totally. Yeah. Because there's more people pulling out, less people investing.

Speaker 2: What how big can VCX get? Like, if I'm a major platform VC fund, do I see this and think, okay, I'm gonna have more competition at at series b Mhmm. C eventually, like, is this something that you can think can scale to tens of billions of of AUM? What's your

Speaker 7: Are you a dream walker?

Speaker 1: Are you in my dreams?

Speaker 2: Maybe. Maybe. But I can see where you're I can see where you're going.

Speaker 7: Yeah. I mean, the the the hope and the goal here, I mean, there's sort of two sides to the marketplace. So the next turn of the wheel is I need to convince the best private companies this is good for them. Mhmm. You know, we're one company on their cap table. We're a venture fund. To the private companies, we're a venture fund.

Speaker 1: Mhmm.

Speaker 7: You know? It's just like any other venture fund. There's no differences except for our capital, Evergreen. Right? Forever capital, low cost, passive. Like, passive long term capital, which to me as a founder and a builder, like, that's the best money around. I'd rather have that than value add, quote value add. So I think that we get to a place where structurally an allocation to passive long term money becomes, like, the best companies get it. Yeah. The best companies want it. Yeah. And and and so, like, kind of a Jack Bogle Vanguard model would be if we can become sort of a structural bridge, then we get scale, we lower the bigger we get, the lower our fees. The lower our fees, the bigger we get. And, you know, at a $100,000,000,000, our fees are, you know, tens of basis points. Right? It's super disruptive to the venture industry. I mean, it's good and bad because they're gonna they're gonna want us and hate us at the same time.

Speaker 1: Mhmm. Well

Speaker 2: It's very it's very it's very it's very cool.

Speaker 1: Yeah. Mean,

Speaker 2: I think, you know, yeah, we never give investment advice here but I think in general for 99% of people, if you're excited about great private companies, you should take

Speaker 1: some good picks.

Speaker 2: An index approach that allows you to have liquidity along the way. Yeah. Makes makes a lot of sense. And I and I think there's like a lot there's a lot more to come here in the category. I would expect it to be oligopolistic in the way that even, like, the platform VC funds are. You know, they can all get bigger together. So excited to see more more innovation.

Speaker 1: It is funny. I I you know, we were tracking, like, will VC funds go public? Dan Primak was telling us that that might happen. I never really expected it to go the other way, but it makes so much sense with your strategy where that goes. And the the value prop that you've given to founders at a particular stage just makes so much sense. The pitch is fantastic.

Speaker 2: Are you are you hiring like new kind of quasi VC like partners? Are you gonna try to poach from any of the of the

Speaker 7: other That's good question.

Speaker 4: I mean

Speaker 2: because I mean it feels like you're you're building you're building Fundrise which has like millions of investors Yeah. And then you're seemingly like now, basically, like, need to invest in all the products that we love and use. Yeah. I I imagine you'd like some support.

Speaker 7: Yeah. I mean, this is this is in my takeaway, and I guess I don't know if other people have experienced this, but my takeaway is very hard to delegate successfully. There are like like Fundraiser would be together. The founding team's been together fifteen years.

Speaker 1: Wow.

Speaker 7: You know, every year maybe we hire a 100 people.

Speaker 1: Another success too.

Speaker 7: Yeah. Like, it it takes a long time to find people who are just like, you can delegate to and they just deliver.

Speaker 1: Mhmm.

Speaker 7: I've I think I've almost never had the experience where you hire somebody I've hired I've tried Go hire the fanciest person with crazy, weird resume. They just don't deliver.

Speaker 4: Mhmm. I know.

Speaker 7: I I don't know. I mean,

Speaker 1: I sometimes you get rolled on your sleeves.

Speaker 7: It's done with across different industries and finance and real estate. And and so I mean, like, maybe there's a venture person who could just get access and you just pay them. But I sort

Speaker 2: doubt that. Yeah. I mean, I think I think it oftentimes, the hardest thing is finding undiscovered talent.

Speaker 7: Mhmm.

Speaker 2: But the undiscovered talent is what typically ends up actually being like a game changer in an organization. You know, somebody that doesn't necessarily have the pedigree and that that could be that could be for you, like somebody who's just historically been a software engineer and they're like, I was already always like interested in investing. And then they come in and like bring a new approach to investing that kind of works in the in the structure that that you guys have.

Speaker 7: But I guess like my I guess there's two ways you make money venture. One is that you you discover something before it's the hottest thing ever. You come in early.

Speaker 1: Yeah.

Speaker 7: The other one is that you just get access Yeah. When they're already hot and you just ride the product market fit train.

Speaker 1: Yep.

Speaker 7: And so I'm hoping this Yeah.

Speaker 2: And that's been that's been the the ish. There's been so many attempts at like democratizing the private market within tech and a lot of them end up looking like crowdfunding platforms and then they have this massive

Speaker 1: Yep.

Speaker 2: Negative selection bias Yep. Where they're getting the worst companies Yes, that come on and crowdfund and then the investors don't end up making money and it creates this vicious cycle and then the companies just go away over time. And and this is like, you know, potentially it seems like guiding to the opposite of that which is like you have a differentiated value add. Yeah. You have a product that no other platform VC can offer. Yeah. And then you talked about all the the potential like positive flywheel of like Yeah. More capital, lower fees, more capital, lower fees, more investors, you know, more value add. So

Speaker 1: thank you so much for taking the time to come chat with us. Congrats on the success, the overnight success, fifteen years in the making. The chat loves to see it and we appreciate you taking the time.

Speaker 2: Great great to great to finally meet.

Speaker 1: Have a great weekend. Yeah. We'll talk you soon, Ben.

Speaker 2: Cheers. Bye.

Speaker 1: Let me tell you about Restream. One livestream, 30 plus destinations. If you want a multistream, go to restream.com. And let me also tell you about Gusto, the unified platform for payroll benefits and HR built to evolve with small and medium sized businesses. We are running over, so we'll bring in our next guest, Faris, from Normal Computing.