Silicon Valley-headquartered startup accelerator-cum-early stage VC fund house 500 Startups is raising a new, and its third, flagship fund with a target corpus of as much as $100 million, more than twice the size of its second umbrella fund raised a year ago.
Simultaneously, it has also partnered with equity-based crowd-funding platform SeedInvest which would allow it to go for public fundraising from accredited investors in the US for its new fund as well as some of the other funds, it said in a blog post.
SeedInvest has built an investor verification system and a white label solution that enables VC funds to manage their own fundraising activity and investor bases.
Historically, VC funds have been prohibited from talking publicly about raising capital. This restriction has long been problematic for managers seeking to raise awareness about new venture funds. However, with the recent amendments with the JOBS Act in the US, VC funds may choose to solicit by filing under a new exemption from registration propagated by the US Security and Exchange Commission (SEC). By doing so, venture funds are able to speak publicly about their fundraising activities and potentially tap into a much larger investor base.
"Making this change in our fundraising process allows us to reach a much broader audience of investors than ever before," said Dave McClure, founding partner of 500 Startups. "We are excited to be working with SeedInvest to streamline our fundraising process and help verify our investors' accreditation status."
The public fundraising would source money for the new flagship funds as well as few other funds previously floated—Fund I Annex (follow-on fund for 500 Startups' first generation global flagship fund), 500 Luchadores (regional fund focusing on Latin America) and 500 Durians (regional fund focusing on Southeast Asia).
Interestingly, the firm had floated an India-focused micro venture fund 500 StartupWallah with a corpus of $5 million, along the same time as the other two regional funds. The firm had not publicly announced closure of this fund but it has not included it in the roster of funds for which it is seeking money through SeedInvest partnership.
Last November, Pricebaba.com, a location-based price search engine for mobile phones, had raised an undisclosed amount from 500 StartupWallah.
500 Startups was founded in 2010 by McClure, a former executive at PayPal. Its network includes more than 750 startups, 200 mentors and 1,000 entrepreneurs across the globe. 500 Startups typically invests up to $250,000 in a company during the first leg, which means the new flagship fund would allow it to back around 400 startups. Its preferred sectors include financial services, gaming, payments, SaaS and education on mobile and web. Till now, it has funded over a dozen startups in India, which include companies like WalletKit, TradeBriefs, Instamojo and gazeMetrix.
SeedInvest was launched last year and has attracted thousands of investors who are collectively looking to invest over $175 million in startups.
(Edited by Joby Puthuparampil Johnson)