From left to right: the FundersClub software engineer Shlomo Zippel, along with Wharton graduates Felicia Curcuru, Alex Mittal and Boris Silver, all work at one of the first online venture capital platforms.
With over $2.5 million invested in a timespan of seven months, the FundersClub is aiming to take venture capital to a new level.
Co-founded by 2007 Wharton and Engineering graduate Alex Mittal and 2010 Wharton graduate Boris Silver last summer, the FundersClub is an online-only venture capital platform. It was also the first online platform to receive membership from the National Venture Capital Association.
Common roots
The company’s founders first met during their undergraduate days at Penn, when they were both pursuing degrees in the Wharton School and developing their interests in entrepreneurship.
“The company exists partially because of Wharton,” Mittal added. “It’s the common tie that brought us in proximity to each other.”
Before creating the FundersClub together, Silver and Mittal pursued their own careers, starting their own enterprises which ranged from Silver’s fantasy sports company Sport Interactiva to Mittal’s touch screen hardware company Innova Dynamics.
Silver and Mittal were joined by another Wharton alum, 2007 graduate Felicia Curcuru, in the company’s early stages.
Curcuru, who worked for McKinsey & Company prior to the FundersClub, met Mittal as an undergraduate student as well.
“Alex and I knew each other since freshmen year in college,” she said. “We wrote a business plan together for an entrepreneurship class.”
The three alumni concur that their common backgrounds and shared experiences at Penn were critical to the success they have achieved today.
An innovative platform
The FundersClub allows people to invest capital into venture funds managed by the company, which in turn are used to fund private entrepreneurial companies who are first starting out.
Traditionally, venture capital transactions are conducted offline due to U.S. Securities and Exchange Commission regulations that prohibit private companies from directly soliciting the public for investments.
Private companies cannot fundraise through online efforts because it is considered a form of solicitation. This is where the FundersClub comes in as an intermediary between potential investors and companies seeking funding.
Both Silver and Mittal believed the venture capital industry could be more efficient and accessible to the common investor by establishing an “online marketplace” for investors and companies.
“Based on my experiences founding companies ... and from conversations with founders, other venture capital funds and people who have been sidelined from investing, there weren’t that many opportunities for people to invest in the private markets,” Mittal said.
Silver added that from his past experiences as an angel investor, or someone who provides funding for startups and entrepreneurs, he felt like the market was not “very efficient offline in raising capital” and that at the time “there really was no way to do this on the internet.”
In order to work with the FundersClub, both investors and potential companies need to meet certain criteria. Investors must have an annual income of at least $200,000 or a net worth of at least $1 million, and companies must pass a detailed vetting process led by a formal investment committee that analyzes the company’s market size, potential for growth, services and other factors. The average investment size spans from $1,000 to $250,000.
“Our companies are highly curated ... some are referred to us by top [venture capitalists] and others by our members all across the country,” Mittal said.
Currently, the FundersClub receives inquiries from over 100 companies each month. Of these companies, the FundersClub narrows them down to three to four that become “targets” for FundersClub investments, enabling investors to analyze companies more closely and engage in more efficient deals.
On the investing side, the company contains over 5,000 accredited investors from a wide spectrum of backgrounds, including senior executives, engineers, prominent actors and lawyers.
“We aren’t just providing money for the best companies but also enabling them to succeed,” Mitall explained. “Ultimately we are aspiring to identify the best opportunities, do our due diligence and help them create value. It helps to have this really powerful network of accredited investors.”
All in a day’s work
Originally, the FundersClub consisted of only the two co-founders and Curcuru. Now, the company has grown to six employees and has plans for potential expansion in the future.
Even though the company has a consistent group of investors and companies, working at a start-up means there is no regular daily routine.
“There is no typical day at a start-up,” Silver said. “But, I spend a lot of my time looking at companies, helping support our existing portfolio and a lot of time on our legal operations as well as our accounting and financial operations.”
According to Mittal, “realistically everyone wears different hats from time to time.”
In addition, the company’s location in San Francisco has allowed the FundersClub to go back to its “Wharton roots.”
“We’ve been closely plugged in with the executive education branch of Wharton San Francisco, going to their events, speaking with entrepreneurs ... we try to be as involved as we can be,” Curcuru said.
Going forward
In terms of expansion, the FundersClub hopes to attract an even greater number of investors in the future.
“We’ve funded a really great batch of companies, but then taking that and scaling that forward massively is what we’re trying to do.”
For aspiring entrepreneurs at Penn and beyond, the three agreed on a few important pieces of advice.
“Don’t be afraid to ask dumb questions, be really determined and stay hungry,” Silver said.
A previous version of this article stated that around $22 million was invested in the FundersClub. The $22 million is the total invested in FundersClub funded companies so far, including the amount contributed by other investors and other venture capital firms outside of FundersClub.
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