In late 2020, a group of Stanford students banded together to create Stanford 2020, a venture fund solely to invest in their fellow classmates’ ventures. Given the school’s past in spinning out successful startup founders, it unsurprisingly had no trouble raising $1.5 million for the debut investment vehicle -- waitlist not included.
Now, two years later, the leader of that club, Steph Mui, is trying to replicate that playbook in the form of a venture-backed startup, and solo entrepreneurship. PIN, which stands for power in numbers, has freshly raised a $5.6 million seed funding round led by Initialized Capital, with investments from GSR, Industry, NEA and Canaan.
PIN wants to replicate the Stanford 2020 story for other community-based ventures. The company says that it provides interested clubs with the back office framework, legal and tax support and has a platform where leaders can look for capital raise opportunities, meet other members and manage portfolios. It makes money through a SaaS fee, which Mui says she hopes stays below 2% of a club's total assets under management.
“Anyone who has started an investing vehicle, whether it's an investment club to a traditional fund, knows how difficult it is because of all the administrative obligations there are to make sure the fund is set up properly and is compliant,” Mui explained. “Community investment clubs are even more difficult because of the number of investors (a club can commonly have hundreds of members), which introduces even more friction during the fundraising process and ongoing operations.”
The startup isn’t sitting too far from companies like AngelList, which is unbundling the founder experience, and Republic, which is trying to make it easier for anyone to invest in startups.
A newly funded startup all about helping people break into the venture capital investment world and land coveted cap table spots feels very 2020. During a downturn, the pitch seems more risky. For example, as founders enter a period of uncertainty, the appeal of having one dedicated investor may take precedence over a party round of advisors with varying ownership, VSC Ventures’ Jay Kapoor told TechCrunch last week. “The problem with those party rounds was when it came time for somebody to step up and really support the company, they weren't there," Kapoor said.
Founders always want to protect their equity, but in an unstable market, can an investment club win deals? PIN is working on different products that would create an incentive for club members to support founders beyond capital. Like, a hiring bounty system.
Mui explains how founders who are hiring can push a job description that they’re promoting to all their community club members, who will then receive it through the PIN platform. Each action is tied to a specific reward, so if a member refers to someone who gets hired, they could get a money prize or a leaderboard spot that identifies them as someone who is going above and beyond to help the startup.
The product developments are still in the works, but largely with the goal of getting around some of the issues of party rounds. Mui added that the majority of people in Stanford 2020 were first-time check writers, which meant that their care and personal connection to an investment is “significantly higher and more powerful than, arguably, a general party round” where an investor may have hundreds of startups.
It’s not a characteristic that she or the startup can depend on indefinitely.
“The unfortunate timing with us building right now is that we’re benefitting a lot from interest from traditional groups, unsurprising people like other schools, early-stage tech companies, accelerators and [those] who would want to use this product anyways,” Mui said. “It’s a much bigger uphill battle in getting more nontraditional investors -- which is something we care about... [but] has taken a little bit of a backseat.”
She added: “If you're already less familiar with how technology works and started investing and you're in this downturn, you're impacted and you lose your job and you have less disposable income to invest. Naturally, this becomes less of a priority…so it's just been disappointing to me personally.”
While the dynamics of the market have impacted PIN’s ability to land a diverse set of first users, Mui is optimistic of the future. She credited the growing mindshare around crypto-native DAOs (decentralized autonomous organization) as part of the reason that investment clubs are of more interest these days. DAOs are all about collective decision-making frameworks, a concept that other fintechs and crypto companies can easily bring to a world like investment. Just this week, OrangeDAO -- built to bring together 1,000 YC alumni into one place to invest in startups together -- raised $80 million. Earlier this year, Tribevest landed millions for a collaborative investment tool.
“When the [TechCrunch] article came out about Stanford 2020, my co-founder and I thought about doing this as a full-time company, and actually one of the main reasons we didn't at the time was that we were convinced that maybe a Stanford class is a corner case because of the fair criticism that some readers brought forward,” about privilege, Mui said.
“What changed that divide for me was talking to literally over 100 groups…and realizing that’s totally not the case,” she said. “Now that I’m a founder, I realize that all startups have very different needs... all those groups benefit from having community clubs of all different sorts on their cap table because of the expertise they require.”