iSelect Fund promotes venture investments for early-stage startups
St. Louis may not be a city of venture capitalists now, but one Missouri-based company hopes to soon increase startup investment throughout the Midwest. Co-founder Scott Levine describes the iSelect Fund as a “venture fund vehicle," meaning the fund will serve as a go-between for hand-picked startups and accredited investors...
“We’re doing something very cutting edge and solving a really big problem, which is providing investors unprecedented, yet prudent, access to the venture capital asset class,” Levine told Silicon Prairie News.
According to its website, iSelect is the first “build-your-own private equity fund.” The fund allows accredited investors—who have a net worth of $1 million or are making at least $200,000 a year—to invest a minimum of $50,000 in one of its vetted early stage ventures. Each startup company is selected following a competitive application process and evaluation period. Investors receive a promise of fund structure, management and distribution along with company selection, and iSelect potentially saves startups time and money by acting as a vehicle for funding opportunities.
Since it began accepting candidates this summer, the fund has received 20 to 30 applications each month. Columbia, Mo.-based company adFreeq is one of seven companies iSelect has approved for investment so far—the other six startups are all based in St. Louis.
AdFreeq founder Peter Meng said he worked all summer on a new business and financial plan along with a total business review to ensure his company met iSelect’s criteria. He hopes looking to raise $1 million through iSelect by April 2014, and if his funding goal is met, Meng will be able to hire all of his contracted workers full-time and work toward profitability.
“From a startup perspective, you have somebody who’s out there raising funds for you,” Meng said. “You don’t have to go do it yourself and you can focus on your business. That’s huge because that’s a huge time consumer. It’s one of the hardest things about doing a startup.”
The six other startups involved have funding targets anywhere from $500,000 to $3 million. Levine says this kind of capital isn’t always readily available to startup companies. After working for years in a law firm dealing with venture capital law, he saw a need for new investment opportunities in startups.
“We saw us as an organization putting more and more companies out on the street looking for capital and recognizing that there just really isn’t capital available in the marketplace,” Levine (right) said. “There are a lot of accredited investors not currently participating in this ecosystem. We saw an opportunity to reach those people by creating a product that’s designed to attract them.”
The Jumpstart Our Business Startups Act—also known as the JOBS Act—that was signed into law by President Barack Obama in April 2012 also has boosted iSelect’s potential. Levine said the law has been relevant to iSelect’s business model, but not necessarily critical.
The law, which went into effect Sept. 23, encourages small business funding, and allows for crowdfunding, giving accredited and non-accredited investors access to early stage venture opportunities. The law also allows iSelect to promote private venture investment and the venture captial asset class, Levine said. ISelect applied for a solicitation permit through the Securities and Exchange Commission and was able to begin advertising its investment opportunities Oct. 9 of this year.
Moving forward, Levine envisions iSelect becoming a staple investment opportunity for private investors.
“We’re raising money from private individuals and that’s our short term goal,” Levine said. “The long-term goal is to work with the wealth management community in every city we operate in, to be sharing the iSelect Fund opportunity with their clients.”
If investment advisors begin to promote iSelect as they would with other financial products like mutual funds, Levine predicts an explosion of growth in the future of his business. Right now iSelect is opening office space in St. Louis and Kansas City and is looking to further expand.
“It’s exciting,” Levine said. “This could be revolutionary. Nothing quite like this exists.”
Credits: Scott Levine photo courtesy of iSelect Fund.
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