Madrona promotes Anu Sharma and Daniel Li as Partners

Fresh off the announcement of more than $500 million in new capital across two new funds, Seattle-based Madrona Venture Group has announced that they’re adding Anu Sharma and Daniel Li to the team’s list of Partners.

The firm, which in recent years has paid particularly close attention to enterprise software bets, invests heavily in the early-stage Pacific Northwest startup scene.

Both Li and Sharma are stepping into the Partner role after some time at the firm. Li has been with Madrona for five years while Sharma joined the team in 2020. Prior to joining Madrona, Sharma led product management teams at Amazon Web Services, worked as a software developer at Oracle and had a stint in VC as an associate at SoftBank China & India. Li previously worked at the Boston Consulting Group.

I got the chance to catch up with Li who notes that the promotion won’t necessarily mean a big shift in his day-to-day responsibilities — “At Madrona, you’re not promoted until you’re working in the next role anyway,” he says — but that he appreciates “how much trust the firm places in junior investors.”

Asked about leveling up his venture career during a time when public and private markets seem particularly flush with cash, Li acknowledges some looming challenges.

“On one hand, it’s just been an amazing five years to join venture capital because things have just been up and to the right with lots of things that work; it’s just a super exciting time,” Li says. “On the other hand, from a macro perspective, you know that there’s more capital flowing into VC as an asset class than ever before. And just from that pure macro perspective, you know that that means returns are going to be lower in the next 10 years as valuations are higher.”

Nevertheless, Li is plenty bullish on internet companies claiming larger swaths of the global GDP and hopes to invest specifically in “low code platforms, next-gen productivity, and online communities,” Madrona notes in their announcement, while Sharma plans to continue looking at to “distributed systems, data infrastructure, machine learning, and security.”

TechCrunch recently talked to Li and his Madrona colleague Hope Cochran about some of the top trends in social gaming and how investors were approaching new opportunities across the gaming industry.

Ada Ventures closes first fund at $50M, investing in diverse founders tacking society’s problems

A year ago this week Ada Ventures — a UK/Europe focused VC with an ‘impact twist’ aiming to invest in diverse founders tacking societal problems — launched on stage at Techcrunch Disrupt. (You can watch the video of that launch below).

Today Ada announces that it has closed its first fund at $50 million. Cornerstone LPs in the fund include Big Society Capital, an entity owned by the UK government, as well as the the British Business Bank.

Check Warner, a co-founding partner, said the raise was oversubscribed: “We weren’t even sure we’d be able to raise $30 million. And then to actually get to 38 million pounds then $50 million, which was over our initial hard cap of 35 is, is really, really big.” All of the fund was raised on video calls during the 2020 pandemic.

Geared as a ‘first-cheque’ seed fund, Ada is trying to tackle that thorny problem that to a large extent the VC industry itself created: the ‘mirroring’ that goes on when white male investors invest in other white men, thus ignoring huge swathes of society. Instead, it’s aiming to invest in the best talent in the UK and Europe, regardless of race, gender or background, with the specific aim of “creating the most diverse pipeline, and portfolio, on the continent”, while tackling issues including mental health, obesity, workers rights and affordable childcare.

It appears to be well on its way. In 2020, Ada invested in eight seed-stage companies tackling the above issues. Four of the eight companies have female CEOs. This brings the total portfolio size to 17, including the ‘pre-fund’ portfolio.

In terms of portfolio progress: Huboo Technologies raised a £14m Series A, which was led by Stride VC and Hearst Ventures; Bubble delivered tens of thousands of hours of free childcare to NHS staff; and Organise grew their members from 70,000 to more than 900,000, and campaigned for the government to provide support for the self-employed during Covid-19.

On Ada Lovelace Day this October, Ada launched its own Angel program, enabling five new Angel investors to write their first cheques. This is not dissimilar to similar Angel programs run by other VCs. It also has a network of 58 ‘Ada Scouts’ resulting in around 20% of deal flow, with two investments now made across the portfolio that were scout-sourced.

This is no ordinary scout network, however. Ada’s Scout community includes the leaders of Hustle Crew, a for-profit working to make the tech industry more inclusive, and Muslamic Makers, a community of Muslims in tech.

In 2021, Ada says it will continue to grow its network of Ada Scouts across the UK, with a focus on the LGBTQ+ community, disabled entrepreneurs, and regions outside of London.

And Scout network is not just ‘for show’, as Warner told me: “We have spoken to the Iranian Women’s Association and Islamic makers and all these groups that are underrepresented within tech and VC. And they bring us companies. And if we end up investing in these companies, we pay them both an upfront cash fee and also a carried interest share. So there are quite a few things that make it distinct from other scout programs. Many other scout programs just take existing investors like existing angels, and give them more capital and double up their investments. We’re actually enabling a whole new group of people who wouldn’t otherwise be able to get access to VC. We involve them in our due diligence process, we get their insight into markets that we wouldn’t necessarily understand, like the Shariya finance market, for example. So there are quite a few things that we’re doing differently. And we now have 58 of these scouts, who drive between 10 and 20% of our deal flow on any given month.”

Warner continued: “When we launched we couldn’t have predicted the seismic changes and tragedy brought on by Covid-19, or the social dislocation precipitated by the killing of George Floyd. These events have provided the backdrop of the first year of deployment from Ada Ventures Fund I. In light of these events, the Ada Ventures strategy feels more poignant — and urgent — than it has perhaps ever been.”

In an exclusive interview with TechCrunch, Warner and co-founder Matt Penneycard admitted the fund is not ‘labeled; as an ‘Impact fund’ but that it shares a similar orientation.

Penneycard said: “The difference, the difference is often in the eye of the beholder. In that, it’s the way the investor wants to bucket it. Some investors might see us as an impact fund if they want to, and that’s fine. Other investors see the massive financial arbitrage that you get with a fund like ours, just because you’re looking in very different places to other funds. So, you’ve got more coming in the top of the funnel, if you’ve got a decent process, you should get a better outcome. And so with some of our investors, that’s kind of one of the primary reasons they’re investing, they think we’re going to generate superior returns to other funds, because of where were are looking. It isn’t pure impact. It’s a real fund, it just happens to have the byproduct of quite deep, meaningful social impact.”

Indiegogo founder launches alternative investments discovery platform Vincent

As more and more alternative investment marketplaces pop up around specific verticals like art or collectibles, Indiegogo founder Slava Rubin is launching a Kayak-like platform called Vincent which helps curious investors get a handle on what the entire asset class has to offer.

Rubin and co-founders Evan Cohen and Ross Cohen have raised $2 million for the venture with backing from investors including Uncommon Denominator, ERA Ventures, The Fund and Rubin’s own firm Humbition. Vincent launched in beta this July but the firm is now ready to take the platform wide with a public launch. Rubin says the team has assembled the “most comprehensive database of alternate investments.”

Rubin has been a driving force behind alternative investments since his Indiegogo days and has helped guide some of the existing legislation that has made investments in alternative assets more tenable.

Part of the buzz around alternative investments in 2020 is the result of evolving guidance from stateside regulatory bodies, while added attention comes from the boom around investment platforms that bring users more approachable tools to access financial institutions. Specific verticals may be hoping to build up a Robinhood -like brand and following around their particular niche, but Vincent is aiming to benefit from rising tides and users eyeing diversification.

“[Our partners] are really heads down often on a lot of curation around a specific deal and trying to become experts in that space,” Rubin tells TechCrunch . “What we’ve learned is that the investor is thinking more about trying to get exposure to alternative investments and not only do they want exposure to one alternative investment, they want exposure to the entire asset class.”

The company currently has partnerships with about 50 platforms, Rubin tells me, including platforms like WeFunder, SharesPost, Rally Rd. and Otis. The deals which span real estate, venture, collectibles, and art, among others, bring Vincent users access to $2 billion worth of investments, the company says. Users visiting Vincent are asked whether or not they are accredited which routes them to the list of deals they have access to.

Similar to Kayak, people are using Vincent to source the deals, but once they find an asset that tickles their fancy, they’ve being redirected to the partner platform’s site or app in order to actually carry out the deal. Once a user carries out an investment on said platform, Vincent receives a standard fee from the partner platform.

Vincent’s main challenge is building up a brand that resonates with users without actually managing the actual investments themselves. Most of these partner platforms, as Rubin notes, are built around curating and developing an expertise around a specific niche, whether that works in a broader scenario is the big question.

“The whole goal of an aggregator is to really simplify an experience where the market is massively fragmented,” Rubin says.

Vincent is also aiming to be more than an aggregator, serving up editorial content with a blog and newsletter that the team hopes can make the platform more of a one-stop-shop for investors looking to educate themselves on alternative assets. For his part, Rubin hopes that the gold rush of startups building alternative investment platforms is the perfect time for a player to come in that focuses on streamlining everything.

 

ORIX invests $60M in Israeli crowdfunding platform OurCrowd

Japan-based financial services group ORIX Corporation today announced that it has made a $60 million strategic investment into the Israeli crowdsourcing platform OurCrowd. In return, the crowdfunding platform will provide the firm with access to its startup network. OurCrowd also says that the two groups will collaborate to create financial products and investment opportunities for the Japanese and global market, including access to its venture funds and specific companies in the OurCrowd portfolio.

ORIX is a global leader in diversified business and financial services who will strengthen OurCrowd in many ways,” OurCrowd CEO Jon Medved said in today’s announcement. “We are enthusiastic about the potential to further transform the venture capital asset class together and provide a strong bridge for our innovative companies to the important Asian markets.”

While ORIX already operates in 37 countries, including the U.S., this is the company’s first investment in Israel. It comes at a time where Japanese investments in Israel are already surging. And earlier this year, Israel’s flag carrier El Al was about to launch direct flights to Tokyo, for example, and while the pandemic canceled those plans, it’s a clear sign of the expanding business relations between the two countries.

“We are excited about investing in OurCrowd, Israel’s most active venture investor and one of the world’s most innovative venture capital platforms,” ORIX UK CEO Kiyoshi Habiro said. “We intend to be active partners with OurCrowd and help them accelerate their already impressive growth, while bringing the best of Israeli tech to Japan’s large industrial and financial sectors.”

So far, OurCrowd has made investments in 220 companies across its 22 funds. Some of its most successful exits include Beyond Meat and Lemonade, JUMP Bike, Briefcam and Argus. ORIX, too, has quite a diverse portfolio, with investments that range from real estate to banking and energy services.

Greece’s Marathon Venture Capital completes first close for Fund II, reaching $47M

Marathon Venture Capital in Athens, Greece has completed the first closing of its second fund, reaching the €40m / $47M mark. Backing the new fund is the European Investment Fund, HDBI, as well as corporates, family offices and HNWIs around the world (plus many Greek founders). It plans to invest in Seed-stage startups from €1m to 1.5m initial tickets for 15-20% of equity.

Team changes include Thaleia Misailidou being promoted to Principal, and Chris Gasteratos is promoted to Associate.

Marathon’s most prominent portfolio company is Netdata, which last year raised a $17 million Series A led by Bain Capital, and later raised another $14m from Bessemer. On the success side, Uber’s pending $1.4B+ acquisition of BMW/Daimler’s mobility group was in part driven by a Marathon-backed startup, Taxibeat, which was earlier acquired by Daimler.

Partners George Tziralis and Panos Papadopoulos tell me the fund is focused generally on enterprise/B2B, plus “Greek founders, anywhere”.

Highlights of Fund One’s investments include:

  • Netdata (leading infra monitoring OSS, backed by Bessemer & Bain)
  • Lenses (leader in DataOps, backed by 83North)
  • Hack The Box (cybersecurity adversarial training labs)
  • Learnworlds (business-in-a-box for course creators)
  • Causaly (cause-and-effect discovery in pharma)
  • Augmenta (autonomous precision agriculture)

Tziralis tells me the majority of its next ten companies have already raised a Series A round.

Tziralis and Papadopoulos have been key players in the Greek startups scene, backing many of the first startups to emerge from the country over 13 years ago. And they were enthusiastic backers of our TechCrunch Athens meetup many years ago.

Three years ago, they launched Marathon Venture Capital to take their efforts to the next level. Fund I invested in 10 companies with the first fund, and most have raised a Series A. The portfolio as a whole has raised 4x their total invested amount and maintains an estimated total enterprise value of $350 million.

They’ve also been running the “Greeks in Tech” meetups all over the world – Berlin to London to New York to San Francisco, and many more locations in between, connecting with Greek founders.

Investors give Baltimore’s Facet Wealth $25 million to sell businesses on financial planning as a benefit

Yesterday, Baltimore-based fintech company Facet Wealth said it raised $25 million in financing as it readies a new business line pitching financial planning as an employment benefit to businesses looking to recruit top talent.

Employment benefit packages are expanding beyond the basic gym membership and healthcare to include subscriptions to Netflix, discounts on delivery and ride-share services, and other perks. So why not financial wellness?

The thesis certainly managed to attract a big-money backer, with Warburg Pincus, the multi-billion dollar private equity investment firm which doubled down on its commitment with the new financing into the company.

The company said the latest round would be used to finance the expansion of Facet Wealth’s direct-to-consumer business even as it readies its employee benefit service for launch.

Already customers are signing up for pre-launch partnerships to get their employees on the program. Early wannabe users include ClassPass, MyVest and ChiliPiper, the company said.

“Since our first investment two years ago, the Facet Wealth team has proven their ability to meet a unique consumer need, evolving and expanding their offering to build a truly innovative client experience and business model”, said Jeff Stein, Managing Director at Warburg Pincus. “Their expansion into the employer market further solidifies them as a category-defining company that is well-positioned to disrupt the wealth management industry for years to come.”

To date, Facet Wealth has raised $62 million in funding from Warburg Pincus, Slow Ventures and other, undisclosed investors.

Greylock and MLT are trying to diversify tech’s wealth cycle

Greylock Partners has teamed up with Management Leadership for Tomorrow to address issues of diversity and inclusion in the technology industry.

“Our view is this has to be a comprehensive approach,” MLT Founder and CEO John Rice told TechCrunch. “This is not just a coding program, mentor program, fellowship program. There are plenty of great ones. They’re important. But what we’re saying is you have to work on all these levers and take a long-term view. Our view is we can really move the needle exponentially to grow minority participation in the highest leverage areas of the tech ecosystem.”

For starters, the multifaceted partnership will enable Greylock to tap into MLT’s network of around 8,000 Black, Latinx and Indigenous professionals and connect them with potential roles at the firm’s portfolio companies. Additionally, Greylock and MLT will work together to support retention at those companies, as well as help MLT professionals pursue careers in venture capital.

“Being at Greylock and seeing the tech ecosystem over the last 20 years — it’s become pretty clear that, at no surprise to us, modern technology is one of the greatest opportunities for wealth creation,” Greylock Partner David Sze told TechCrunch. “Has been one of the greatest creators for wealth and is likely to be so in the future — in the foreseeable future.”

But the greatest financial returns accrue to founders, early employees and investors. That creates this network where those early employees and alumni from top companies like Facebook or Google then go on to become founders of the next generation of startups in the wealth creation cycle, Sze said.

“And the cycle repeats itself,” Sze said.

Then, VCs are eager to back teams with people who used to work at those high-growth companies, he said.

“That’s just how the Valley works,” Sze said. “It’s a social network in and of itself. [ … ] But the issue is that Black and Latinx and Native American people really largely have been left out of tech startups and venture capital and those networks. And as a result, it actually is a compounding factor.”

For those folks in the system, it compounds in their favor but that means for those left out, it becomes harder to figure out how to break into it, Sze said.

“And look, VCs and tech startups — we just have to be honest that we’ve been really bad at getting this right,” Sze said. “Historically, I mean, we’ve let the system sort of evolve without much top down oversight in regards of diversity and inclusion and we just really need to change that.”

That’s a key reason why Greylock and MLT are partnering to try to get more Black, Latinx and Indigenous people in these tech startups. And it’s not that there is a pipeline problem because there is plenty of available talent, Sze said. But he said that if there is a pipeline problem, “the problem is actually on our side.”

“It’s not on the talent side,” Sze said. “There is plenty of talent out there. It’s that the networks and systems that have existed and grown over time in the Valley have not been conducive to allowing the inclusion of that group.”

Greylock’s partners also donated $5 million to anchor MLT’s first-ever impact fund, which allows MLT to be a limited partner in Greylock’s latest fund, a $1 billion fund.

“We have a long history with our LPs,” Sze said. “We do not let new LPs in very often and we’re super excited to have them involved because we think it’s a force multiplier.”

The hope with this partnership is that it’ll spur ideas for other collaborations with VC funds, Sze said. For Rice, he hopes that other leaders in tech will take note and get on board with moving the needle.

“Leaders need to be at this time, at this critical juncture, be much better informed about why we are where we are,” Rice said. “[ … ] Leaders not only need to be well-informed but also be willing to hold themselves accountable to be more informed. And that doesn’t require them to be experts on the history of racism. It requires them to understand like they understand, you know, AI and bitcoin and things like that. Understand this stuff.”

Leadership, Rice said, also looks like committing to a comprehensive approach with the same level of rigor that venture capitalists apply to how they invest in companies, and that tech companies apply to their growth.

“If we don’t have that same level of rigor in our approach and we just think that we can move the needle with random acts of diversity, then we’re done. We’re not going to move the needle. It’s going to require, you know, a comprehensive approach.”

Papa raises $18 million to expand its business connecting older adults with virtual and in-person companions

The Miami-based startup Papa has raised an additional $18 million as it looks to expand its business connecting elderly Americans and families with physical and virtual companions, which the company calls “pals.”

The company’s services are already available in 17 states and Papa is going to expand to another four states in the next few months, according to chief executive Andrew Parker.

Parker launched the business after reaching out on Facebook to find someone who could serve as a pal for his own grandfather in Florida.

After realizing that there was a need among elderly residents across the state for companionship and assistance that differed from the kind of in-person care that would typically be provided by a caregiver, Parker launched the service. The kinds of companionship Papa’s employees offer range from helping with everyday tasks — including transportation, light household chores, advising with health benefits and doctor’s appointments, and grocery delivery — to just conversation.

With the social isolation brought on by responses to the COVID-19 pandemic there are even more reasons for the company’s service, Parker said. Roughly half of adults consider themselves lonely, and social isolation increases the risk of death by 29%, according to statistics provided by the company.

“We created Papa with the singular goal of supporting older adults and their families throughout the aging journey,” said Parker, in a statement. “The COVID-19 pandemic has unfortunately only intensified circumstances leading to loneliness and isolation, and we’re honored to be able to offer solutions to help families during this difficult time.” 

Papa’s pals go through a stringent vetting process, according to Parker, and only about 8% of all applicants become pals.

These pals get paid an hourly rate of around $15 per hour and have the opportunity to receive bonuses and other incentives, and are now available for virtual and in-person sessions with the older adults they’re matched with.

“We have about 20,000 potential Papa pals apply a month,” said Parker. In the company’s early days it only accepted college students to work as pals, but now the company is accepting a broader range of potential employees, with assistants ranging from 18 to 45 years old. The average age, Parker said, is 29.

Papa monitors and manages all virtual interactions between the company’s employees and their charges, flagging issues that may be raised in discussions, like depression and potential problems getting access to food or medications. The monitoring is designed to ensure that meal plans, therapists or medication can be made available to the company’s charges, said Parker.

Now that there’s $18 million more in financing for the company to work with, thanks to new lead investor Comcast Ventures and other backers — including Canaan, Initialized Capital, Sound Ventures, Pivotal Ventures, the founders of Flatiron Health and their investment group Operator Partners, along with Behance founder, Scott Belsky — Papa is focused on developing new products and expanding the scope of its services.

The company has raised $31 million to date and expects to be operating in all 50 states by January 2021. The company’s companion services are available to members through health plans and as an employer benefit.

“Papa is enabling a growing number of older Americans to age at home, while reducing the cost of care for health plans and creating meaningful jobs for companion care professionals,” said Fatima Husain, principal at Comcast Ventures, in a statement. “

A meeting room of one’s own: Three VCs discuss breaking out of big firms to start their own gigs

One of the more salient trends in the tech world — arguably the engine that propels it — has been the recurring theme of people who hone talents at bigger companies and then strike out on their own to found their own startups.

(Some, like Max Levchin, even hire entrepreneurial types intentionally to help perpetuate this cycle and get more proactive teams in place.)

It turns out that trend doesn’t just apply to companies, but also to the investors who back them. At Disrupt we talked with three venture capitalists who have followed that path: Making their names and cutting their teeth at major firms, and now building their own “startup” funds on their own steam.

On the macro level, the whole world has been living through a challenging time this year. But as we’ve seen time and again the wheels have continued to turn in the tech world.

IPOs are returning, products are being rolled out, people are buying a lot online and using the internet to stay connected, there has been a lot of M&A and promising startups are getting funded.

Indeed, if entrepreneurs and their innovations are the engine of the tech world, money is the fuel, and that is the opportunity that Dayna Grayson (formerly of NEA, now founder at Construct Capital), Renata Quintini (formerly at Lux Capital, now founder at Renegade Partners) and Lo Toney (formerly GV, now founder at Plexo Capital) have zeroed in to address.

Grayson said that part of the reason for striking out to start Construct Capital with co-founder Rachel Holt was what they saw as an opportunity to create a firm that specifically funded startups tackling the industrial sector:

“Half the U.S. economy’s GDP, half the GDP of this country, hasn’t really been digitized,” she said. “[Firms] haven’t been tech enabled. They’ve been way under invested … The time is now to build with early stage entrepreneurs.”

While Construct is focusing on a sector, Renegade was founded to focus on something else: The stage of development for a startup, and specific the Series B, which the firm refers to as “supercritical,” essential in terms of getting team and strategy right after a startup is no longer just starting out, but before and leading to scaled growth.

“We saw through our boards over and over again companies that figured out how to scale their organizations, put in the processes,” said Quintini, who co-founded Renegade with Roseanne Wincek. “On the people side, they actually went further and captured a lot more market cap and market share faster. Once we saw this opportunity, we could not let it go.”

She compares the current imperative to really focus on how to build and scale companies at the “supercritical” stage to the focus on early stage funding that typified an earlier period in the development of the startup ecosystem 15 years ago. “You could get a million dollars and be in business, a lot more people could, and you had less time to figure out what really resonated with customers,” she said. “That really gave rise to today.”

Toney has taken yet another approach, focusing not on sector, nor stage, but using capital to help germinate a whole new demographic of founders, the premise being that funding a more diverse and inclusive mix of founders is not just good for creating a more level playing field, but also for the good of more well-rounded products that speak to a wider population of users.

“I was having a great time at GV, but I just saw this opportunity as being one that was too hard to resist,” said Toney of founding Plexo, which invests not just in startups but in funds that are following a similar investment principle to his. Investing in both funds and founders is something GV did as well, but the added ability to turn that into investing with a social imperative was important. “To have this byproduct of increasing diversity and inclusion in the ecosystem [is something] I’m super passionate about,” he said. 

We are living through a time when the tech world seems to be awash in capital. One of the byproducts of having so many successful tech companies has been limited partners rushing in to back more VCs in hopes of also getting some of the spoils: Many firms are closing funds in record times, oversubscribed and that’s having a knock-on effect not just in terms of startups getting funded, but VCs themselves also multiplying with increasing frequency. All three said that the fact that they all identify as more than just “another new VC”, with specific purposes, also makes it easier for them to get themselves noticed to get involved in good deals.

Grayson said that the challenge of starting a firm in the midst of a global pandemic turned out to be a piece of good fortune in disguise in an industry that thrives on the concept of “disruption” (as we at TechCrunch know all too well … ).

“We were really lucky that we started investing in a COVID world,” she said. “So many things have been up ended. And I think, you know, software adoption and technology adoption have been moved up 10-20 years in industry. [And] the way that we work together really has changed.” She also said that they’ve found themselves almost looking for companies “created in a COVID environment,” which indeed would qualify as a battle-tested business model.

In terms of raising funds themselves, Toney also recalled the period when we saw a real surge of VCs emerging to fund companies at the seed stage and the growth of “solo capitalists” around that.

“I think what’s really interesting about solo capitalists is [how] they take their understanding of operations, and a deep network of other technologists, both from big companies as well as entrepreneurs, and … leverage access to all that deal flow by going out and actually raising capital from other sources, whether that be high net worth individuals or family offices or even institutions,” he said.

Investment tech won’t solve systemic wealth gaps, but it’s a good start

Robinhood founder Vlad Tenev recently sparked controversy when he told the New York Times that lower participation in equity markets by younger Americans “ultimately contributed to the sort of the massive inequalities that we’re seeing in society.”

In his 2015 book “The Economics of Inequality,” Thomas Piketty argues that when the growth rate of invested capital outpaces the growth of GDP (and the average per-capita earnings), income inequality will increase. Where Vlad Tenev missed the mark is neglecting to note that while participation in equity markets is key to building wealth, a prerequisite to investment is having capital to invest in the first place.

Structural changes (including access to affordable health care, job training, higher wages, expanding infrastructure, and other public policy initiatives) are necessary to combat systemic inequality. But innovations in fintech can supplement these policies by providing tools that can give people access to wealth-building investment opportunities at the individual level. While these advancements aren’t a substitute for the macro forces necessary to bring societal change, they can help provide one opportunity to remove barriers individuals have faced.

The age of fintech and the millennial investor

Despite recent controversy around the zero-commission stock trading revenue model, fintech investment apps have given retail investors unprecedented access to the stock market. This is especially true for younger investors, who lag behind other generations in terms of expected wealth.

Popular fintech apps like Acorns, Public and Robinhood have created a niche for millennials and Gen Z retail investors looking to begin investing in the stock market. From January to April, Robinhood alone has acquired more than three million funded accounts, with an average age of 31.

Similar trends are emerging in other asset classes that have traditionally not been accessible to retail investors. For example, according to EY, real estate crowdfunding investments have doubled to more than $8 billion since 2016. Commercial real estate in the U.S. was valued at around $16 trillion in 2018. That’s about half the size of the U.S. stock market during the same time period.

Real estate is a critical asset class for wealth building: Approximately 90% of millionaires have made their money from investments in real estate. This can partly be explained by the fact that the asset class is so siloed: Historically, only wealthy investors could access these opportunities.

A few fintech companies have emerged in the real estate space in attempts to widen access to the asset class, but to-date none have truly opened up the market to the everyday investor.

Lowering the cost of participation

So what does this mean? If everyone can access real estate investment opportunities, can they all become millionaires? Probably not. But if circumstances allow anyone to access the tools and educational resources to achieve financial stability, then acquiring wealth becomes much more plausible.

Financial literacy and access are key components in the establishment of stable financial footing. Also important is eliminating many of the costs associated with being in the lower earning brackets — often referred to as the “poverty tax.”

An industry-wide push toward commission-free trading is a prime example of fintech removing these costs of participation. A $10 trade fee on a $100,000 trade is nominal, yet that $10 becomes significant for a share purchase of $100; you would need a 20% gain just to cover your transaction costs. Yet the zero-commission and fractional share models haven’t seen widespread adoption in real estate investment markets.

Of all traditional asset classes, real estate remains one of the costliest to participate. The adoption of zero-commission and low-cost share models have the greatest potential to echo what is happening in the stock market: Opening doors to everyday investors.

What’s next?

It’s only a matter of time before we see the junction of real estate and fintech take shape.

This is one area where technology can make a material difference. According to a study from the University of California, Berkeley, fintech solutions like algorithmic lending reduce some of the barriers that have made it difficult, historically, to purchase a home.

The study found that leading fintech products don’t completely solve the problem, given the deeper underlying systemic issues. However, they do reduce rate disparities by more than a third.

As these companies open up new investment opportunities and reduce the buy-in costs, we will hopefully see a greater share of wealth being accumulated by those who create the value that underlies equity investments: everyday Americans.

Based on the history of limited access and the current absence of investment opportunities, it’s a fair argument that exposure to new wealth-building tools and financial literacy — in a tech-powered, millennial-friendly way — can help solve the barrier-to-entry problem and open up access to more stable investments.

With over 24 million users across Stash, Acorns and Robinhood — many of them overlapping — there’s no shortage of interest in tech-enabled investing. The average Acorns investor, for instance, is 29 years old and makes $50,000 a year — a far cry from the accredited investor’s minimum salary of $200,000.

Don’t be surprised to see these new investors seek out holdings in alternative assets like real estate, energy and more. It’s all about access, quality of offerings, education and user experience.

Fintech founders often like to overstate the level of social good their products can bring. We, as two real estate fintech founders, believe that we can help individuals on a person-by-person micro level, but larger structural change outside of tech is also necessary if we want to see real, widespread improvement. It goes without saying that tech alone won’t change deeply embedded structures, but it sure can open a lot of doors.

Correction: A previous version of this article had said that Robinhood has added six million first-time investors since the pandemic hit. A spokesperson contacted us to say “Robinhood added 3 million funded accounts from January to April.”