Fundrise began as a fintech platform that allowed individual investors to buy into real estate. Real estate remains a central part of the company’s portfolio, but it has recently applied a similar model to venture capital. With the launch of its Innovation Fund, it’s offering individual investors the chance to buy into private tech companies, an opportunity that’s historically remained the purview of large institutional investors.
Ben Miller, the company’s CEO, has been vocal about the Innovation Fund’s investment in artificial intelligence, with early investments in companies like Databricks, Canva, and DBT Labs. His goal is to provide a means for individual investors to buy in early into what he and many others see as a generational opportunity.
“I mean, is it bigger than the internet? I think it probably ends up being bigger than the internet, definitely bigger than a personal computer,” said Miller in an interview on the “Motley Fool Money” podcast. “There’s going to be a lot of money and growth and excitement — and most people won’t be able to participate because it’s happening in the private markets.
“There’s 10 companies in the public markets that are leveraging AI, and Nvidia is one of them,” he continued. “You can buy Nvidia at 1,000 times revenue or whatever it is, but most of it is happening with startups. And individuals couldn’t invest in that until we created a new way. That’s what’s so exciting. I mean, we’ve basically kind of broken the oligarchy hammer lock on it.”
Miller is particularly bullish on companies like Databricks, which he thinks will be the “guts” of an upcoming boom in AI, as they could provide the data infrastructure required for complex large language models.
‘The Picks and Shovels’ of AI?
In a recent appearance on Real Vision’s “Daily Briefing,” Miller expounded on his approach to investing in AI. He said that, despite concerns about a potential upcoming market downturn, he remains optimistic about the long-term potential of AI. Thus far, this has translated into the Fundrise Innovation Fund targeting companies that, while perhaps not as flashy as OpenAI or Nvidia, are developing technologies that could be crucial to building out popular generative AI applications.
“There are companies like DBT Labs and Databricks, and those companies are the picks and shovels of the gold rush. They’re the most important foundational technologies of what’s happening, and that’s why we invested in them,” he said. “Most people have never heard of them. You really have to be technically in the space. You have to be a data engineer or data scientist to understand what these companies do, but that’s fine with me because that’s how you know they’re real.”
Databricks was founded in 2013 by the original developers of Apache Spark, Delta Lake, and MLflow. With a central focus on AI, the company recently made headlines through the acquisition of MosaicML, a startup dedicated to assisting businesses in crafting their own AI models, at a price tag of $1.3 billion. More than 10,000 companies use Databricks’ products to build analytics and machine learning tools, and the company recorded $1 billion in revenue in the last fiscal year.
It specializes in providing cloud-based data lakes, centralized repositories used to store vast amounts of raw data, irrespective of its structure. Unlike traditional databases or data warehouses that require data to adhere to a specified schema before it’s stored, data lakes accept data in its natural form, be it structured, semistructured, or unstructured. This characteristic makes data lakes highly flexible and adaptable to various data types. Data lakes are foundational in nurturing machine learning and large language models due to their capability to host a massive amount of diverse data, which is essential for training these models.
Fundrise Innovation Fund’s Data and AI Holdings
Databricks is the Fundrise Innovation Fund’s most significant investment to date. In July, it invested $25 million into the company, representing roughly a quarter of the fund’s total assets.
But it has pursued investments in other data and AI companies as well. This includes Canva, an increasingly popular AI-based graphic design tool, and DBT Labs, a data analytics platform that has received early backing from VC giants Andreessen Horowitz and Sequoia Capital. Its portfolio also includes data infrastructure companies such as Vanta, Elastic, Immuta, Splunk, and Confluent.
Fundrise has described the Innovation Fund’s strategy as “evergreen,” meaning it’s targeting long-term plays.
“We invested in Databricks, we invested in Canva. Both those companies, I think, have two decades of growth ahead of them. I think Databricks is the next-generation FAANG,” said Miller on “Motley Fool Money,” referring to the acronym for the stocks of Meta (formerly Facebook), Amazon, Apple, Netflix, and Alphabet (formerly known as Google).
“So it has such a long horizon on it that it’s a little bit like real estate, and even if it goes public that doesn’t mean you’re a seller. Selling Google after they went public would’ve been insane.”