VC Funds Aimed at Retail Investors Come with Volatility
With this year’s crop of superstar IPO filings, including SpaceX and Anthropic, there has been a greater focus on the role venture capital plays in investors’ portfolios. The stage at which promising companies go public has moved much later in their evolution, meaning that investors seeking the outsized returns of betting on the next Apple, Amazon, or SpaceX must do so while the companies are still private.
Traditionally, that has not been an avenue open to many individual investors, as venture capital funds have tended to come with qualified purchaser requirements, hefty investment minimums, 15-plus-year payoff horizons and limited liquidity mechanisms. A new crop of players, however, is promising mass-affluent investors that they can enter the venture capital business as well, often without the need for accreditation or investment minimums. Whether they can succeed in doing so without making investors take on outsized risks relative to returns is an open question.
One of the first companies to launch a venture-capital fund marketed to retail investors was Destiny XYZ Inc. in the spring of 2024. Called Destiny Tech100 (DXYZ), the fund focuses on “late-stage venture-backed companies,” with Destiny XYZ viewing them as a more stable investment than fresh start-ups. Destiny Tech100, which today has a market cap of about $1 billion, comes with a 2.5% annual management fee—roughly in line with what a traditional venture capital fund would charge—but requires no accreditation or minimum investment, since it’s structured as an exchange-listed closed-end fund (CEF).
Today, the fund lists 36 companies among its holdings, including SpaceX and OpenAI. Over a 52-week period, DXYZ posted total returns of 21.02%. Over the most recent three-month period, its total returns fell by 44.16%, with its shares trading at $32.94 apiece as of Monday afternoon, down from their 52-week high of $72.87 per share.
Another example of an evergreen fund offering venture capital exposure to retail investors is Cathie Wood’s Ark Venture Fund (ARKVX), an interval fund with a minimum investment of just $500. Like DXYZ, this fund lists exposure to well-known tech companies, including OpenAI, Stripe and Anthropic. Over a three-year period, ARKVX reports its annualized NAV per share grew by 36.14%, and its annualized one-year NAV per share grew by 84.75%. This fund also comes with a hefty annual management fee of 2.75%. As of August, its market cap stood at roughly $1.24 billion.
One of the biggest funds in the space is the Fundrise Growth Tech Fund (VCX), with a market cap of $1.22 billion. Fundrise, a fintech firm that got its start in the 2010s as a real estate investment platform, launched the fund in 2022 with the goal of investing in AI, space exploration, data infrastructure and financial technology. It listed it on the New York Stock Exchange this March under the ticker symbol VCX. VCX has exposure to Anthropic, Databricks, OpenAI, SpaceX and Epic Games, among its holdings. Also structured as a CEF, with no accreditation or minimum investment requirements, the fund comes with an annual management fee of 1.85%. Fundrise claims that its cumulative gross returns since inception totaled 84.4% as of March.
Since listing, VCX has had a wild ride in the public markets, at one point trading at $575 per share before coming back down to the $40 range. The fact that, in late July, Fundrise moved up the fund’s lockup period expiration for restricted shares by one month, from September to August, has led some Reddit commentators to speculate that the company was trying to manipulate VCX’s share price.
This year, Robinhood got into the “democratizing venture capital” arena. In March, the company launched Robinhood Ventures Fund I (RVI), a CEF seeking investments in aerospace, defense, AI, computer software, financial technology, robotics and similar industries. The fund, which has a market cap of $563.6 million, comes with an annual management fee of 2.00% and lists OpenAI, Databricks and Revolut among its investments. RVI reached its peak share price in mid-May at $77.39. Since then, RVI trading has settled in the mid-$20 range.
In early August, Robinhood followed up by launching Robinhood Ventures Fund II (RVII), structured as a traded BDC. According to Robinhood, the fund committed $20 million to 80 companies, about 65% of which are in the technology sector, and has plans to invest in seed rounds for additional promising start-ups, especially those that participated in the Y Combinator accelerator program. The BDC, which has no accreditation requirements or investment minimums, has a 2 and 20 fee structure (2% annual management fee plus 20% carried interest). Robinhood expected RVII to debut at $25 per share. As of Monday, it was trading at $22.91 per share and had a market cap of $208 million.
Traded BDCs, like listed CEFs, are not required to provide regular redemptions, according to Kimberly Flynn, president of XA Investments, a consulting firm that tracks the evergreen fund market, with a focus on interval and tender-offer funds. However, listed funds can be quite volatile. “These are definitely speculative investments,” Flynn noted. “They can go to a pretty big discount if the demand shifts on them.”
Likewise, Michael S. Covello, executive managing director at Robert A. Stanger & Co., which doesn’t track Robinhood’s funds but tracks the larger BDC market, noted in an email that Robinhood has a unique following among retail investors. “So they may be successful, but the broader traded BDC market is trading at a discount to book, so it does not seem to be an opportune time to list,” Covello wrote.
According to CEF Advisors, exchange-listed BDCs currently trade at an average discount of 21.98%. Their one-year price total return has fallen by 11.28%, while the one-year NAV total return stands at 2.41%.
It’s easy to understand why the promise of venture capital exposure would be appealing to retail investors, according to Kyle Walters, an analyst at private markets research firm PitchBook. Even if the fund makes dozens of investments, only one or two need to perform well to deliver attractive returns to investors. And with this new crop of funds, “you get exposure to a laundry list of really large companies that are raising a lot of capital and are seemingly poised for a lot of success.”
The issue, according to Flynn, is that this latest crop of vehicles is aimed at do-it-yourself investors who would not be able to participate in interval funds or 34 Act funds, which are difficult to access without a brokerage account or accreditation status.
“In some ways, these products disintermediate the financial advisor,” she noted. “And a lot of people would argue that’s not a good thing because you are investing in private markets and the financial advisor has a role to play there in terms of education and hand-holding.”
Financial advisors often prefer evergreen structures (such as interval funds and tender offer funds) to provide clients with exposure to alternative investments since these funds don’t trade on public exchanges and require giving investors regular redemption opportunities. An example of a tender offer fund that provides retail investors with exposure to both high-growth start-ups (20% to 50% of its assets) and publicly traded technology stocks (50% to 80% of its assets) is the Coatue Management Innovative Strategies Fund (CTEK). Launched by alternative asset manager Coatue in May of 2025, CTEK has already risen to a net asset value of $10.5 billion.
The fund lists Anthropic, Revolut, OpenAI and Stripe among its top positions, but classifies them as private equity investments. According to Coatue, since its inception, CTEK delivered returns of 51.3% for Class I shares. CTEK features a 1.25% annual management fee and a 2.07% incentive fee. However, CTEK requires a $50,000 minimum investment and an accredited investor status.
Another prominent example is the StepStone Private Venture and Growth Fund (SPRING). As of July, it had 497 investment stakes in 2,000 companies and a total AUM of $8.7 billion. Since its inception, SPRING has delivered annualized returns of 29.81% for its Class I shares. It is restricted to qualified clients. Investment minimums range from $50,000 for some share classes to $1 million for its Class I shares.
Whether holdings in most of the venture capital funds marketed directly to retail investors are representative of a true venture capital strategy is another question, according to Flynn. Where a venture capital investment approach differs from a private equity one is in providing seed money to a slew of unknown start-ups and betting that at least one or two will grow large enough to provide a substantial payoff. The strategy inherently involves more risks than the private equity approach of investing in established firms, but also much higher payoffs. Neither OpenAI, nor SpaceX, nor Anthropic, however, can be viewed as little-known start-ups in 2026.
Meanwhile, the outsized returns that venture capital investments can provide relative to public markets are often associated with longer investor holding periods. The past 12 months have been atypical, likely due to a spike in IPOs in 2025 and year-to-date in 2026, which included SpaceX. After a three-year period in which the total number of IPOs remained under 225, last year saw 347 offerings and this year 232, according to Stock Analysis. The U.S. Venture Capital Index, constructed by global investment firm Cambridge Associates, shows that as of the first quarter of 2026, pooled-horizon returns on venture capital investments net to LPs totaled 26.13 over a one-year period, at least 10 points above the long-term average. At the same time, those returns were just 72 basis points above the modified public market equivalent (MPME) for the Russell 2000 Index and 73 basis points above the MPME for the Nasdaq Composite Price Index for the same period.
However, over five years, the U.S. Venture Capital Index outperformed the MPME for the Russell 2000 by 260 basis points and the MPME for the Nasdaq Composite Index by 414 basis points. Over 10 years, it outperformed the MPME for the Russell 2000 by 614 basis points and the MPME for the Nasdaq Composite Price Index by 123 basis points.
“I know they say ‘venture,’ but there is very little of what a venture capitalist would call ‘venture,” Flynn noted. “A lot of it is late-stage private equity. A lot of the investments are still private companies, but they are beyond venture rounds of financing.”
Because of these constraints, both Flynn and Walters expect new fund growth in this market segment to be somewhat limited. Robinhood may have a captive audience on its investing platform to rely on before listing its funds, but other players might struggle to generate enough demand from the bottom up compared to established venture capital specialists.
On one Reddit forum, even some of the people who invested in RVII expressed concern that they have been able to buy as many shares as they requested without issue—the most in-demand venture capital funds tend to get oversubscribed quickly. Others complained about the 4.18% expense ratio the fund features.
“It’s a very different model in terms of the underlying metrics and how the firms think about performance and realizing their returns. I would expect that you will probably see a decent amount of capital flow,” said Walters. “I don’t think it will be nearly the scale of what we’ve seen in private equity or some other asset classes, but it won’t be insignificant either.”
