The Nation’s First Community Round Match Fund
A playbook for organizations that strive to empower entrepreneurs with community-sourced capital.
For 80 years, U.S. securities laws prevented the vast majority of Americans from investing in startups. Retail investors could invest in public companies like Starbucks on Wall Street, but not in their neighborhood coffee shops on Main Street. They could “invest” $10,000 on the spin of a roulette wheel in Vegas or a horse in the Kentucky Derby, but not in their friend’s tech startup. They could “back” a startup on Kickstarter, but they couldn’t own that startup’s equity.
In 2012, the JOBS Act changed that. Coming out of the 2008 Great Financial Crisis, the legislation intended to get more capital flowing to early-stage entrepreneurs and give everyone—not just rich people—the opportunity to invest in private companies.
It took a few years for the SEC to hammer out the regulations, but in May 2016, the first startups began raising capital through Regulation Crowdfunding (Reg CF), which was one part of the JOBS Act.
Since then thousands of startups have raised over $2 billion dollars from hundreds of thousands of micro-angel investors through Reg CF. And while it is still a small percentage of “the market” for investments into early-stage companies, the market share of Reg CF is growing rapidly. In the first half of 2023, venture capital dollars deployed declined by 70%. But Reg CF investments were a lot more resilient.
In 2020, Render Capital was launched by Access Ventures as an intentional regional investment strategy to increase entrepreneurs’ access to capital. Access Ventures raised $15M to launch Render Capital and what is now known as the “Louisville Community Fund”.
The Louisville Community Fund is structured as a blended finance strategy because it recognizes that the capital needs of every entrepreneur are unique. From its inception, the Louisville Community Fund of Render Capital included traditional equity and debt, but also recognized the need for alternatives to these traditional methods of funding startups and launched the first in the nation community round match fund.
The goal of this match fund was to unlock creative ways of supporting founders, catalyze new investment within the region, and cultivate a much larger community of micro-angel investors, excited to support local founders.
The future for this initiative includes expanding it in both Kentucky and Indiana through state economic development channels to unlock more dollars and more opportunities for founders.
“The reality is that only 1% of new businesses ever raise venture capital, and only 16% secure traditional bank financing - therefore, a blended capital strategy is needed to build a thriving ecosystem and to meet entrepreneurs where they are. ”