By Nin Desai, Founder & CEO of NIN Ventures, a Crowdfunded Technology Venture Capital Firm.
Venture capital provides financing to early-stage emerging companies with high growth potential in exchange for an ownership stake (equity). The risks venture capital firms take investing in disruptive technologies or business models often yield higher returns than their limited partners (or investors) require. As these companies grow, they create jobs, and the economy prospers.
The History Of Venture Capital
The roots of venture capital (VC) trace back to the 18th and 19th centuries, when whaling was the ultimate high-risk, high-reward venture. Tom Nicholas, in his book, VC: An American History, draws parallels between whaling expeditions and today’s VC funds. Returns could be extraordinary, while failures were often catastrophic. This era also established core VC principles, such as asymmetric risk and portfolio diversification (backing multiple ships).
By the mid-1800s, whaling had peaked, and as America’s industrial revolution accelerated, informal venture investing evolved. Wealthy families and organizations often funded inventors and entrepreneurs. The true birth of modern venture capital occurred after World War II, when in 1946, the American Research and Development Corporation (ARD) was founded.
The 1950s saw further support through the Small Business Investment Act, which encouraged investment in small businesses. California’s fertile ground proved especially receptive in what became Silicon Valley.
The late 1970s and 1980s marked a pivotal acceleration. The ERISA “prudent man” rule change allowed pension funds to allocate funds to venture capital, unlocking vast institutional capital. The 1990s dot-com boom brought explosive valuations and eventual correction, but many survivors emerged stronger with disciplined approaches emphasizing unit economics and staged financing.
Crowdfunding In Venture Capital
The venture capital landscape has been constantly evolving; however, venture capital remained largely the domain of wealthy individuals and families until 2012, when President Obama signed the Jumpstart Our Business Startups (JOBS) Act, which enabled crowdfunding for small businesses.
Crowdfunding is a practice of funding a project or venture fund by raising contributions from a large number of people, typically via the internet.
I think crowdfunded venture capital is an evolution in its truest form; it gives investors genuine freedom, the ability to pick a fund and also the fund manager(s) of their choice based on their personal investment strategies. This approach not only proves to be a fair process, but it also gives investors an opportunity to eliminate the middlemen (e.g., the pension fund managers and their management fees, etc.), which can generate higher returns and help investors in taking control of their financial decisions.
However, while big risks can come with big rewards, crowdfunding can be challenging. Crowdfunding requires sharing information about the details of a startup’s technology, business model and trajectory. And one downside of crowdfunding is an all-or-nothing funding risk, where investors receive nothing if the company misses their goal.
Funding Cycles
Venture capital often operates in cycles. Although no two cycles are identical, I’ve noticed shifts in fundraising tend to follow a familiar pattern. Only $66.1 billion was raised across 537 funds in 2025, extending the decline that followed the pandemic-era peak of $222.9 billion raised by 1,777 funds in 2022, as per PitchBook. We’ve previously seen a similar type of dip in venture fundraising activity in 2012, which is when the JOBS Act was introduced.
However, I think the dip is different this time. There is a record $311.2 billion of dry powder in 2025, and as PitchBook notes, “One-third of today’s dry powder stems from funds raised during the pandemic-era boom, and GPs have continued to reserve more capital for follow-ons and portfolio support.” In 2024, 30 firms raised 75% of all capital raised by VC funds in the U.S., with many of them investing in AI. Without a rebound in distributions, fundraising conditions could remain challenging for managers in 2026.
The Future Of Funding
Crowdfunding is worth considering because it allows founders to raise capital without giving up equity or taking out loans. It serves as both a fundraising tool and an organic marketing engine.
The key benefits of crowdfunding include market validation, a built-in audience and alternative funding. However, for future success, investors need to do their due diligence when investing in any fund and considering new avenues to generate revenue.
So what does this tell us about the future of startup funding? It may be time to give another look at crowdfunded venture capital or crowdfunding 2.0.
The information provided here is not investment, tax, or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
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