A VC - Latest Comments in Getting A Piece Of My Action

Re: Getting A Piece Of My Action

valto — Wed, 31 Dec 2008 05:53:27 -0000

I'm excited. I have been thinking this problem of old VC model for several years from my start-up advisor role.

From the beginning of 2008, I started thinking solutions for this, in more serious level. On July I got an idea for an overall solution and started working on the business model for Venture Capital 2.0. At that time I had not heard or read about wiki fund or Entrepreneur Commons. These posts I have discovered after, we started to work on this in more serious way.

While working on building our founders team for Grow VC and doing some other stealth mode activities and viral marketing, I have found these articles and to me these all just proves the great potential of our model version, that still remains as it's been since July (for the main concept and solutions).

We now have a great team of founders committed to setup our version of Venture Capital 2.0 service and are excited about all of this - I can't wait to get 2009 going. Lucky for me it's only few hours to new year ;)

I feel this model will get sorted one way or the other, the path seems "so clear". Will it be us or someone else that will eventually succeed, remains to be seen....

Re: Getting A Piece Of My Action

evbart — Wed, 03 Dec 2008 13:50:05 -0000

This is already happening in a pretty "industrialized" way.

I do bizdev for Angelsoft, and we've got over 400 angel groups and VCs using our platform to more efficiently take in, screen, and invest in deals.

We're definitely seeing an increased ability to syndicate a deal across lots of small groups of angel investors to raise larger rounds of financing, but we obviously are facing the same barrier with the "accredited investor" requirement from the SEC, and we spend a lot of time making sure we're on the right side line.

Thats part of the reason that we've focused on targeting investment groups, rather than just individual angel investors. They are harder to qualify.

It wouldn't be all that tough to extend our existing infrastructure to individuals, so you could massively crowdsource an investment.

Re: Getting A Piece Of My Action

fredwilson — Mon, 24 Nov 2008 10:46:59 -0000

That's a sobering thought

Re: Getting A Piece Of My Action

Chandra — Mon, 24 Nov 2008 08:05:59 -0000

I wonder, calling shots would be critical in here.
Smaller Investment partners, it is easy to make a call, but with smaller investors pooling up and then to take a decision, it would be virtual nightmare, at as simple as it is said in theory.

Re: Getting A Piece Of My Action

jyothirmayee — Mon, 24 Nov 2008 07:14:58 -0000

I wouldn't put such a big bet of being the silicon valley (not a humble comment) since infrastructure still lags way behind and the market would not be comparable to the current US market for next 5-8 years at least. Additionally the talent pool is sparse and economic freedom doesn't exist to take the plunge.

However it is possible to build great companies out of India serving for the bigger markets of US, europe etc at very low costs. Most startups with 3-5 people can operate with low operational costs (incl personal expenses of founders) less than $2000 a month. So something like $20K funding will free up these startups for well into a year to work peaceful and execute well. And $20K for past colleagues from US is peanuts.

I think Indian successes and entrepreneurial environment was vastly dominated by traditional services model till now and recently there has been a new wave of young folks with experiences working with their US counterparts who are really innovating and dare to launch new products and ideas at their own costs. Sadly, I think the VC firms don't have much decision power here or have lost hopes with success out of India except for traditional markets. So all of these companies are bound to struggle with financial crunch.

Re: Getting A Piece Of My Action

fredwilson — Mon, 24 Nov 2008 06:55:37 -0000

I don't know much about india but I think its poised to be the next silicon valley

Re: Getting A Piece Of My Action

jyothirmayee — Sun, 23 Nov 2008 23:24:34 -0000

Hi Fred,
I am planning to get this into action in India and raising investments from ex-colleagues in US/India as convertible debt. http://www.entrepreneur.com...

Keeping it to the close community of ex-colleagues makes it more convincing for people to invest reducing the risk around evaluating competency, trust etc - additionally helps the startups to get involvement from past colleagues who could be experts in varied aspects.

As you said innovating here needs that I as an entrepreneur be much aware of the regulatory measures I put down there. Would you suggest to work with a current investment firm or if I can ask would you be interested to help me out. :)

Re: Getting A Piece Of My Action

fredwilson — Sun, 23 Nov 2008 12:59:36 -0000

I think we might have to go there

Re: Getting A Piece Of My Action

Tom Evslin — Sun, 23 Nov 2008 12:53:37 -0000

So what would you think of just saying no prior regulation, no illusion of regulation but strict enforcement of sanctions against fraud and caveat investor (investor beware) since there is no illusion of regulation?

I'mnot proposing that, just asking.

Tom Evslin
blog: blog.tomevslin.com
novel: hackoff.com
latest: The Interpreter's Tale

Re: Getting A Piece Of My Action

Ed — Sun, 23 Nov 2008 12:39:07 -0000

I think Fred is being brave and very cognizant of the fact that
the current regulations did not accomplish what they were engineered for.
a lot of ink had flowed to form the constructs as they were when this wide
failure became apparent.

Then to me, it stands to reason that I should be able to invest
where I see fit. The market will say yes or no.
If my money is no good, let USV say 'Thanks anyway, maybe next year".

Change is needed before SEC standards start looking like the horror
show that is our long tail tax code.

Re: Getting A Piece Of My Action

Ed — Sun, 23 Nov 2008 12:28:05 -0000

Agreed.
And conversely, they could cause enough inefficiency to negate the benefit of such an organism.

Re: Getting A Piece Of My Action

fredwilson — Sun, 23 Nov 2008 11:03:30 -0000

That's right Don

But many of our portfolio companies have built large and sustainable and
very profitable businesses given enough time

It often takes 5-10 years to do that

Patience is required for sure!

Re: Getting A Piece Of My Action

fredwilson — Sun, 23 Nov 2008 10:49:32 -0000

I think we need entrepreneurs to step up and innovate in this sector

Then investors can get behind this idea

Re: Getting A Piece Of My Action

Michael Lewkowitz — Sun, 23 Nov 2008 09:03:28 -0000

Giddyup! Comment in the social venture commons post or d me on twitter
(@igniter) and we'll get to it.

Re: Getting A Piece Of My Action

howardlindzon — Sat, 22 Nov 2008 18:27:04 -0000

well said as well.

no easy answer.

Re: Getting A Piece Of My Action

howardlindzon — Sat, 22 Nov 2008 18:26:12 -0000

amen, I want to be a part of it. have been working towards it for 5 years

Re: Getting A Piece Of My Action

Tom Evslin — Sat, 22 Nov 2008 11:12:14 -0000

Fred:

You're making a brave stand by advocating less regulation rather than more given the current conventional wisdom. Of course you're completely right that all the regulations and all the regulators didn't see and didn't point out that the balance sheets of huge publicly traded financial corporations were balanced on nothing at all.

Perhaps the fiction of regulation even lulled us into false security while regulation has also barred the exit door for good smaller companies and their investors (panic hasn't helped with exits either).

I further riffed on your theme at http://blog.tomevslin.com/2...

Re: Getting A Piece Of My Action

Steve — Sat, 22 Nov 2008 11:00:09 -0000

ValueClick Inc. (VCLK) is tradting at a PE ratio of less than 4.

Re: Getting A Piece Of My Action

Tommy_Mancino — Sat, 22 Nov 2008 09:58:14 -0000

Looks like I was wrong re: corporate entities, see http://www.sec.gov/answers/.... See #5 under Reg D. I still hate these regulations.

Re: Getting A Piece Of My Action

dean collins — Sat, 22 Nov 2008 09:39:46 -0000

i also dont get why people dont 'invest' into overseas companies that then invest in USA based entities.

without being rude - I sometimes find americans very limited in their 'global' thinking about how to get things done.

Cheers,
Dean Collins
www.Cognation.net

Re: Getting A Piece Of My Action

Tommy_Mancino — Sat, 22 Nov 2008 09:33:17 -0000

Can't non-accredited investors simply form an LLC or other entity, which then invests? Corporate investment entities aren't restricted by 30 act requirements, and in any event, there are exceptions for officers/partners of corporations as well, right? Not to say that a firm would necessarily want or allow it. The requirements are ridiculous anyway. There are a lot of bright people, with multiple graduate degrees that don't meet the income/net worth requirements to be "accredited". That said, I have never seen these requirements stop investment from someone that really wants to invest, and the company/fund wants in the deal.

Re: Getting A Piece Of My Action

AndyFinkle — Sat, 22 Nov 2008 09:14:59 -0000

Funny I just posted that exact thought (Creating a secondary market for private investments) a few days ago on alleyinsider.. . http://clusterstock.alleyin...

I do NOT agree however that non-accredited investors should have access to these deals. That rule is there for a reason, and too many non-accredited investors would get hurt, or abused IMO

www.twitter.com/A_F

Re: Getting A Piece Of My Action

Blunder — Sat, 22 Nov 2008 08:56:22 -0000

First of all, direct investors in private companies do not want to give up their rights of first refusal, co-sale, etc. Most VC deal terms fundamentally hamper the development of a secondary market. Second, most private companies should not have large numbers of shareholders. They are difficult to administer and you would have to disclose too much information to too many people in order to have enough transparency for a true secondary market. Third, if you want to buy stock in illiquid, poorly understood small companies, you already have a place where you can do it. It is called the public market where thousands of small cap companies trade very infrequently. Truthfully, what kind of activity would you really expect to have with a secondary market of private companies? Every now and then there would be a lot of activity around a hot company and the rest of the time you could hear the crickets chirping.

Re: Getting A Piece Of My Action

Jesper Bergmann — Sat, 22 Nov 2008 07:57:25 -0000

I think this is a very interesting discussion, however I think that money is not such an important factor in building a great companies as the competences and mentoring that comes with the money.
That is why I don´t see a big benefit in investing in small companies that can not get VC funding unless those investments come with some specific competences and contacts that can help the company. In my view simply receiving envelopes with money from all parts of the world would not generate better returns for investors than I believe investing in blue-chip stocks will in the long run. Add to that that you will have a big issue in terms of agency problems, i.e. how do you monitor the guys you invest in, if they are not in your proximity and you don´t have any say in their business decisions.

This is not to come across to gloomy because I do not think the VC model is perfect at all, however it serves the important purpose of usually having people with industry expertise select the most fit investments and in turn investors will only invest in the best-performing VC funds, so while I´m sure the current system can be improved I don´t think the current state of affairs is that bad.

Re: Getting A Piece Of My Action

Hayk — Sat, 22 Nov 2008 05:55:33 -0000

I agree with Jay.

The entire issue of retail-level investors (not angel investors) investing in private companies/startups could be subdivided into three stages:

1. money transfer from individual/retail investors
2. management of collected sums/fund
3. investment of the fund money into companies

Parts 1. and 2. were superbly executed during the Obama campaign (for example see http://bit.ly/kwQ0). The collection part worked just fine. The channeling part of collected donations/sums was subsequently EFFICIENTLY spent/invested. Same principle, i think, only details are different.

The main difference will come here in part 3. Regulatory part comes in here.

Btu as said above, there is a huge market need and the market is familiar with individual financing/loans/lending/donations systems through kiva, zopa and election campaigns. Perhaps something can be done in terms of introducing some kind of legal/regulatory framework for such an idea to be implemented.