As VC is stressed in the recession and struggling as a model in the United States we're seeing new players move into that arena.Since large ad agencies owned by holding groups also have to adjust their model, some of them are developing VC capability. (These are the firms that were not the pioneers in "digital" (AKQA), or "interactive" (Barbarian) even if they now have an arm that offers that).
There were some agencies that developed brands in-house, incubated and launched them (Berlin Cameron, Fuse).
But that takes human resources away from their consulting and forces them to become product managers as well as an array of other B2C responsibilities.
This seems like a good next step, excited to see how it turns out.
Having VC capabilities allows them to transfer their consulting abilities to advisory abilities.
In addition to injecting funding, they can also provide "the creative capital that can't be found elsewhere." That is more than the support a traditional VC will provide.
"Most early startups can't afford to go to agencies, they're too expensive. And many startups don't have leadership with business acumen that agency execs do."
Another view from founder and CEO of Loopt, Sam Altman, is to get investors that have "a ton of experience building companies and understands what it takes to scale."
The difference between a small business and a start-up is scale,
start-ups can scale exponentially.
So finding those that can help you move quickly on the right track to scale.
We are seeing an iteration, or iterations, of organizations that fund ventures.
Like Bjarke Ingels equated the design process to mapped evolutionary trees, some of these organizations that fund ventures will succeed and be iterated further. Some will go extinct.
Iterations upon this can feature investors also being developers that have understanding of marketing but core competencies in helping "build" the "products" the venture sells. Adage outlines how "VC" can move from just investing and advising their venture to placing the venture in the complex markets. That can be furthered by having different types of consultancies also getting into VC.
Moral Leadership for a more Inclusive FutureJacqueline Novogratz, CEO, Acumen Fund
I. Dignity is more important to the human spirit than wealth.
Think more broadly about what poverty means.
II. Charity and aid alone will not solve the problem of poverty.
Charities "create dependency rather than dignity."
Jacqueline Novogratz describes Acumen Fund as a "non-profit Venture Capital fund for the poor investing in companies, leaders and ideas."
"Investing philanthropic funds."
"Think much more seriously about our systems"
"At Acumen it always starts with the people."
"Can take five to fifteen years for the [financial] returns to come back"
Acumen Portfolio Examples Ex 1:
Husk Power Systems - Bihar in India
Many of the people have been profiled as "economically impossible to reach economical means"
"gasifiy the rice husks"
"via minigrids that can reach 10,000 people"
made with bamboo sticks and "strings" as electric lines.
currently reaching about 170,000 people with Husk Power
In India 90% of people in ambulances are dead.
Taxis are used more often for ambulances
Ambulances are not regulated,
It took private initiative an private capital to build it.
brand image differentiation - yellow color, unique phone number 1298
avoid corruption - not taking bribes.
ethos - service for all - patients are taken to free clinic
marking - subsidizing their costs, they display advertisements on the side
invested - started with 9 ambulances in 2007, a year before the Mumbai terrorist attacks, and will soon reach 1,500 ambulances
"create systemic change"
"We're already seeing it replicated in other countries"
Ex 3: d.light
instead of Kerosene lamps
"in the 80's and 90's it was top down."
"you'd come in and" say "here's this solar plant"
[hard to diffuse]
Housing - Jawad Aslam
outside of Lahore Pakistan
Javat - a year to register the land because of the corruption
[diffusion problem] - no one trusted that there would be jobs around [meta-system problem]
-it's connected to status, wealth, beauty [the opposite of Tata car]
Ex: 5 Western Seeds
sells hybrid seeds in Africa
Acumen in Kenya
-public toilets - previous attempts at innovation here have not diffused
"The Road of Fear"
-"evident in terrorism, business"
The other road...
"Road of Justice of Love"
-"the only road that takes us where we need to go."
-takes us into a "single tribe"
This is a time of "great instability and great opportunity"
"Using the power of the markets and smart design"
"Scale - we don't want to invest in anything that will reach 1M people"
"typical capital commitments range from $300,000 to $2,500,000 in equity or debt with a payback or exit in roughly eight to fifteen years." (AcumenFund.org)
Even though their investment period is about eight to fifteen years, Acumen Fund considers their investing to be venture capital because they invest in early stage companies.
Their exit may consist of: the management of the company they invested in buying back shares, or selling to a strategic investor, or continuing to earn dividends.
They also engage in what they call "Lab Investments," which "are smaller-scale, high-risk experimental investments, where funding can be disbursed rapidly and lessons can be learned in the short-term."
Primary Investment Criteria:
Potential for Significant Social ImpactCompanies need to make a product or deliver a service that addresses a critical need at the BoP in the areas of our strategic and geographic focus. Delivery of the products or services should generate social outputs that compares favorably with products or services either currently available on the market or through charitable distribution channels.
Potential for Financial SustainabilityA clear business model that shows potential for financial sustainability within a five to seven year period, including the ability to cover operating expenses with operating revenues. This period corresponds to the tenor of most commercial loans, and positions entrepreneurs to access commercial finance in the future.
Potential to Achieve ScaleAn objective of reaching approximately one million end users within a five year period with the benefits of the product or service. If the entrepreneur's business model does not aim to reach one million consumers, does it have:
* The potential to grow by an order of magnitude (i.e., 10x) within five years?
* Potential for material impact on the social problem it is trying to solve?
* A position as one of the leading service providers in the market in which it operates?
* A strong and experienced management team with the skills and will to grow a sustainable enterprise at the BoP?
* The presence of a strong management team that has the requisite skills to execute the business plan and a clear and compelling vision?
* A management team with the will to work with the market to achieve the goal of serving the BoP?
* A management team with positive ethics?
-does not work if when everyone gets sick.
Working at the macro-mezzo and micro level
-to set up a much more robust system.
Speaking about the current insurance model in the US.
"in some ways, we'd have to burn down the health insurance system"
Resources and people mentioned:
This lecture is part of Bruce Nussbaum's Design At the Edge lecture series.
Notes taken on a mobile device. Pardon any auto-corrections or incorrection.
A new service with a new model for funding private companies.
"A new company has won approval from US regulators to serve as an online exchange for shares in private companies such as Facebook." (Financial Times)
Xpert Financial will be the first electronic exchange with formal approval from the Securities and Exchange Commission to deal in private company stock." Letting them bypass traditional venture capital financing." (Financial Times)
I'd like to get an inside look at Xpert, but they are in stealth.
It's great that there are options to traditional models of funding as opposed to venture capital, which is having trouble as a business model. Late last year at a conference, some people were mentioning that venture capitalists would fund a company and push it until an IPO so the VC can gain their principle back plus profit -instead of the VC earning profit from their portfolio company generating revenue. Not everyone feels positive about Xpert or Facebook raising funding.
"Goldman SPV to sell Facebook to "hi net worth clients" at $50bn valuation? What could possibly go wrong? Ponziconomy: back with a bang!" - Umair Haque via Twitter @umairh
"Facebook & Goldman Sachs in a private deal only for the rich to make insiders rich? It doesn't feel right. Google did it much better." Bruce Nussbaum via Twitter @brucenussbaum
See Financial Times for orgional article in it's complete context here.
Approval for Xpert to deal in private company shares, By David Gelles in Charleston, South Carolina Published: January 3 2011 22:03 | Last updated: January 3 2011 22:03
Notes taken on a mobile device. Pardon any auto-corrections or incorrection.