Half-baked idea: an open source VC
What do you guys think about this?
An open source VC. Suppose I exposed an API that gave you access to every pitch Venrock sees? You could get access to every deck we get and all the work product we produce as we evaluate an investment. There is a lot of data inside Venrock on the performance of past investments, the best structures which produce the best returns, etc. We could group collaborate on valuing the likely outcomes of the company. We could collectively monitor the twitterstream, the blogosphere and crowdsource the view of our network as to the likely prospects of the company. Once we decide to invest, we could use our collective networks to promote the company, create distribution deals for our companies, and otherwise work to build it into a successful enterprise. For every deal we decide to do, we would create some sort of carry-sharing where the economic upside is distributed among those in the network. Not sure how we divide up the spoils in a way that is fair. More to come on this, but surely there is power in the network we have assembled. Thoughts?
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Sounds like a good idea if you can find a way to compensate your community for their work (*cough* kluster *cough*). Also need to carefully control what information is publicly exposed.
Vencorps is doing something along these lines already.
If you’re being serious, I think this is not that half-baked, and actually a great idea; IMO there is far too much ambiguity and vc “wizardry” that goes on in the startup investment space, leaving both entrepreneurs and other would-be investors in a potential startup unnecessarily “in the dark”. I would love to see:
1) companies that you have passed on, and where you had issue; if they’re not right for you, maybe they’re right for someone else? maybe you’d love to go in with them on a series B but they’re too early stage right now; kind of tough to do if they don’t get a series A, so why not share? (i know this happens a little)
2) models for putting valuations on companies; i don’t need to know names, but i’d love to see what axiomatically, for venrock or xyz other fund, drives value for a video gaming company let’s say? and how this differs fund by fund?
3) i love the whole using collective networks to distribute/promote idea; don’t know how it could be done optimally, but that just sounds so awesome
there’s a ton of other things I could imagine on my hypothetical wishlist for an idea like this; something like this would def be pretty amazing
Azeem, I agree. I think there is potential in the concept, it just needs more work. Many times, the reason the VC passed has less to do with the merit of the idea and more to do with where the VC is in their investment cycle and how well that concept fits the thesis the VC operates under, yet this info is hardly ever communicated to the entrepreneur. More on this soon.
Since I’ve been hands-on involved with open source projects for >10 years, I couldn’t resist taking the bait on this…
In general, from the point of view of the “project leader(s)” (i.e., you and Venrock) the obvious attractiveness of an open source approach is the potential for getting various sorts of help from others outside the immediate organization. That potential depends on how big the pool of potential contributors is, how low the barriers to entry are for participation, how amenable the tasks are to being addressed by casual contributors, and what their motivation is.
In your case the pool of potential contributors would be relatively large (basically anyone with a serious interest in the types of businesses you’d be funding), but you’d also be competing for their attention with their own jobs and other things they’d be involved in. On the barriers to participation front, you might have issues with having to get people under NDA for certain things, which lowers the ability of someone to do “drive by” contributions (e.g., reading about a potential deal somewhere, downloading your material about it, and making a useful comment or other contribution).
On the nature of contributions, the question would be what sort of things people could usefully do. I’d be reasonably optimistic about that, especially if a good part of what you’re looking for is information you hadn’t previously been aware of, reasonably informed opinions and perhaps some promotion of what you’re doing.
Finally, in terms of motivations, I’m not sure that people would necessarily be looking for a direct monetary payoff — and in fact leading people to expect a payoff might be counterproductive. (Open source projects make it clear up front that people are volunteers, and can’t expect any return except for getting the software itself to use, modify, redistribute, etc.) I suspect people would rather be looking for an opportunity to do something interesting, show off their knowledge, build a reputation, and perhaps parlay that reputation into future employment opportunities. And beyond that, I think a lot of people would be interested in helping to create products and services that they themselves would like to see — which is very similar to the base motivation for people who contribute to open source software.
So the net-net for me is that this is an interesting idea worth your exploring, with the major issue being the sensitivity of the dea-related information you’d be making available, and how that would affect the ability of the right people (from your point of view) to participate.
David, have you heard about the Request-for-Funding process that TheFunded.com is doing?