Posts Tagged ‘VC 2.0’

Podcast: Grow VC presentation at Sun, Sand and Startups event

Tuesday, March 9th, 2010
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On Thursday the 18th of Feb just few days after our launch, the second triple-s/Founders Lounge co-production by Sun, Sand and Startups group took place at the Gran Foc, featuring a talk by Jouko, titled “New funding opportunities for web and mobile startups around the world”.

Thanks to Kristian and his team here is the recorded podcast from the event. Below is some of the topics from Jouko’s presentation:

You can listen for the podcast below and you can also subscribe to Grow VC podcast via iTunes. Sorry for the occasional background noise and that it was cut short at the end. Again big thanks to Kristian and his team.

 
icon for podpress  Grow VC at Sun, Sand and Startups event: Play Now | Play in Popup | Download
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“everyone funding startups” – Grow VC’s community funding model is launched

Monday, February 15th, 2010
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fee_splitCrowdfunding becomes a reality for startups

15th of February 2010 – Hong Kong – Grow VC today launched its one long-awaited core business model, a community funding model. Under this model Grow VC will pool 75 per cent of membership fees into a community fund that gets invested back into promising member startups. Community fund investments are managed by Grow VC, but all investment decisions are made by Grow VC members who determine how to invest their portion of the fund to other startup companies that they feel have the most potential.

Grow VC is fixing the inefficiencies of private seed funding for web and mobile companies with a global social network and crowdfunding. The service includes the tools needed for building a startup from the ground up, to getting funding at the seed level. It introduces startups to investors, experts and other entrepreneurs, helping them discover common interests and providing new transparent ways of achieving investment.

The community-fund feature includes a members leaderboard based on the merit of the members’ investment decisions. The most successful decision makers will be financially rewarded when the community fund begins earning return on investment (ROI). All decisions are completely transparent so Grow VC members can always view how successful past and ongoing investments are.

Grow VC cofounder and CEO Valto Loikkanen said: “Our model gets startups acquainted with the entire investment process and we are the first to offer this type of peer-to-peer crowdfunding. For our service to have a sustainable future, the cost structure must be kept low and our own interests must clearly align with our members’ interests – so that our success is dependent on the success of other startups, investors and experts in our community.”

Grow VC cofounder and chairman Jouko Ahvenainen said: “Early phase funding requires new solutions. VC’s are moving their focus to more mature companies, and LP’s are decreasing investments in VC funds. Entrepreneurs want to have more competition and transparency in the funding market, and business angels require better tools to find good startups and for easier dealmaking. This new model opens totally new opportunities in funding, and it also offers practical help like transparent term sheets and investment agreements.”

More about the community funding model

The model encourages entrepreneurs to start looking at other startups from an investors’ point of view, helping them to improve their own profile and communication. Through their funding process in Grow VC, startups can also build a global, multilingual and geographically distributed network of industry peers of Grow VC members, motivated to support their venture.

For early stage investors, or “funders”, the information that the community decisions provide about noteworthy startups brings a level of transparency not seen before in investing in tech, web and mobile startups.

The patent-pending community fund model is the original core innovation in Grow VC’s arsenal of unique funding models and the reason behind Grow VC’s inception. In 2009 the company was also the first to announce a global service-investment model, whereby service providers in the industry can invest in companies using work resources as “sweat equity,” in addition to money.

Joining Grow VC, and the basic features such as building a person profile, are free. Premium features including the services above come with subscriptions ranging from $20 to $140 per month, depending on how much money the startup company is seeking or how much the investor is looking to invest. For unlimited service investments, the monthly subscription fee is $90 per month.

Following its first five months in public beta, Grow VC’s community just reached 700 registered users from within the startup and investment communities.

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iPad and Apps Economy

Thursday, January 28th, 2010
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We all now know officially that Apple launched iPad. It is an interesting new concept between mobile phones and laptops. And definitely it will have and need a lot of applications to be successful. We saw already some games, books, and newspapers that are available.

iPadThe next step is to get developers to make much more apps. Paul Grim, a General Partner at venture capital firm SunBridge Partners, commented the apps business from the traditional VC point of view in Venturebeat’s article, An investor’s take on the iPad — how to parse the hype. In this article Paul Grim says:

Although I do believe there will be many successful apps on the iPad, I don’t believe they are generally venture-backed material. As with most of the iPhone apps, this will be a hits-driven business with little capital intensity; most of the successes will likely be angel or self-funded.”

This is the same point Grow VC has emphasized many times (like yesterday). We have actually divided the mobile startups now into two main categories (there are of course much more segments inside these categories):

  1. Hardware and more demanding technical platform startups
  2. Application startups

The first category includes companies that have been funded by traditional VC’s. But many of those firms also need seed funding before a VC round. The second category is not really for the traditional VC’s. But it doesn’t mean that they are not good business opportunities. But the capital structure and risk profile is different from VC’s targets. They can start with small money, and it is not technology risk, but much more market risk, i.e. can they really get loyal users.

This is one reason, why new models for seed and startup funding are needed. And we believe Grow VC’s concepts, which we have now in beta and especially new ones we launch in this year, will offer a new way to fund these companies.

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Future of Venture Capital

Saturday, January 23rd, 2010
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Silhouettes representing healthy, overweight, ...

Image via Wikipedia

Today I was reading one of my favorite VC blogs AVC by Fred Wilson about “The Venture Diet is Working“, where he says:

2010 will be an interesting year. If VC investments go back up to $25bn to $30bn per year, then the diet didn’t stick and we are back to an overfunded industry that will produce subpar returns on average.

If, on the other hand, the new normal is $15bn to $20bn per year, then the diet worked and we’ve scaled back the business to healthy levels.

This comment relates to he’s earlier post about the “Venture Capital Math Problem“, where he explains about the problem that – too much money will make the whole VC industry to under perform.

As this is one of the reasons we have started Grow VC, I wanted to point out that things are not the same everywhere. So here’s my take on the topic:

I think this is similar problem than it is with food. In some western countries there is too much food and problems that are associated with that, like obesity. Yet in many parts of the world, people are starving.

So if some markets in the world have too much money in VC, it does not mean there is too much money overall, it’s just wrongly distributed. I do understand that, there are also problems with having too much money per sector, so that nobody is getting good results, but that too is wrong distribution.

Early VC money should always be going towards new innovation and not to be “me too in the popular segment” – there are plenty of problems in the world for entrepreneurs to solve & VC’s to be successful.

If we think that “Four Years After Founding, Kiva Hits $100 Million In Microloans“, I feel that it’s a strong indication that entrepreneurship in all shape and sizes can be instrumental on reshaping our world for the better.

There is a big gap between what Kiva.org is doing and with these problems of having too much money in venture capital in some regions. For us this shows that there needs to be much better distribution, more transparency and more activity in this segment overall – and this is exactly where we are focusing our efforts.

Here’s my dialog with Fred, on the “Venture Capital Math problem” 8 months ago:

Me:

I think this just shows that money does not solve problems. The problem here is not too much money, but how it’s now distributed.

VC industry is starting to look like the newspaper industry ;) – better to wake up, the blogs are coming…

Fred:

What are the blogs of the VC business?Things like Y Combinator are great but they are feeding us even more opportunities so I see them as additive, Although I also see blogs as additive for the newspaper business if they’d just see themselves as curators and aggregators instead of content creators

Me:

I guess the closest thing to “blogs of VC industry” today are angel investors. But that’s for today. Also Y-combinator and the likes are great too and could be considered as “blogs of VC industry”. However their “next step” need to change away from just VC’s.

The fundamental change will become, when there are “platforms” for anyone to start a “blog for VC industry” and that’s what we are doing in www.growvc.com.

Overall, we feel that in long term the money will be spread to more potential start-ups and more of them will not go via IPO but just buy back of shares, mergers etc. with lower ROI. But that’s OK if the time for ROI is shorter and cost of management is lower.

So – be more direct, spread wider, lower the management cost, speed up the ROI cycle and you can accept lower ROI.

If you think about the structure of today, from where the VC money really comes from, you start to see the “big picture”. – basically it means that individuals like you and me pay for pensions funds etc. and these funds then invest to VC funds. VC’s then make investment decisions and “manage” the investments, all the way to take it public (hopefully). Basically just to sell it back to us…

When more people will start to understand this cycle because of more info and transparency online (if they are interested), people will not accept this structure. Because in the long run what matter is, if the companies in question sell what matters. And that is not a question of size.

Fred:

Got it
I hope this works
It would scale much better

Related to this topic, below is a very interesting speech given by Fred Wilson at talks@google. You need to spare an hour to look the whole video, but I feel it’s well worth it. Just have some popcorn & coke and relax.

What makes it interesting to me, is that those industries that are going to be disrupted by internet in the future, currently have same issues what Venture Capital does, yet for some reason those would not apply to VC industry.

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Why investment agreements are secrets?

Sunday, November 29th, 2009
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Do you know a VC that is ready to publish their investment agreements? I haven’t seen too many. And if you ask about this, some venture capitalists don’t like the question. They start to explain, how it is a benefit of both parties to have confidential agreements. I agree there are

Investment Agreement

details that can be confidential, for example valuation, but is it really necessary to hide all terms and conditions. Would it be good for entrepreneurs and for the whole startup business to know openly terms and conditions from different companies before any decisions?

Why I raise this questions. Because many entrepreneurs feel they have been cheated when they finally understand all details, e.g. liquidation preferences, anti-dilution, and decision veto terms. I think it is not so much a problem with top tier VC’s that really make success stories. But there are so many tier 2 or lower VC’s (e.g. local ones in Europe and elsewhere) that don’t make too many success stories and they play with terms and conditions to get ROI for themselves but nothing for founders or business angels that have invested before VC’s. I know many entrepreneurs or business angels who have done big mistakes with their first company. Often people are not willing to talk about these experiences.

Grow VC is going to use public investment terms and conditions for its investment concepts (e.g. the new model we launch in January) and we also publish guidelines for angel investments. We also try to develop concepts that put all parties to more equal position. We believe it is also the best for businesses. It must the common interest of all parties to get benefits from the success of a company. And we want that all parties can comment and develop these concepts.

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Cyberport: Business Park and Incubator in HK

Friday, September 25th, 2009
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I had a pleasure to visit Cyberport, Hong Kong based business park and incubator, in this week (thanks to Dr. David Chung). Cyberport has really nice location in HK. And one of its ideas is to combine a nice environment to live and work. It offers excellent facilities, for example, for content and media companies by having studios to develop and edit rich content and excellent hosted IT infrastructure with very high speed connections. So, it is a good place for example for a game company (like the company that has done the successful Ninja Saga game for Facebook) or internet service companies.

This kind of business parks and incubators are important to develop web and mobile business. They improve companies’ capital efficiency, and really enable a group of 5 talented peCyperport modelople to launch a world class service. These incubators are important also for investors. It helps investors work, if a company can get services from an incubator and if the incubator can also offer senior level support and advises to the company. It is also a kind of qualification that a company is selected to an incubator network that also makes investor’s own due diligence work easier.

Local incubators also need a good international network. This is something, where we see interesting new opportunities in the future: get incubators, investors, and companies around the world work together and combine right resources. Internet and mobile business cannot have geographical borders.

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Update – Grow VC private Beta

Friday, July 17th, 2009
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Tip of The Iceberg

By stargazr441

A warm welcome to all new readers and members in Grow VC. It’s now been a bit over two weeks from our first beta launch, that we had scheduled for the 2nd Q of 2009. So it’s a good time to share some of the things we have experienced.

During our developments, it’s always been very important for us to be able to keep our planned dates and milestones. So as we were approaching the end of June, we started to finalize the material and features we had ready so far and put up the initial private beta service and our main site.

In typical startup manner we were pulling long hours to get everything to the point needed for us to pull this off. When it came to the day of launch we still had some minor hiccups, and missed our target launch time by a few minutes.

Other than that small delay, we could have not asked for more than what we got for our initial launch response -  we were all extremely exited to see the first posts written about our service and see people lined up in our server hitting “reload” in their browser to see when it went live (my apologies for those who had to wait a few extra minutes).

Here’s some of the posts written about Grow VC so far:

ReadWriteWeb
ArcticStartup
Museum of Modern Betas
The Startup
London Calling
The Next Women
Open Gardens

After the big push on working towards the launch, going through this first beta launch, seeing the great initial response from the markets, seeing people registering to our service and immediately starting to give us feedback, I feel personally very humble to be able to continue our journey with you, so a BIG thanks for those that have helped us so far and those registering to our service and wanting to be part of our venture to “forever change the early stage funding model.” After all this is just the beginning! And we are here for the long haul!

Now – after the launch, first being just exhausted after all of the work and hoopla, then enjoying the launch, registrations and feedback we are receiving – to pulling all of this initial feedback and thoughts back together, we have been fixing bugs and adding new features as fast as possible. Also we have had to do some new features we had not planned and restructure some of our existing features. We are very exited to continue our work towards the next milestones in our road map.

As we are running our private beta, we are taking new registrations in limited numbers by invitation only and we have released some invitation codes via above sites.  We have also invitations available via different Grow VC LinkedIn groups.

We are doing this invitation model during private beta, to be able to make sure we can continue to develop our service in an organized manner and communicate with users to help make our service better for everyone.

The road ahead

As we have launched our private beta and there is something to put your head around, there is so much more that we can and want to communicate about our ideas and thinking about what Venture Capital 2.0 means to us. In coming posts we will start explaining more of our thinking and sharing our ideas. We’d also love to get your feedback comments and ideas, on how can we do better.

At the moment, there are a few of the original core ideas with matching feature updates to our service from the early days, that we are still holding onto, so we can release those later in a more official manner. You can expect these bigger releases, first this fall, and the next one by the start of 2010. The reason we are holding back on revealing these, is that there are important open negotiations going on with several parties around the world related to these announcements.

Other than those few bigger ideas, we want to openly share as much as we can about what we are doing and thinking, so those that want can participate and be part of the change we are doing.

We want you!

What comes to you, as a reader, user in our service, being an entrepreneur, expert or a funder, we could not think of a better and more valuable audience, that we would like to be able to serve with our solution.

  • as an entrepreneur in general and particularly in web and mobile space, I could not imagine better people that can really challenge us to do our best and give us the type of feedback that matters
  • as a funder, selecting start-ups that you feel have earned the extra resources, speed and/or visibility that you can help them to achieve by participate on funding and sharing your knowledge, contacts and expertise to benefit your joint venture
  • as an expert, putting all of your knowledge and skills to play an meaningful role, on making not only our service better, but also helping to build some extraordinary companies of the future

In our world that feels more unified by the day (at least in the online world anyway), there is no question that big changes continue to happen on so many fronts and that there will continue to be from small to extreme global problems that need to be solved. This is the exact reason why entrepreneurs are called to action by so many. Problems of all sizes need solving and industries of many types need serious restructuring.

We want to do our part by building a platform where new start-ups can have a seriously new launch-pad, that they can recognize as their own and you can help us develop it even better.

If you feel that what we are doing is important to you – we invite you to join us, via our service, LinkedIn Groups, FriendFeed and/or Facebook. To follow our progress, be sure to subscribe to our RSS feed and/or follow our Twitter feed.

There is so much that need to be done and so much you can do to help us – to help start-ups, starting right now by sharing your opinions and feedback below :)

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More capital entering the lower level of the startup funding ecosystem

Tuesday, May 19th, 2009
Google Buzz

Again this post in Funding post continues from the topic of serious bootstrapping trend. More start-ups being capital efficient (good thing for entrepreneurs) etc. This comment below highlights the current trend very well:

“I see a lot more capital entering the lower level of the ecosystem probably because… the opportunities for being capital efficient are actually more available now than they were before,” said Owen Davis, managing director of NYC Seed.”

More about the subject in the video below:

There is a reason why this is also looking more appealing for VC’s. The VC’s problem is well outlined in this post: The Venture Capital Match Problem, by Fred in Ask VC.

Below is my dialog with Fred (in comments):

Me:

I think this just shows that money does not solve problems. The problem here is not too much money, but how it’s now distributed.

VC industry is starting to look like the newspaper industry ;) – better to wake up, the blogs are coming…

Fred:

What are the blogs of the VC business?Things like Y Combinator are great but they are feeding us even more opportunities so I see them as additive, Although I also see blogs as additive for the newspaper business if they’d just see themselves as curators and aggregators instead of content creators

Me:

I guess the closest thing to “blogs of VC industry” today are angel investors. But that’s for today. Also Y-combinator and the likes are great too and could be considered as “blogs of VC industry”. However their “next step” need to change away from just VC’s.

The fundamental change will become, when there are “platforms” for anyone to start a “blog for VC industry” and that’s what we are doing in www.growvc.com.

Overall, we feel that in long term the money will be spread to more potential start-ups and more of them will not go via IPO but just buy back of shares, mergers etc. with lower ROI. But that’s OK if the time for ROI is shorter and cost of management is lower.

So – be more direct, spread wider, lower the management cost, speed up the ROI cycle and you can accept lower ROI.

If you think about the structure of today, from where the VC money really comes from, you start to see the “big picture”. – basically it means that individuals like you and me pay for pensions funds etc. and these funds then invest to VC funds. VC’s then make investment decisions and “manage” the investments, all the way to take it public (hopefully). Basically just to sell it back to us…

When more people will start to understand this cycle because of more info and transparency online (if they are interested), people will not accept this structure. Because in the long run what matter is, if the companies in question sell what matters. And that is not a question of size.

Fred:

Got it

I hope this works

It would scale much better

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The New York Times: Do We Need VC’s

Sunday, May 17th, 2009
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The New York TimesThe New York Times asks today “Do Web Entrepreneurs Still Need Venture Capitalists”. Robert Hendershott, a professor of private equity and entrepreneurship at the Leavey School of Business at Santa Clara University, says that venture capital is becoming obsolete, because the cost of starting a Web company decreases, thanks to cloud computing services and technology that entrepreneurs can rent instead of buy, many founders can finance a new company without the help of venture capitalists, using their savings, money from family and friends and credit card debt.

paidContent.org listed some opposite opinions. Boring to say, but I think both of them are right. Web companies can be started with small money. They still might need VC money in later phases, but we have now a problem in early phase funding from VC’s. Private investors or angels can also be professional and help company as VC’s. And it is not guaranteed that all VC’s can really help start-ups. There are some top level VC’s and a lot of totally useless. We must also remember that companies can get professional help from other sources than VC’s, you don’t necessary need VC to make an exit. I think we see changes in the whole ecosystem. And it is not only one solution that fits to all companies.

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Forbes: Risk-averse VCs

Saturday, May 2nd, 2009
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CashForbes’ article is a good summary of VC’s dilemma: VC’s want to be larger and avoid risks. Forbes says: “Venture firms raising ever-larger investment funds–which produce ever-larger fees, of course, and rich lifestyles for the VCs getting them–have simply backed too many crummy companies over the last 10 years.” And it continues: “Geoff Love, whose U.K.-based Wellcome Trust is an investor in many top VC brands, said onstage at the conference that he thinks larger funds and fees have made many venture capitalists more risk-averse.”

I think this is nothing new for people who are working in start-up and VC business. But it once again highlights many relevant issues. And especially this is a problem for early phase web and mobile companies. They need smaller money to prove that they can launch a beta version and start to get users and market feedback. During the last six months I have talked with several people who are launching their new web or mobile service and they have been interested to get investors. My advice is to find smart business angels and/or try to make it with so small money as possible, get users, and learn how the business model works. But of course all entrepreneurs haven’t enough money to do it without external investors.  Hopefully Grow VC can help them soon.

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