Grow VC > Blog

Few days back I got an email from Chris Mottau at North Venture Partners. In his email he says that “he feels, we share the same vision” and that he became very excited about what we do;  “I love the mojo of your blog” – in his words.

He also wanted to share their new guidebook called Breaking Through The Broken: The Transparent Guide To Overcoming The Inefficiencies In Early Stage Venture Capital. -saying that he thinks I will like it.

Sure enough, I really did. It’s well written, up to date, quality piece (33 page of reading) and it’s really good overall view to current funding climate and to various problems that exists. What I really like about it personally, is that it does covers many of the latest and new emerging services that are trying to help change things in these currently broken models of early stage funding.

I asked if I can highlight some of my favorites from this piece in our blog and he said: “I’m glad you enjoyed the document, feel free to share it on your blog…it represents a good deal of work for us of which we are very proud”.

So here are some of my personal favorites:

Early stage investing will always be considered a high risk, high reward game. But what if there were smarter, more efficient tools that enabled both investors and entrepreneurs to optimize the process by making the investment process “less gut” and “more guided”? Could we eliminate some of the fear and confusion surrounding early stage investing and begin to truly optimize entrepreneurship?

————

This all raises the question; what is the early stage investor community currently doing to optimize entrepreneurship and increase the success rate of their investments?

————

On one side there are the mysterious “deal makers” who might seem easy to reach with the click of a mouse, but in reality are incredibly difficult to engage with meaningful dialogue. On the flip side, there are the passionate entrepreneurs who are eager to find out what an experienced investor thinks of their “big idea,” but usually hear back nothing at all after submitting their materials for consideration.

————

Start-ups are now cheaper to launch than ever before, as $500K has become the new $5 million. Primarily because basic software that was once absurdly expensive is now free (open source), and astonishingly good hardware (or virtual processing power) is now very affordable.

————

To change our future we need to re-think the past. Moving forward into  an era of collaboration and transparency isn’t just a nice idea; right now it’s an imperative.

————

The cold fact is that most investors still won’t even glance at a business plan unless it’s gotten a referral from a credible third party. It’s not only about who you know, it’s also about how you know them. Entrepreneurs and business plans referred by others who have proven to be good filters for garbage ideas, often float to the top of the pile. How else do you expect investors to filter through 34 years of reading material? Everything else usually gets dumped into the circular filing cabinet. Today most investment deals come down to personal TRUST, which is pretty hard to create in a virtual world.

————

“The real issue is that getting financing is difficult and inefficient for the investor. I’m having to create a whole slew of personal relationships, networking, etc… – just to get small amounts of money. While I like being social and getting out there, it’s slow. We need a Wal-Mart model for “common’ money” (i.e. under $500k using a typical business model). The real issue is that many people could be funded so much more efficiently, with better returns, if the industry was more transparent.” – Adam Nelson, Founder of varud.com

———–

“With Angelsoft, all of the personal aspects of Angel investing seem to be removed from the equation. My materials are submitted through Angelsoft forms, and then disappear into some system that encourages a group of busy angels to evaluate the opportunity in a black box. Do they like it? Do they hate it? Do they even read it? I have no idea, since I have never heard anything!” – comments a disappointed entrepreneur.

———–

Remember, investors (like Hollywood studio executives) see and hear of thousands of deals a year and have very little time to spend on them. If your idea doesn’t fit into their “box of knowledge”, it’s going to be quite difficult to break through and earn a second meeting. If you can’t narrow down your business to a sticky single sentence, you’re probably not ready to get in front of an investor anyway.

———–

Paul Graham, a prominent Silicon Valley entrepreneur and Angel investor sums up the feeling of many entrepreneurs when he said, “VCs that suck less are all about disclosure and transparency.” To truly produce fundamental change and foster innovation it’s time for investors to allow entrepreneurs to see the world from their side of the table.

———–

Note: one other insight that can be pulled from the real estate market is the standardization of deal documents and terms. The liquidity of real estate hinges upon the simplicity of the standardized paperwork. Just imagine the efficiencies that could be gained from standardized deal terms in early stage venture investing.

Like said these are just some of my favorites from this great guidebook. Make sure to read the whole “Breaking Through The Broken: The Transparent Guide To Overcoming The Inefficiencies In Early Stage Venture Capital.” It’s really worth it. And please, make sure you let us know how you like it.

Thanks Chris for sharing this.