Advice capital
Stowe Boyd has a smashing post today suggesting a shift form venture capital to advice capital. As VCs find themselves unable to throw big buckets o’ money at ever-smaller, nimbler, quicker startups, it becomes impossible for them to manage their real assets: time, distraction, and knowledge. I think that this provides opportunties for strategic investors who have more than money to offer and also for smart, independent people (such as bloggers, Boyd suggests) who can offer advice, connections, and questions. The challenge is to make this more than a show advisory board but a real relationship and a longer-term commitment for both than old-style consulting (thanks to payoffs in long-term equity). I’ve started down that path with a few companies myself.
February 20th, 2006 at 2:49 pm
Sounds very 1999. I remember when B School professors were lining up to be advisors to dotcoms in exchange for equity.
February 20th, 2006 at 3:36 pm
The challenge lies in the mismatch between the needs of worthy start-up entrepreneurs for relatively small amounts of venture funding and instititutional venture capitalists who cannot dedicate the time to justify dealing with small investments. Hense, we’ve watched a steady erosion of the share of venture capital (and therefore VC’s time) directed to the seed and start-up stage to about 2% of available capital…while expansion and later stage investments claim 80%+
February 20th, 2006 at 3:52 pm
There is an unwritten rule in the investment arena that I feel holds true for any budding entrepreneur: When you ask for capital you get advice and when you ask for advice you often get capital.
I don’t even think this is counter intuitive. Entrepreneurs who are flexible with their vision and adaptive to market conditions are the ones who investors want to put money behind. In addition they are often the ones who realize they have a lot to gain from the input of others. I don’t think a person can have a “go-at-it-alone” personality and succeed.
February 20th, 2006 at 11:35 pm
Catch 22. Get investment capital and lose some control. Don’t get investment capital and lose expansion options that could mean the ultimate downfall of the company
February 20th, 2006 at 11:36 pm
http://www.digital50.com , http://www.adn1.com
February 21st, 2006 at 10:13 am
February 22nd, 2006 at 11:54 am
[...] But some in the ad biz get it and one who does is Rishad Tobaccowala of Publicis, who was the company’s chief innovation officer and today announced he’s starting a new company inside the ad giant to seek out and jumpstart innovation, to consult to advertisers and media companies, and even to invest — with advice capital – in startups like Brightcove. Here’s a Journal story about the company, called Denuo, and here’s a Rishad interview. (Full disclosures: I’ve become personal friends with one of the media thinkers in Rishad’s tank, Tom Tercek, and I’ve made blogboy spiels and business introductions for them — without financial gain, silly me.) [...]
February 23rd, 2006 at 3:37 pm
Hmmm…I would’ve expected this to run with a ‘Exploding VCs’ headline.
Big Old Dumb venture capitalists!
February 23rd, 2006 at 5:41 pm
[...] Fred Wilson does his Roone Arledge imitation as he doth protest too much about Stowe Boyd’s advisory capital post and my agreement with Stowe. Unless you have capital at risk or some other form of “skin in the game” like sweat equity, you cannot and will not feel the thrill of victory and agony of defeat that binds the VCs and entrepreneurs in startups. Capitalism works for a reason. Greed and fear are powerful forces. I have worked with many “independent directors” over the years. And they are often incredibly good directors who add value in all sorts of ways. But they don’t feel it in their gut the way the entrepreneur does. VCs, particularly the best ones, do feel it in their gut. And so they are there for the entrepreneur when they need it most, joined at the hip with the risk/reward belt. [...]
February 27th, 2006 at 3:47 pm
[...] There have been other opinions on the subject here, here, here, here and yes, here. [...]
June 30th, 2007 at 3:00 pm
Jadyn…
Computers Businesses and individuals alike have all grown to rely…
October 16th, 2007 at 10:28 pm
[...] George Lipper of the National Association of Seed and Venture [...]