Comments on: Advisory Capital http://www.buzzmachine.com/2006/02/25/advisory-capital/ by Jeff Jarvis Thu, 11 Mar 2010 20:07:11 +0000 http://wordpress.org/?v=2.9.1 hourly 1 By: BuzzMachine » Blog Archive » The shrinking VC http://www.buzzmachine.com/2006/02/25/advisory-capital/#comment-31461 BuzzMachine » Blog Archive » The shrinking VC Mon, 06 Mar 2006 13:12:19 +0000 http://www.buzzmachine.com/index.php/2006/02/25/advisory-capital/#comment-31461 [...] Renowed VC Alan Patricof leaves Apax to start a new — and small — fund: $50 million vs. Apax’ $20 billion that will be invested in only 12-14 early-stage companies. I’m among those who’ve been speculating about a restructuring of the VC biz in a world where companies need less money. I’d say this is evidence of the transformation. [...] [...] Renowed VC Alan Patricof leaves Apax to start a new — and small — fund: $50 million vs. Apax’ $20 billion that will be invested in only 12-14 early-stage companies. I’m among those who’ve been speculating about a restructuring of the VC biz in a world where companies need less money. I’d say this is evidence of the transformation. [...]

]]> By: Sean Wise http://www.buzzmachine.com/2006/02/25/advisory-capital/#comment-31257 Sean Wise Fri, 03 Mar 2006 20:30:24 +0000 http://www.buzzmachine.com/index.php/2006/02/25/advisory-capital/#comment-31257 I think you, and Stowe Boyd, are bang on about this. Advisory Capital, or what we call Mentor Capital, is a value onto itself. We have carved out a niche doing this north of the border, so it will be interesting to see if that replicates well or if the B/S consulting factor takes over. As for a confernce on this...Mr. Boyd, myself and the gals from Under the Radar were just discussing that...so you never know.... I think you, and Stowe Boyd, are bang on about this.

Advisory Capital, or what we call Mentor Capital, is a value onto itself.

We have carved out a niche doing this north of the border, so it will be interesting to see if that replicates well or if the B/S consulting factor takes over.

As for a confernce on this…Mr. Boyd, myself and the gals from Under the Radar were just discussing that…so you never know….

]]> By: Fraser http://www.buzzmachine.com/2006/02/25/advisory-capital/#comment-30613 Fraser Mon, 27 Feb 2006 01:18:46 +0000 http://www.buzzmachine.com/index.php/2006/02/25/advisory-capital/#comment-30613 You're bang on with this comment: "the relative value of expertise and experience grows in relation to money, so the smart VCs will compensate for the reduced need for money with increased use of targeted expertise." Studies are already finding this relationship occuring in VC transactions (<a href="http://disruptivethoughts.com/2006/02/25/advisory-capital-not-when-vcs-do-it-better/" rel="nofollow">you can read about it in my post on the subject</a>) and are being rewarded for it. The natural progression will be for a VC firm to continue to add services that are valuable to a start-up that aren't traditional VC value-adds. We'll start to see various models attempted: VC firms with a number of advisory boards, VC firms with a number of "in-house" advisors, ... As money becomes less of a scarce commodity, competition will force the VC industry into change. It's already happening. You’re bang on with this comment: “the relative value of expertise and experience grows in relation to money, so the smart VCs will compensate for the reduced need for money with increased use of targeted expertise.”

Studies are already finding this relationship occuring in VC transactions (you can read about it in my post on the subject) and are being rewarded for it.

The natural progression will be for a VC firm to continue to add services that are valuable to a start-up that aren’t traditional VC value-adds. We’ll start to see various models attempted: VC firms with a number of advisory boards, VC firms with a number of “in-house” advisors, …

As money becomes less of a scarce commodity, competition will force the VC industry into change. It’s already happening.

]]> By: John Gauntt http://www.buzzmachine.com/2006/02/25/advisory-capital/#comment-30505 John Gauntt Sun, 26 Feb 2006 02:56:18 +0000 http://www.buzzmachine.com/index.php/2006/02/25/advisory-capital/#comment-30505 I'm curious to see how all these start-ups who can launch with so little $ can crack the viability problem once they stop selling to friends and family. As far as I can tell, if they intend to scale to let's say simply a $1 million annual revenue, you're talking about several full time employees. With 365 days a year, there is a certain threshold of deal size to reach that magic number. Maybe I'm old fashioned for thinking in such terms, but I want to take a look at what is a delineation between hobbyists and people who take the Web 2.0 mantra seriously in terms of building businesses. To reach that threshold, these gazelles either need to sell to a huge number of small accounts or a clutch of bigger accounts. The smaller accounts presume some kind of network or affiliate structure while the larger accounts probably require dedicated sales. In each case, the customer side needs to ask "Yes, whatever you've built is cool and adds value. But how am I going to feel secure that within 18 months YOU are still around given that you've only got about 25-50K of skin in the game." That's still the part that confounds me. I can see the start-up and development costs being radically simplified because of web services etc. But I can't see a short cut toward scaling a true $1 million a year of REAL money business without incurring some of the economic trade-offs that typify regular businesses. That's why at the end of the day, I don't see a huge difference between AC and a good board of advisors. I think that a lot of grief is going to come because the AC principle assumes that a certain defiance of gravity, when you think about it. My two cents... I’m curious to see how all these start-ups who can launch with so little $ can crack the viability problem once they stop selling to friends and family. As far as I can tell, if they intend to scale to let’s say simply a $1 million annual revenue, you’re talking about several full time employees. With 365 days a year, there is a certain threshold of deal size to reach that magic number. Maybe I’m old fashioned for thinking in such terms, but I want to take a look at what is a delineation between hobbyists and people who take the Web 2.0 mantra seriously in terms of building businesses. To reach that threshold, these gazelles either need to sell to a huge number of small accounts or a clutch of bigger accounts. The smaller accounts presume some kind of network or affiliate structure while the larger accounts probably require dedicated sales. In each case, the customer side needs to ask “Yes, whatever you’ve built is cool and adds value. But how am I going to feel secure that within 18 months YOU are still around given that you’ve only got about 25-50K of skin in the game.”

That’s still the part that confounds me. I can see the start-up and development costs being radically simplified because of web services etc. But I can’t see a short cut toward scaling a true $1 million a year of REAL money business without incurring some of the economic trade-offs that typify regular businesses.

That’s why at the end of the day, I don’t see a huge difference between AC and a good board of advisors. I think that a lot of grief is going to come because the AC principle assumes that a certain defiance of gravity, when you think about it. My two cents…

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