Do you talk about folks like Ron Conway, Reid Hoffman, Paul Graham, Chris Sacca, Peter Thiel, Michael Arrington, Jason Calacanis, Jeff Clavier, Fred Wilson, Dave Winer, Mitch Kapor, Dave McClure (oh man…I’m tired and there are so many more) like they are movie stars?
Then you might have what it takes to be a Venture Capitalist or the more elite crowd of proven Angel Investors. Or, you might be a starry-eyed entrepreneur that falls a sleep every night dreaming of elaborate schemes that would land 5 minutes in front of one of these Titans to pitch your business.
Why Must Funding Be So Hard?
Being a serial entrepreneur, I can attest to how distracting raising venture capital is to a young venture. It nearly killed Kaleidico in the early days. In fact, we abandoned the notion altogether, but that’s another post.
The important point is that raising capital is hard, very hard. Even armed with a smoking hot idea, a solid business plan, and a proven team you are going to spend a ton of time traveling, setting appointments, pitching, writing pitches, rewriting pitches, running pro formas, and hanging out in all the right places. Meanwhile, you almost forget that you’re trying to create a viable product or nurture a few early adopting, trusting customers.
Must it be that hard?
I’ve often wondered why the venture capital market isn’t more efficient.
Could Venture Funding Be More Efficient?
That’s why Mix VC, social media, create crowd funding, a Crain’s Detroit Business article, caught my eye this morning.
A couple of Detroit-based firms obviously came to the conclusion that that inefficiency is a big opportunity.
“Detroit-based Fundington LLC and Royal Oak-based eRaise LLC are part of a clutch of websites around the country gearing up to help early-stage companies sell equity online using private markets.
The complication: Rules for the new process won’t be released by the U.S. Securities and Exchange Commission until January.” (source: Crain’s Detroit Business)
Kickstarter.com might immediately come to mind as a clear first mover in this emerging opportunity in Crowdfunding, but there is a clear distinction.
In the current model of Crowdfunding, hampered by Securities and Exchange Commission (SEC) rules, sites like Kickstarter.com are simply donations site, often exchanging small token incentives for small sums. In the model envisioned by companies like eRaise, investors would get real equity in their ventures and conceivably the startups would be able to raise more significant capital.
Good Startups Stay, Smart Investors See More Deals
Another benefit that I see for those of us that sit outside of Silicon Valley is that we (being startup or investor) have more opportunity right where we live.
As a startup you have access to potentially thousands of investors that want you to succeed, but don’t require you to move into their Silicon Valley garage. On the flip side, as an investor I get access to see so many more deals–the unspoken secret to venture capital success.
What do you think? Will this work? Will the SEC untangle the regulatory noose?