Is the current VC model ripe for disruption?
Posted by Arun Uday on October 19, 2007
Have been irregular for the past few days in posting, mainly on account of a heightened deal activity here. Expect things to clear up in a couple of weeks and resume regular blogging. Meanwhile, happened to visit the site of a SV based early stage investor - First Round Capital. Their investment thesis had an interesting point, which had me thinking. To quote from the site - “We love investing in technologies and business models that are able to shrink existing markets. If your company can take $5 of revenue from a competitor for every $1 you earn – let’s talk!”
I think what this effectively means is that they are looking at industries which have huge inefficiencies and/or players who could do the same thing (profitably) that competition is now doing but at a much lower cost. Examples that come to mind readily are the outsourcing industry (India for IT and China for manufacturing) and internet advertising industry (Google in particular), which had lots of wasteful expenditure, which new entrants were able to eradicate. Thats all fine. But, here’s the interesting bit - the other large industry that I can see where also there is a huge degree of “inefficiency” is the VC industry itself. Consider all the billions of dollars that are poured every year on startups that never go anywhere. Could there be disruptive models in the VC industry as well, which would reduce if not eliminate inefficiency? Paul Graham, who runs a popular incubation project called Y Combinator discusses this in an essay. He basically argues that given all the changes in the technology landscape, starting up has become so easy, that the VC industry also needs to move towards an assembly line style “standardization model” rather than the old fashioned “customization model” that the VC industry has been employing so far. As one would imagine, Y Combinator does just that. Is this a disruption that could change the VC landscape? Wonder how our friends at First Round Capital would react to this idea.
October 22, 2007 at 6:11 am
[...] International Properties and Investments, Inc. wrote an interesting post today onHere’s a quick excerptHe basically argues that given all the changes in the technology landscape, starting up has become so easy, that the VC industry also needs to move towards an assembly line style “standardization model” rather than the old fashioned … [...]
January 23, 2008 at 10:10 am
There is a sudden splurge of the Entrepreneurial activities and ventures in India. These activities are backed up by a large number of Angel Investment, Venture Capital Funding organizations etc.
Angel investments even a newer concept as masses are still not aware what angel investment is. However to reach angel investors is not a cakewalk. Angel investors are highly skilled people in their own areas and they are not easily accessible. In India, there are very few options where a person can such investors or try to get funding. It seems like there are a few firms, which provide you with such resources.
I came across such a venture, which startled, as it seems they help you with all the necessary services, which are required to start-up a business. They have also given the outline as to how to pitch to investors, patents, copyrights, information etc.