It is unfortunate that an entrepreneurs idea is only as good as its funding. After four start ups, I am well aware of the value behind minimizing expenses and getting to market quickly before costs get in the way. However, If large scale ideas first need capital then an entrepreneur needs to move focus away from his core idea and figure out how to raise the minimal necessary funds. A young business will expend a disproportionate amount of time on learning all about how to first learn about how investments are structured, pitching their idea and then being evaluated by investment groups - rinse and repeat. In this down economy, VC and Angel firms are holding out on deals because they can win better terms by extending negotiations. By design, the entire process of raising capital slows innovation.
My application to Singularity University was based on the thesis by which I, ‘propose new open methods to remove the perceived risk aversion to investing in innovation.’ Clearly, the rate of innovation is rapidly increasing. Access to capital must proportionally ease. Otherwise, growth will be held captive by an innovation capital bottleneck and ideas will not be funded. The solution is to provide open tools and guidance used by entrepreneurs to sharing with capital investment firms to evaluate and manage risk.
A new dawn of accelerated investment should do the following:
1. Allow investments to come from those who are not an Accredited Angel Investor as defined by the SEC in Rule 501(a) of Regulation D under Rule 144 of the Securities Act [either (a)net worth of $1,000,000 or (b) annual income of $200,000]
The reason being, passionate people and young minds want to finance new ideas but this rule says that only 0.15% of the global population can invest this way. (World Wealth Report 2007 {http://www.capgemini.com/resources/thought_leadership/world_wealth_report_2007/}The solution here could be creating a new investment company with numerous share holders all voting on what opportunities to take. Risk is offset with a basket portfolio. Exposure is monitored because funding is cut if monthly or quarterly numbers are not met.
2. Provide 3rd party tools to monitor key performance metrics of investments.
3. Publish open courseware for learning the skills demanded by a business world constantly iterating.
Audited elements of a business reduce the due diligence cycle needed by each investment firm, gear the company to think about moving their performance indicators up and to the right. Audits could be performed against accounting, all code from architecture and components through unit and user testing, business contracts to forecast future revenue. Each of these keeps entrepreneurs engaged in moving forward. The 3rd party will offer insight into how successful the business may be and how much money is needed.
In principle, privacy will always be respected so that a young company only releases information to those trusted. Ideally, these points enhance open source problem solving and get us closer to open source execution.
By opening up early stage capital, more ideas will get to the next level. Traditional investment groups will now compete out in the open against public attitudes. More accountability will be placed on fair terms and producing ideal results for the good of all rather than the profit of few. The formula for success will be understood by a greater audience and can be adopted for Internationalization. Beyond the hubs of innovation in Israel, Vancouver, Munich, Cape Town, Dublin, San Francisco and others, the aim is to provide access to all regardless of geographic location. Innovation should be born from ideas not elite regions of the globe.
Increasing the rate of invested capital allows tomorrows entrepreneurs to focus on developing future technologies and the business models to monetize them.
I was writing an essay for the Entrepreneurial stream of Singularity University and decided to post it for general discussion. Inherently, the rate of innovation is speeding up. If the process of raising money does not proportionally accelerate, then the capital markets will (continue to) slow growth.
I propose a few ideas on we can get around this process while providing lower risk to investors while improving the chances of an entrepreneurs success. I fully understand the value of Venture Capitalists and greatly appreciate what they are bringing to to table at AdventureLink. Thoughts on this domain are purely my own and do not communicate the ideas of my employer or their investors.
I encourage readers to give me responses and RT these writings in hopes that models of new efficiency are born.
-James Shamenski
