The Past, Present and Future of Capital Funding
The Internet and the integration of valuable software into corporate systems, has disrupted almost every industry there is, laying bare vast quantities of knowledge, which in the past was extremely well hidden and only known to a privileged few. Just 10 to 15 years ago, you had to be lucky to find the right “know how” and get the right connections. In fact, breaking into certain industries could often take a whole generation or more. Now, those days are gone.
This phenomenon of “open knowledge” we live in today opens up all kinds of opportunities for entrepreneurs and for investors as well.
This knowledge is laid bare through information, blogs and media all available over the Internet; information that was not available in any way shape or form some ten years ago.
As a modern entrepreneur, all you have to do to find out what a venture capitalist is looking for is go to a VCs blog.
Some of the most respected VCs now share their insights, the process, the things they look for in a startup and even information they require in a specialized business guideline.
When Did It All Start?
We can say that venture capitalists like Naval Ravikant, Fred Wilson and Brad Feld were pioneers. They began to open up and tell us what they wanted to see through their blogs back in 2002 and 2003. Later we saw companies like Venture Hacks and The Funded pop up. These sites even allowed people to begin rating VCs – a feature that disgruntled many an investor.
Thanks to these blogging pioneers, we now have explicit and clear information on what a venture capitalist looks for, what a term sheet is and how to reach them. These were once hidden clues that only the very clever entrepreneurs could find.
The Next Step
Alongside this initial contribution we’ve also witnessed an incredible advance in technology, which significantly reduces the cost of launching a new company. This means many new startups don’t need those large VC funds to get started. This opened the doors to SuperAngels or MicroVC. This is an investor that has a collaborative mindset, one that doesn’t have a large board of directors, and one who offers easy terms. In turn this opened up a new trend for investors, that of open discussions, personalities and easier terms.
Now Comes the VC Service Provider
VC firms are now so open that many have changed the way they do business completely, making the VC a service provider. The software they use to streamline their startup networks and companies has gone a long way towards making this possible.
The federal government has also put its two cents in with The Jobs Act and Crowdfunding
This gives entrepreneurs online options for raising the money they need.
Many angel investors and entrepreneurs feel we are on the brink of new change. They believe the average business bank loan may quickly go out of style, and instead people will fund other people; mentor them and network them with others.
In exchange investors will share in their success. If they can’t pay you back, then no consequences, but if the entrepreneur is successful then so is the investor. The key to doing this effectively will be through the use of algorithms which identify the best people to fund.