Want to hear more about venture capital and long tail entrepreneurs at SXSW?

August 8th, 2008  

We’ve probably talked about this all before, but I thought it would be good to summarize the concepts, ideas and changes we’ve been discussing. And if you want to hear more, vote for the proposed “Venture Capital for Long Tail Entrepreneurs” panel using the SXSW 2009 Panel Picker. For more background on the idea check out the earlier “Venture Capital for the Long Tail” post, and for more information about SXSW read about SXSW 2009.

“Venture Capital for Long Tail Entrepreneurs” describes the need for a fundamentally different, economically viable model for creating and funding micro-businesses in the Long Tail of economy. A new model of business is emerging as the costs to start and scale businesses decline, the culture of Generation Y begins to impact the workplace and increased personal transparency forces companies to re-think how to compete in the marketplace for employees and customers.

The result is a shift towards a more personal, collaborative and distributed system of value creation, yet venture capital has yet to deliver a funding and economic model to fit the specific needs of the long tail of micro-businesses. The formation and success of micro-businesses will depend on how our culture and business support systems adapt to the new set of organizational challenges created by these trends.

Granted, this is an opportunity: an addition to the traditional venture capital model, not a replacement.

Creating an economic model that fits this niche will take a lot of work to change our notions of venture capital and entrepreneurship.

If everybody loved their jobs and enjoyed working for large companies, and if large companies were the most efficient and effective organizations for creating value, this wouldn’t be necessary.

Since that’s not the case, let’s start thinking.

Category: Incubating Life, VC for the Long Tail  

SIMILAR THOUGHTS

Viewing 7 Comments

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    Two quick thoughts:

    - You should link to this [and other work] on your panelpicker post
    - Maybe framing this in terms of "reducing waste" will help with traction...all those failed companies, all those people that cut checks...isn't there a way to pool risk? etc...
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    Good point...

    "Reducing waste" is a good way to frame "why it's good to take small risks rather than large ones."

    I wonder if "pooling risk" is a misguided step towards addressing the need to mitigate entrepreneurs' risks.

    Investors do this: they mitigate risks by taking diversifying investments over multiple stages and pool risks to a degree by co-investing with partners.

    Can we create a structure to provide the same opportunity for entrepreneurs?
    - Partners: require / incent / fund partners (or even groups) rather than solo entrepreneurs?
    - Commit in stages; test ideas, stage-gate investments more, providing more points for entrepreneurs to end or up their involvement?
    - Diversify their commitments: pool risks with other entrepreneurs? Entrepreneurial collectives across a range of unaffiliated ventures?

    It's interesting that most of this challenges the archetype of the traditional entrepreneur; but why does that have to be the standard?
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    That sounds like a strong step in the right direction...pooled entrepreneurial risk. I like the co-op structure for artists/bands/musicians...maybe it has some relevance here.
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    TD, sounds very interesting. I think a model like this is very relevant in areas where there is no VC ecosystem and where the preception is one of too much risk.
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    Good point, and the most interesting application may be in nurturing startup cultures in some parts of the world. perhaps the safety net of "pooled risk" and the halo brand of some startup successes running under the same corporate umbrella would help.

    maybe in some cultures Corporate VC would be more applicable and valuable since the corporation's name would be well-known, respected, "safe"...
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    I'm a little late to the conversation on this post, but I'd like to make a few "devil's advocate" points.

    One of the problems of a "collective" concept is that the larger the pool of entrepreneurs, the harder it is to obtain any consensus on how to structure it or run it.

    Entrepreneurial ventures tend to attract individualistic, maverick, pioneering types and I'm not sure that that type of risk-taking, hardcharging personality is typically compatible with a more collegial, "pooled" mentality.

    If I'm going to work hard in order to potentially reap great rewards from a successful entrepreneurial venture, I'm not sure I would want to participate in a collective that somehow offloaded some of the other entrepreneurs risks onto me.
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    Devil's advocate views are always appreciated.... granted, the idea of pooling risks could lead to a selection bias where all the "collective" gets are the bad risks / marginal business opportunities. And the idea might have limited application to certain industries, firm sizes, cultures, etc.

    And while I agree that entrepreneurial ventures do tend to attract people of those characteristics, there is nothing to say that they have to; it does not have to be the only model of entrepreneurial success. In any case the idea of an archetypical entrepreneur is not the same across all cultures and countries, and thus the applicability of a "collective" concept will vary considerably.

    Even entrepreneurs need partners; even entrepreneurs need people for support, to help drive and create, to share ideas with, to share experiences and lessons learned, and even to share risk.
    They key is that this "collective" concept will never replace the traditional entrepreneur & venture capital model: it is an addition, an extension, not a replacement. And thus it won't attract all entrepreneurs of all stripes: but that's ok. The opportunity is to extend the idea and reality of entrepreneurship to a larger base of people, enterprises and business relationships.
 

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