Disrupting the VC Business and Exploring the Because Effect
I keep running into Rick Segal. Doesn't matter how remote or large the event might be, there's Rick. It happened last summer in Copenhagen, when Rick was the first guy I recognized in Denmark sitting in a steetside cafe on the evening before Reboot started. And it happened again earlier this month at CES in Las Vegas, when I ran into Rick somewhere in the bowells of the monstrous South Hall, which is possibly the largest single conference space in the world.
Rick is a VC: a venture capitalist. He's also a rebel. So, every time we meet up, we naturally find ourselves talking about how venture funding is ripe for disruption (in the manner of Clayton Christensen's Innovator's Dilemma, which describes how old slow-innovating industries are disrupted by small, original and inventive newcomers). While the technologies and markets funded by VCs continue to change, Rick says, the VC business itself has changed very little. Partners rotate through, but the dance stays the same. And it's getting as old as disco.
So this past weekend, in the midst of a many-city junket, Rick came by our house in Santa Barbara (a nice warm Winter break from Rick's native habitat), and we brainstormed all kinds of fun stuff. Which was an education for me, because I've generally avoided the detail side of the Venture business. Sure, I've sat in on pitches, and advised VCs and their funded companies at various times and in various ways (more often informally than formally). But my eyes usually glaze over when talks turn to term sheets and angels and burn rates and A-, B- and mezz rounds of funding. But Rick wasn't talking about that stuff. He was talking about speeding up and otherwise improving the simple act of getting good ideas off the ground.
But rather than share his ideas (which maybe oughta be his job anyway), I thought I'd ask the rest of ya'll what you'd do to improve the venture business especially in the earliest stages, when you've got a good idea that needs a bit of funding to help get started.
I'm especially interested in exploring what I've been calling the because effect. This is what you get when your new business isn't just about inventing and controlling technologies and standards, but about taking advantage of the new opportunities opened up by fresh new technologies and standards. For example, making money because of blogging, or RSS, or desktop Linux, or whatever rather than just with those things.
The because effect is a kind of jujitsu. While other people look to make money with something, you're finding ways of making money because of something.
Prime example, because of search, Google and Yahoo make money with advertising. Another: because of Rivendell, Salem Communications saves money with its core buisness, which is broadcasting. Because of his blogging, Thomas Mahon makes more money with his tailoring business.
Thoughts? Ideas? Stories?