Disrupting Venture Capital with UDDT
Then read Dave Winer's How to reform the VC industry.
Dave's case compresses to these two points:
1. One word: disintermediate. Take out the middleman. We don’t need the partners, limited or general, they gum up the works. We need money to start new ventures. Luckily we know the people with the money, they’re the users. And we need people to validate the ideas. Same people, the users.
5. In any case, I’m sure there will be startups that need capital. Let’s assume so. So let’s start a new company, with Rick Segal as the CEO (if he’ll do it) called User Internet Capital Corp or something catchier. File all the right paper with the SEC, and do an IPO. You have to, because we’re going to be selling shares to the public right at the start. This thing will be public from day one. The purpose of the company will be to invest in promising young Internet companies, chosen by the users, nurture them through startup, get them liquid through acquisition or IPO and distribute dividends to the shareholders accordingly. Retain some cash for overhead and (I insist on this) a small percentage for pure technology research and development, so there will be new ideas to base the startups of 2009 and 2011 on.
That’s it. Never stop investing. All you have to do is listen to the users, who also happen to be the owners. How about that?
Public ownership, hm? Where have we heard that before?
What Dave wants here is exactly the opposite of The Way It Usually Works, where "going public" and "exit strategy" are a bit too related.
Here "coming public" might be the better expression.
I like it.
Mark Evans responds with A New VC Model?". A sample:
Web 2.0 may not be a bubble yet but there are intriguing, if not troubling, signs that the inmates want to take over the prison. Dave Winer's call to remove VCs from the formula has some merit but it assumes investors in a publicly-traded venture company will have faith that the people running it are smarter than VCs. So who are these people and what makes them more insightful than VCs? Before anyone gets carried away about turfing VCs from the equation, let's concede there is a role for VCs within Web 2.0 but it will have to evolve because many start-ups don't need much of what the biggest thing VCs bring to the table: money. Given development and distribution costs are modest, and the best services will market themselves virally, where is the VC's value that will get them a piece of the action?
Mark then throws the funding challenge to Rick, Mark Cuban, Dave, Niklas Zenstrom and Tim Draper, to name a few. And concludes,
Scoble says amen to Dave's idea, then asks What are the "ventures" the entrepreneurs actually need? Then goes on to name eleven examples.
In Crunch Notes, Mike Arrington also points to John Roberts of CNET, who responds to Scoble with this:
Ideas are not what’s lacking. Execution, talent, stubbornness, focus, and leadership are the currency, in combination, which convert into excellent businesses. Ideas are sprinkled, for free, throughout the industry. Yes, having an idea first counts for something… a slim head start. Not much more.
The rest of the list is a reasonable extrapolation of where things might go. But let’s remember that people (and their organizations) don’t change as fast as the technologies which make this type of “venture