Tom Evslin contributes to the discussion about advisory capital with a suggestion — give ACs equity, not options — and a question: How will startups meet the right ACs? Should there be AC firms? Good question.
I think that VC shops would be wise to set up — and arrange compensation for! — networks of advisory capitalists, who could aid the startups with advice and expertise and the VC firms with deal flow and with help managing a far greater number of far smaller investments. These relationships should not be exclusive, otherwise you won’t get the maximum deal flow and introductions and the best deals for you. As with the rest of life online today, you should think networks: The more and better connections you make, the better.
Now the problem for the VCs remains: Startups need less money and thus it’s hard to invest enough for your real clients — your investors — without stretching your real resources — your time and attention. That’s why ACs are needed: to help you reach and invest in more companies by finding them and advising them. As I said the other day, the relative value of expertise and experience grows in relation to money, so the smart VCs will compensate for the reduced need for money with increased use of targeted expertise.
Should there be AC firms? Maybe. But I think not: The value is in flexible networks, in knowing people who know people who know stuff. I fear a firm would just act like an old consultance: Hire us and buy our bullshit and take your chances. Advisory capital is about personal relationships. VCs bring other people’s money. ACs bring their own knowledge.
So I think the thing to do is to old the first ACcon: a Demo without cash, in which startups meet experts with experience and they get to know each other and test each other and see whether they want to date. It’s not much different from other networking events, like Web 2.0 and Nick Denton’s old First Tuesday, except that money isn’t the draw and the currency, smarts are.