Advice capital

Stowe Boyd has a smashing post today suggesting a shift form venture capital to advice capital. As VCs find themselves unable to throw big buckets o’ money at ever-smaller, nimbler, quicker startups, it becomes impossible for them to manage their real assets: time, distraction, and knowledge. I think that this provides opportunties for strategic investors who have more than money to offer and also for smart, independent people (such as bloggers, Boyd suggests) who can offer advice, connections, and questions. The challenge is to make this more than a show advisory board but a real relationship and a longer-term commitment for both than old-style consulting (thanks to payoffs in long-term equity). I’ve started down that path with a few companies myself.

  • Sounds very 1999. I remember when B School professors were lining up to be advisors to dotcoms in exchange for equity.

  • George Lipper

    The challenge lies in the mismatch between the needs of worthy start-up entrepreneurs for relatively small amounts of venture funding and instititutional venture capitalists who cannot dedicate the time to justify dealing with small investments. Hense, we’ve watched a steady erosion of the share of venture capital (and therefore VC’s time) directed to the seed and start-up stage to about 2% of available capital…while expansion and later stage investments claim 80%+

  • There is an unwritten rule in the investment arena that I feel holds true for any budding entrepreneur: When you ask for capital you get advice and when you ask for advice you often get capital.

    I don’t even think this is counter intuitive. Entrepreneurs who are flexible with their vision and adaptive to market conditions are the ones who investors want to put money behind. In addition they are often the ones who realize they have a lot to gain from the input of others. I don’t think a person can have a “go-at-it-alone” personality and succeed.

  • Catch 22. Get investment capital and lose some control. Don’t get investment capital and lose expansion options that could mean the ultimate downfall of the company

  • dda
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  • Sebastian

    Hmmm…I would’ve expected this to run with a ‘Exploding VCs’ headline.

    Big Old Dumb venture capitalists!

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