2013 was the year of transition in my career. I was just lucky enough to be involved with the formation of new university backed venture fund. I’m totally excited about things I’d be helping my hometown foster its startup ecosystem through this fund in the future. I’m 100% certain that my knowledge of building and running many web startups can contribute something to it and my experience of failures can help aspiring entrepreneurs stay away from making same mistakes I made.
However, having infusion of risk money via VCs is only solving one side of problems to create sustainable startup ecosystem. Due to the nature of venture capital business, VCs are often challenged with fundamental difficulties such that they cannot make an investment in the companies that don’t meet their financial criteria, even if the companies are considered remarkable by them. After all, VCs make an investment using someone else’s money and they are obligated to yield financial return. Thus, financial criteria comes first. Few exceptions are like a corporate venture capital where it puts more weight on strategic alliance between portfolio companies and the company operating the venture capital than financial return.
Because of this, only select group of companies can receive investment and most of the time the companies must 1) tackle a problem that millions of people face and those people willingly pay for its solution. 2) position themselves in high-growth market, and most importantly 3) be able to liquidate its assets through IPO or acquisition.
It’s obvious that not all remarkable companies meet those conditions and VC isn’t the best form of institution to build such companies in the long-run. This is the reason why I recently started talking about importance of community driven startup accelerator. In my opinion, sustainable startup ecosystem requires special type of people whose main objective is purely to build remarkable companies for the community they belong to, not to extract maximum financial result from portfolio companies.
I understand YC and 500 Startups have a similar objective and they are successful but I’m not referring to that kind of accelerators. I’m talking about raise of different breed, more individual driven accelerator/investor/supporter like Gotham Gal being a good example. As her husband explains, Gotham Gal invests in businesses that make sense to her, and decision isn’t based on financial expectation. If we could institutionalize those type of people and turn them into some sort of accelerator form, we can build remarkable companies in a slightly different way and do it in the long-run.
I do not have a concrete idea for what it is just yet, but I will have better understanding as I gain my experience at VC. So expect me to come up with some accelerator-ish experiments this year.