Venture Capital Regrouping
I wrote a post this past weekend at my blog the Entrepreneurial Mind about the dramatic drop in venture capital funding, particularly for newer ventures.
The Wall Street Journal has an article on an innovative attempt to get money flowing back into start-up deals:
In the latest example of investors trying new approaches during the downturn, a venture-capital firm that was an early backer of Facebook Inc. is devising a plan to outsource early investing decisions to hand-picked entrepreneurs and technology executives.
The Silicon Valley firm Founders Fund plans to give at least 12 "fellows" $25,000 to invest in an early-stage company of their choosing. Founders Fund will invest $25,000 alongside those initial investments and request the right to invest an additional $250,000 when the companies raise their next round, according to Sean Parker, managing partner at Founders Fund, which announced it raised a $220 million fund in late 2007. The firm expects to devote roughly $3.6 million to the new program.
We have launched a similar program here at Belmont University called our Runway Loan fund. So far, we have given two loans to alumni ventures of $25,000 each. The terms are that these are set up as interest free loans. Once the principle is repaid, the student or alumnus agrees to begin paying an annual gift to our Center of Entrepreneurship that is equal to one percent of their revenues for the life of the business.
The first two ventures to receive Runway Loans are Cell Journalist and Just Kidding Productions.
Our hope is that we can gain permanent funding for this program so it can be expanded. It provides badly needed seed funding for our students and alumni and a means of creating a revenue stream for our Center that can help us expand what we do over the long-term.
Given our dependence on new businesses to pull us out the recession, we need try all the creative solutions we can think of to support these entrepreneurs.