Sohodojo - New Economy Venture Capital and the Nanocorp

Don't Believe Us? How about 'Red Herring'?

We, the authors, are not pollyanna idealists thinking that the World will be transformed overnight. As much as we all are too often unwitting victims of discontinuous, revolutionary change; so too are we frequent victims to its gradual, unseen accumulation... the Boiling Frog Effect as Charles Handy reminds us in The Age of Unreason.

In the on-going World of Venture Capital, there will still be Old Guard who specialize in investing in companies. (These folks will be the most susceptible to gradual boiling.)

Dan Pink Sees It Coming - F.A.N. Bonds

We're talking about the risk capital end of the free agent financing continuum in this installment of The Nanocorp Primer. Dan Pink, in his landmark book Free Agent Nation, gives us an insightful prognostication about a more generalized form of free agent debt financing, the F.A.N bond. Read more about Free Agent Nation Bonds in Sohodojo's book review.

But more and more you will visit venture capital web sites and see people listed among the investment plays along with the usual company fare.

You may even find extremist Venture Capitalists who specialize in backing talented people only! You could look at this as the Hollywoodization of Venture Capital funding. But this is an unbalanced position as surely as the Old Guard's.

The most dominant and successful 21st Century Venture Capital firms will be mixed baggers holding a dynamic collection of people and corporate investments. These firms will be adding the spontaneous innovation and emergent opportunistic dimensions of self-organizing, self-managing players into the traditional corporate investment mix.

These mixed-bag Venture Capital firms will have a balanced, synergistic portfolio that will produce more and better results than the 20th Century Game ever produced. These investors' free agent entrepreneurs will mix and match components from their investors' portfolios to synthesize new opportunities unmet or unseen by the investors' corporate portfolio. By adding a dynamic collection of boundary-level change agents to their corporate investments, the savvy 21st Century Venture Capital firm will attain leveraged positions his or her 20th Century counterparts could only dream about.

Too 'out there' you think? Don't believe us. Check out the Going Public magazine supplement that comes with the humongous June 2000 issue of Red Herring. Mark Williams has contributed a cogent one-pager, "Old money made new: A short history of venture capital, from the Rockefellers to the present." Williams ends his historical perspective with the following paragraph:

"Besides capital, successful VC firms have increasingly offered expertise in whatever helps entrepreneurs create successful companies (or successful IPOs, anyway). Today, as the tech boom continues to expand and money flows, that trend is intensifying. VC firms themselves have modeled changes in society. Pundits' depictions of tomorrows' enterprises -- lean and horizontal, sometimes just networks cobbled together for the duration of the project, with workers vested in its success -- resemble both the intricate partnerships that VCs cultivate among their portfolio companies and the alliances that VC firms form with each other around their investments."

Right on, Mark. As we decouple entrepreneurs from their play-making corporate wrappers, we see that venture capitalist and entrepreneur are two faces of the same spirit. The hat you wear is simply a function of who's got the money and who's got the idea of what to do with it. The Human Spirit of Enterprise is in us, not in the corporate shells through which we express ourselves.

Thanks for reading,
Jim Salmons and Timlynn Babitsky
11 May 2000, Raleigh NC

Slide text

New Economy venture capitalists will come in three 'flavors' based on the mix of their investments.

Some invest in both people and companies

Some will invest in people only

Old-Guard will stick with companies