Investment the VentureWell/Village Capital way
Last weekend was the close of the NCIIA/Village Capital VentureWell program where the teams chose which two companies would receive $50K investment each. This is a follow-on post to Crowd sourced investment. How do you teach early stage entrepreneurs to think like investors? Give them the glasses of the investor; let them see the world through the investor’s eyes. Put the investment into the hands of the group. Peer sourced investment. It’s new, unique and disruptive.
Village Capital has been doing this for a couple of years all around the world, although the program that I witnessed was the first partnership with the NCIIA. At the NCIIA, we are taking entrepreneurship instruction to the next level. Not only through this program, but through the Lean Launchpad, which trains the trainers in the Steve Blank methodology around customer development, our E-Team program, which provides grants, workshops and mentoring to student teams across the country to bring technology solutions to the market, and our Course and Program grants, which are made to faculty to institute new programs at their institutions around innovation and entrepreneurship.
The three-day VentureWell program was bookmarked on both ends by public events. The first day kicked off with a Venture Forum at the Cambridge Innovation Center, which managing director (and founder & President of the new Hub Boston) Geoff Mamlet says: “with 450 startups, we are the largest collection of startups anywhere.” A la Ignite or Pecha Kucha style, each of the 16 startups had a three-minute slide presentation where the slides automatically advanced. “This keeps it short and sweet,” Joseph Steig, my NCIIA colleague who is in charge of venture development. “It also ensures that they rehearse, and they tell a concise and compelling story,” he adds.
The ending event was SoCap: Soul Boston, which is the first time that the popular Social Capitals Market event was held on the East Coast. At this event, the “winners” of the two $50,000 investments were announced: CleanNG, which has developed a new natural gas storage tank that is lighter yet stronger than current tanks, and Save Energy Systems, a simple, networked system (software and hardware) that optimizes HVAC units and reduces peak demand and energy costs. Congrats Matt Villarreal, founder of CEO of CleanNG, based in Oklahoma (not the first place you think of for startups, but a perfect place for Matt and his team). And congrats to Paul Laskow and Jim Gillespie of Massachusetts-based Save Energy Systems.
The VentureWell program is very interesting on a number of levels. For one, it’s the only national/international program that I know of that actually trains early stage companies about investment. The startups had to apply and acceptance was competitive. Team leaders came from as far away as South Africa – MoWoza, which provides a mobile purchasing system across borders in Africa – and western China – Scot Frank of One Earth Designs, which has developed a novel solar cooker. They also came from around the corner, like Patrick Quinlan and Jason Laferty of Sola Block, a solar-embedded cement building block.
The VentureWell program is the only peer-selected investment program I have ever come across. It’s not quite crowd-sourced because the selection is made internally by all of the teams, but it’s certainly risky: someone is entrusting their money (Village Capital and other investors, including River Valley Investors, a Massachusetts angel group) to others (the actual entrepreneurs) for the investment decision. “Of course you can’t vote for your own startup,” Joseph reminds me. “And, even when we eliminated the top score, we still got the same two companies in first place,” adds James Watson, program director for Village Capital.
Selecting the winners was a grueling training process over four months and three on-sites with practice voting for the teams occurring at the end of each onsite. This means that the process is well perfected and familiar by the time the entrepreneurs select the real winners. This is an incredibly new take on an age-old problem of how to train early stage entrepreneurs so that they advance their startups to where they are potentially fundable. This also means that the startups become much more viable because to be fundable you must have a solid business model and a path to customers, productization, and value creation. And it’s a highly efficient way for investors to make small seed-stage investments. “That’s the goal for our Village Capital programs,” said Ross Baird, executive director of Village Capital. “Village Capital uses the power of peer support to build enterprises that change the world and produces an efficient process for investors by letting entrepreneurs do due diligence on their peers.”
Final thoughts. The importance of learning to think like an investor, to see startups through the lens of the investor, cannot be overstated. The power of peer selection for investment also cannot be underestimated. Entrepreneurs making investment decisions, whether with their own money or others, take the process seriously – as they wish investors to do when it comes time to turn the tables. The training involved in such a program demands a tour de force, brought to you by the NCIIA and Village Capital. What I saw was the first collaborative program between the two organizations, but it will not be the last. The NCIIA and Village Capital are already in the planning stages for several more programs this year.
Stay tuned. Apply. Get funded. Become fundable.