For the fifth in our series of interviews with investors, we decided to do something different. Elliott Dahan, of the START Fund, cannot write you a check. At least not yet; he is working on that. But he is trying to do something much more ambitious, which is to create a totally new model for funding early- and seed-stage ventures. VCs love to fund disruptive ventures. But the VC model itself has been pretty immune to change for decades. So Elliott has set himself the tough job of disrupting the disrupters.
Listen to the Interview
Download the MP3.
There is a lot of information to absorb here. Those who are really interested in this should check out the Slideshare that Elliott has produced. It looks a tad daunting at 41 slides, but it is really 8 main slides with 33 slides of supporting material and references. If you want to follow the MP3 audio, here is the sequence:
- Elliott describes his background. In short: been there, done that, some corporate VC, some angel, some entrepreneur time.
- Is the START Fund an incubator or something that adds value to incubators? (Skip to 1:30 of the interview.) In short, it does add value to incubators. Interesting point: America and Canada have 600 incubators that focus on technology.
- He describes current models of early- and seed-stage funding and what the issues are. (Skip to 4:00.) His take on the three basic models:
- Angels are great. If you know one, you’re in luck. But the chance of finding one that meets the right criteria (knows you, is local, knows your market and technology) is low. And right now, angels have zipped up their wallets.
- With new model seed Funds, such as Y Combinator and TechStars, get what you can to get yourself going, but giving away 6% to 10% for a tiny amount of cash is not smart.
- Elliot was pretty scathing about divisions of VC funds, such as Charles River’s QuickStart. Some choice quotes, all for the VC community:
- “Most entrepreneurs would rather have a root canal than visit with VCs.”
- “Don’t make the entrepreneur come to Sand Hill Road to genuflect while you pontificate.”
Our Take
Elliott is on to something big. The models for funding early-stage are broken. That is why we see a lot of innovation in this area. But the innovation so far is incremental. Some day we may see a fundamental change. Innovation is too important to everybody to leave to the current guardians of the money piles.
Something new that leverages the Internet should be possible. The Internet changes everything: it should be able to change early-stage financing, too.
So, we wish him well. But it is a tough challenge. And his model sounds a tad complex: implementation will be tough.
Listen to the Interview
Download the MP3.
