May 12 2010
May 12 2010
The way good ideas come to life is changing in light of a rising tide of successful “lean start-ups,” angel investors, and social product development sites. Traditionally, innovators have sought out venture capitalists who after a lengthy green-lighting and due diligence process provide access to large sums of money (often with investment minimums in the millions) along with industry, financial and legal guidance. And, in exchange venture capitalists often demand board seats and impose complex deal terms.
But modern start-ups are bucking the traditional VC model. A new wave of successful start-ups, including the likes of Facebook and FourSquare, are following the lean start-up model coined by Eric Ries and Steven Blanc. These companies launch with little investment (Facebook started with well under $1 million), small teams, and a minimum viable product to test market response before additional investment and expansion. They don’t need millions to launch, nor do they need a board of directors. So, they rely on a new funding source, the angel investor, rather than venture capitalists.
Angel investors like Ron Conway, Dave McClure and Mike Maples Jr. are wealthy, well-connected investors without the constraints of VC firms. They don’t mandate complex terms or board seats, they are willing to invest relatively small amounts (tens of thousands instead of millions), and they are quick to make investment decisions (essential for making sure an idea does not get “out-scooped” or become irrelevant). On the downside, they typically do not provide the comprehensive business development guidance a VC firm does.
There is a second alternative to venture capital funding for lean start-ups, the social angel, otherwise known as social product development sites. Open source websites like Quirky.com, Kickstarter.com, Idealist.org, and Innocentive.com are bridging the gap between the angel investor and the venture capitalist. They cultivate innovative businesses by providing both funding and guidance. They are intermediaries between innovators and consumers designed to ensure that no good idea will be left behind due to distance, economic circumstance, or executional know-how.
As an example, the Split Stick is an idea submitted by Marc Julian Zech, an advertising copywriter in Hamburg, Germany for a double-sided mini hardrive (a single USB plug with personal data on one side and work data on the other). Zech submitted his idea for a $99 fee to Quirky.com, and within weeks, the Split Stick had a name, final design and a manufacturing launch thanks to the help of Quirky members.
As these social product development sites mature and gain traction, there is an opportunity for venture capitalists to show they too can be nimble and adapt to the times. Perhaps they can partner with some of the social product development sites to add valuable business guidance and capital. While this may be a departure from their current way of doing business, it’s markedly better than obsolescence in the increasingly successful lean start-up market.
February 23 2010
This past weekend is the first time in a longtime when I did not twitter, facebook, email, touch a computer, or even use my cell phone. I did things like go to dinner with friends, venture into a dueling piano bar, ice skating, in other words; being social without social media.
Don’t get me wrong I’m all for social media. Its helped me to stay connected in ways I didn’t think possible, as well as gather information quickly without the legwork. However, without it, I felt more inspired, observant, and attentive. Maybe it life was better before we had useful distractions like twitter and facebook. Luckily, there’s actually a device to cure you of social media. Within an hour the web 2.0 suicide machine disconnects you from all your social media avatars. So far 3,109 people have used the machine, totaling 229,651 friends unfriended and 391,125 tweets untweeted. Maybe this is a bit extreme but there is something to be said about becoming “anti-social”.
