Who is your business backing as its intellectual venture capital?

The buzz words around the entrepreneurial space are “venture capital” and “private equity”. It’s every startup’s dream to have an investor put funding towards their new idea, or recently launched venture. The money provided sees ideas take flight, the original inventors or entrepreneurs successful, and the PE or VC business making a killing. I’ve been wondering about this divide that exists. There are the smart thinkers, the “intellectuals”, who see a market gap and devise a phenomenal solution. If it’s scalable, IP protectable, and offers some reasonable form of a barrier to entry, it could be a target for funding. In the PE/VC space, a few guys sit with a balance sheet and wait for an incredible idea to pass over their table. They’re not the ones doing the problem solving – they’re just waiting at that bus stop and are keen to take a joyride.  Sure, they’ll through in a few connections and clever derivatives along the way, but you’re not going to meet many private equity big dogs having been the ones with the idea they made money on.  So my view on it, for the most part, is that the great ideas, and the financiers able to see it grow, exist as two separate biosystems. Where they do overlap, and deals are done, friction exists. Perception and risk appetite weed out I’m sure huge numbers of great ideas. Ideas that can change our economy. Ideas that can create jobs for our country.

So does your business pull these two facets together? Does it create the environment where the dynamic thinkers have access to a bit of capital and those that release it are hungry for a bit of risk? Even that, I suppose, is a conundrum in itself. Normally the riskless, measured accountants squirrel the money away and only play it on safe investments – definitely not on ideas thought up round the water cooler.

However, the upside of getting this right is quite amazing. The intellectual property of the idea remains under ownership of the firm, so there’s no need to sell out equity to an investor. The company and shareholders in turn get an opportunity to grow in scale and profits, and the employees feel that they work in a space that promotes active idea generation. Without paraphrasing from Bullshit Bingo, it’s perfect for synergies..

An incredibly tough challenge, this. It starts from the hiring process, and bringing in staff with the ability to look at the world, and your business, differently. The people within the organisation should also be keen to accept new views, incubate ideas and develop solutions unlike any of your competitors. All elements of an ideal circumstance need to be present for this to happen. But it does. Somewhere, someone is doing something that’s going to change the way your industry operates next year. I hope that keeps you up at night, not just the usual suspects of minor bumps in the operation road.

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  1. murraylegg
    Colin Wakefield
    20/11/2010 at 9:10 pm Permalink

    It’s about the mix. A lot like a recipe book.. Take two units of this and mix it with five doses of that. Stir and alla cadanra. The challenge is to keep this intellectual openess, honestly and robusness open at the same time as PnL i.e. the daily marking to market of all intellectual property and the resuts it must brin. What is your measue of PnL? The hard money you make or the perceved value added to a creative process?

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