Taylor Davidson - Latest Comments in Do we need a new funding model for starting businesses?

Re: Do we need a new funding model for starting businesses?

tdavidson — Mon, 11 Aug 2008 17:32:54 -0000

Jessie: loved your response using Utterz, and I appreciate your time and thoughts. Couple key points I picked up on:

Collaboration: you pointed to a potential trend of people (Millenials) hired in groups because of their peer-oriented nature and lifestyle / workstyle. That's an interesting trend I have not considered.

Thinking of "entrepreneurial groups" as you pointed out is an interesting way to think about how small companies could form. I've always believed that entrepreneurs need partners and that the most successful startups were founded by two people; not sure if the data supports that, but I've seen at least anecdotal evidence.

Lifestyle businesses: but the cash can't come just from friends, family and government. That structure exists today, and it's not enough. Burning friends' money and bootstrapping on credit cards are just bad ideas.

Risk and gambling: interesting, I had always considered Millenials (Gen Y) more as risk-takers, but you draw an interesting distinction in the risks they are willing to take. Based on your commentary, I would draw that Millenials are less willing to take big risks (including the risks involved in starting companies) and that Gen X takes bad risks. It is a frame I had never really considered, and an interesting add.

Maybe the key is to make entrepreneurship more possible for the masses, and then it will not be seen as a bad risk? Perhaps an opportunity exists in revising entrepreneurship structures to mitigate risks, test more, reduce personal exposure?

Re: Do we need a new funding model for starting businesses?

JessieX — Sun, 10 Aug 2008 23:51:48 -0000

My thoughts on Milllennials, business start-ups and a new model of funding. http://is.gd/1ml0

Re: Do we need a new funding model for starting businesses?

EthanBauley — Fri, 06 Jun 2008 00:05:19 -0000

Oh, I'm quite aware of the context of India's genius!

The exact same dynamic is present when you compare Indian music and Western music (especially the Western music rooted in the African-American tradition, e.g. blues, jazz, r&b, rock)

It's still effing genius ;-)

But yeah, if you read the rest of that article their main point is: these economies have to deliver more value at less cost. When they apply that same value prop to a Western context...

Re: Do we need a new funding model for starting businesses?

tdavidson — Thu, 05 Jun 2008 22:54:17 -0000

If you want to see entrepreneurship and ingenuity, go to India, I can speak for that. If you want something done, you can get it done on a street corner or market in any major Indian town.

Tata's model may seem genius, but really only to a Western world view. In fact, this disaggregated model of economic value creation is how things are done in India. India already knows how to do this.

Re: Do we need a new funding model for starting businesses?

EthanBauley — Thu, 05 Jun 2008 00:33:31 -0000

Thanks for the shout out, Taylor! Although I'm no more than a living, breathing hyperlink to all things Umair ;-)

I like that this discussion came down to: "How are we educating and preparing people to take these actions themselves?"

In my own career, "business" was a dirty word for a long time. So I really think there is merit in reorienting people's idea of what "work" actually is.

To borrow a term from Jerry Springer, here's my "Final Thought":

We're going to need to come up with a slammin' new world view (which you are getting at) and a way to motivate our workforce ASAP to compete with the pace of innovation that is happening in India/China/etc. (Yes, the "let's collaborate" guy used the word "compete"; we can't let it get to the point where these economies would rather not collaborate with the U.S.; that's a recipe for violence).

They have the need, they have the drive, and they have a chip on their shoulder, after being viewed as second-class economies for half a century:

"As Ratan Tata, chairman of the Tata group of companies, observed in an interview with The Times of London: 'A bunch of entrepreneurs could establish an assembly operation and Tata Motors would train their people, would oversee their quality assurance and they would become satellite assembly operations for us. So we would create entrepreneurs across the country that would produce the car. We would produce the mass items and ship it to them as kits. That is my idea of dispersing wealth. The service person would be like an insurance agent who would be trained, have a cell phone and scooter and would be assigned to a set of customers.'"

"In fact, Tata envisions going even further, providing the tools for local mechanics to assemble the car in existing auto shops or even in new garages created to cater to remote rural customers."

http://www.businessweek.com/innovate/content/fe...

I mean, that is just top-to-bottom genius! Co-creating value, networked distribution, viral franchising, AND a self-reinforcing social motivation? Get outta here!!!

Re: Do we need a new funding model for starting businesses?

tdavidson — Wed, 04 Jun 2008 19:36:06 -0000

It's not just about "social investing". This is a step beyond lending debt capital from one person to another (e.g. Prosper and LendingClub), and not just about making equity investments in people (e.g. My Rich Unkle). It's about thinking about how to create better opportunities for people to start participating in the economy in smaller chunks of activity. Finding better ways to collaborate and get paid for their efforts. Marketplaces for talent (Elance and Guru for consultants) and products (e.g. Etsy and other craft marketplaces for DIY'ers) is a step, but it is not the end solution, since we know most business is created through personal relationships and personal contacts.

And part of this is figuring how we can help add to the supply of entrepreneurs. Figuring out ways to help them eat when they start is a big part of that. Maybe the Millennial Generation is more willing to eat less when they're young to take more of a financial risk when they're young? Will they be happy if they don't get rich and don't get the big exit? How will they adapt?

I don't know: I'm not 22.

A friend of mine had a couple pretty insightful comments earlier today, one of which was: "Whereas VCs invest in ideas and people, this approach leans more toward simply investing in people."

I understand the issues with how the securities legislation and "qualified investors" and reporting rules make it difficult to create and distribute securities to masses of people. But why can't we create easier ways to facilitate the creation and maintenance of one-person LLCs and other corporate structures to provide the corporate structures people need to run lifestyle businesses?

How can we work within existing government legislation to create the best opportunities for people to create and live?

Re: Do we need a new funding model for starting businesses?

pml — Wed, 04 Jun 2008 15:15:23 -0000

Sorry, but I think 'social investing' is a sideshow, a diversion from the problem you address and not a solution.

The core problem is that our great grandfathers burdened us with the Securities Act, a bad idea even at the time, which has by no means stopped securities fraud in this country.

The Act was intended to be highjacked by the syndicalists, moving control of the means of production from owners with their names on the door to labor unions through their pension funds (where would the Vc be without pension funds?). To accomplish that, and serve the big boys on Wall Street, it was necessary to suppress the angel investor market, and as you know there is no angel market in this country today. SEC would move very briskly to suppress any attempt at a true angel market.

You'd literally be better off in RED China.

The nation has been paying for this bad idea and will continue to do so: Cleveland, for example, 100 years ago was the hub of the oil, steel, machine tool, and auto industries. There were more independent automakers in Cleveland in 1907 than the rest of the world combined. Between the M&A racket and the estate tax, there are neither any large manufacturers there, nor anyone with the capital to start up more than a coffee shop. Result? In March, the Times of London called Cleveland a "ghost town" - and they're right!

How does a city or a nation recover when it's productive capacity has bee whored off for a $.05 two-day bump in a public share price? You start over, from scratch. If the Chinese and Koreans and Vietnamese will let you. They threw away state socialism twenty years ago, and with all due haste they've taken over the real production on the planet.

I'm afraid the next generation will have to tear down the superstructure and restore the order of 1900 to avoid becoming a second-world, rust-belt nation. You should see from the obseession with persnal financial security and the resistance to change here that this society has a bad case of atherosclerosis.

Creative, energetic young guys like you should consider moving your skills - your lives - to a more progressive nation.

Re: Do we need a new funding model for starting businesses?

chilepp — Wed, 04 Jun 2008 14:12:50 -0000

Dear Taylor,

You are not alone. I'm the Treasurer/CFO of a late stage startup that has been able to raise $5MM from traditional angel investors only (traditional in the sense that they are every day high net worth individuals interested in a potential high ROI, and not in taking control of our company, or how that ROI is achieved, i.e. M&A, they have not become "institutionalized" like you mentioned in your article - I completely agree with you, most angel group presentations we've made feel like VC presentations - they expect the same terms and exit.

We believe in home grown businesses that are nursed and maintained by the founders. As my partner said to me last week, if Enron had had someone's name at the door, that disaster would never have happened - there would have been a "person" responsible for the company, not a myriad of investors with no direct influence on everyday operations.

We have been lucky enough to attract investors to keep us moving forward without having to give in to the terms placed by VCs. We've worked hard and long to build this company and we plan to stay with it for the long haul AND more importantly, to give our investors a return on their investment that will be unprecedented (even if there is no M&A).

I congratulate you for bringing up this subject and I encourage you to contiue with it. We plan to create a fund in the near future to help startups and the top requirement to qualify (other than a sound business idea and management team) is 1) there will be no IPO or M&A - you the founder will manage and keep your business - we will just help you become successful.

Re: Do we need a new funding model for starting businesses?

tdavidson — Wed, 04 Jun 2008 11:03:13 -0000

Many cities are trying, but in misguided ways. Tax credits to draw in industry, research parks, "innovation agendas", focused efforts to create specific industries, etc. Read NVCA (http://www.nvca.org/) and their news is full of efforts by cities to create the business and economic climates to spur innovation and business creation. However the history of government forcing innovation and business creation along specific, selected industries is mixed at best.

Read "The Creative Class" or anything by Richard Florida to get a taste of the other side of the debate, how cities need to focus on creating the right social, cultural and business environment to draw in the "creative class" of people that will naturally create businesses and economic growth. There's an active debate on both sides, and the answer (like most things) is that it's probably a mixture of both.

The better question is what you point out: what are we teaching kids now that could lead to changing attitudes on what "business" and "jobs" mean?

Re: Do we need a new funding model for starting businesses?

Aronado — Wed, 04 Jun 2008 10:42:24 -0000

Good points, and I don't think you are misguided at all. Look, children are now being taught on computers via software and Internet applications at a very young age (like 1 I think). They are hearing, seeing and understanding that this is *business*, this is where it's at. I suspect/hope they'll be teaching *entrepreneurship* starting in elementary all the way through college in the very near future.

Why can't every major city in America institute some sort of program similar to Y-Combinator ? I am not sure how profitable/successful their portfolio has been but, they are certainly optimistic enough to continue. We need mentors, motivators, & money. It's sad how many amazing ideas are "stuck" out there. Actually, just addressing this is giving me a few ideas right now ;)