29 March 2010


Once again, like a seasonal bout of malaria, the muddle-headed EnterPRize "Business Idea for Venture Capital" ripoff is amongst Us.

For the past several years, Guayacán Venture Capital Fund, along with cronies, has put on a "competition" wherein local entrepreneurs can fling themselves through hoops like sun-stroked seals in the hopes--dim if not totally blind--of receiving a small bucket of cash.

Now the bucket is a thimble: $1,000. For a business idea. In 2010. Uh-huh.

Now I have met several of the "winners" of the EnterPRize competitions and remain in frequent contact with one of the first year winners. By and large, none of the companies selected as winners has set the world on fire, though some have done fairly well.

The problem with the EnterPRize and most venture capital efforts locally are due to 2 factors:

1) The "Every swing a home run" mentality. This mindset leads to two interrelated problems: (1) Not enough money is placed for venture capital to truly develop, and (2) Each potential project is squeezed to a point of paralysis. Venture capital is not a game of home runs, but a game of at bats. It's a game of numbers where the more projects you help develop, the greater the return. Played "Our way," venture capital becomes a miser's dance of well-meaning pressure brokers (the minority) undermining creativity and outright gangsters (the majority) angling to make their money and only their money grow. That isn't venture capital: that is loan sharking. And if you run into a local "venture capitalist" whose initals are "CM," I would advise you to run like hell in any direction away from it.

2) The lack of a "global vision" in Our business community. Very few of Our entrepreneurs have a global vision, an ability to see themselves as affecting people all over the world. Even fewer people on the so-called venture capital side have the global vision. Taken together, what We have is an "Island mentality" further narrowed down by greed. VC business development is not a matter of flinging money blindly at every cockamamie idea that floats by, but it is definitely not achievable with "gator arms" thinking. (To clarify: gators have really short "arms" with barely any reach. Think the rest of it out yourself.)  Hell, We'd be better off with the wild flinging for at least that way We'd get more "at bats" than We have now.

Now when Our (non)government tries to "finance business development," a third factor kicks in: cronyism. Or in its more legal sense: corruption. Our government's track record on helping destroy businesses far far outweighs any pitiful efforts it may have made in developing them. The only reason these programs keep getting funded is so that the ruling party can buy votes.

How should We do venture capital? Glad you asked:

--Establish a VC fund with a minimum of $10 million. Better yet, $25 million. 

--Set a deadline for investing the entire amount at a rate of at least $1 million a month. (A $10 million fund goes out in 10 months or less.)

--Open the competition for funding ONLY to projects that meet the following criteria: Are aimed at existing markets or creating markets of at least 100 million users/clients; aimed at middle-income and low-income users/buyers; are based on integrative technology (not necessarily software, but all technology, capable of linking with exisiting technology, i.e. no "stand alone" products/services) and capable of outsourcing qualified components.

--Have prospective entrepreneurs develop their ideas in 5-10 day workshops running continuously, with the best projects in each group geting $35,000-$50,000 to launch their new businesses.

--Provide the start-ups with "smart offices" in a central facility (if they choose) under a rising commercial rent scale: 0% for 120 days; 33% rent for the next 120 days and 100% rent after that. The purpose: Grow or get out.

--Review each start-up every 90 days. Growers get more resources to speed up; those stuck in neutral get a review to give them 90 more days to get growing; start-ups that aren't holding their own are cut off from the fund and its resources. The 90-day period allows start-ups a chance to flex their skills and creativity without having someone riding their shoulders every day (unless they request that.) Winners get more support and losers get dumped. Simple system to understand and by Jiminy, it works.

--The VC fund investors will get a share of 10% of every start-up launched, with additional percentages per business available through negotiation. If the start-up wants to go elsewhere for funds, fine: that's global thinking. What they cannot do is sell the business without the VC fund's consent. Why? To avoid the flipping of marginal businesses that could undercut the VC fund's long-term gains.

Does any local VC find fit this model? Does the Pope cover up for pederasts? (Oh, sorry, wrong answer.) Of course no local VC fund fits this model. Y Combinator kinda does, but it's up in Yankee territory. No, what We need to do is develop Our own similar model, start giving an incentive to develop global vision amongst Our entrepreneurs and make venture capital an economic engine in its own niche, not to build all of Our economy, but to build Our economy's new cutting edge.

The Jenius Has Spoken.

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