Has Silicon Valley disintermediated itself?

Ron Bloom · July 6, 2011 · Short URL: https://vator.tv/n/1c6a

An ugly chapter in the history of investments has made way for 'The age of the entrepreneur'

Up to this point in the evolution of Silicon Valley investment, legions of hopeful young entrepreneurs emerged from the likes of Stanford University, and crossed over to the other side of Sandhill Road to hawk their business plans. Initially, entrepreneurs had direct access to the real venture capital innovators. But as the VC's became institutionalized, access became limited to underlings only. This diluted the impact of VC's on the outcome of their investments as well as the value they were perceived to contribute.

The magic of the geographic closeness of the university to the readily available source of funds gave us some of the biggest hits and flops of the 20th century. During the boom, an entire enterprise, banking and professional community sprang up around the VC's to support them in their mission.

With the economic downturn, many VC's found themselves unable to provide the insight, guidance and even capital to truly help young companies when they needed it most. In the chaos that followed, many promising companies had no place to turn. No real advice on conservation of capital, no real help on alternative sources of funds. Just goodbye and goodnight.

Well, here is one lesson for the VC community: Good entrepreneurs don't forget.

(Editor's note: For an in-depth discussion on how the VC landscape is changing, be sure to check out Venture Shift, where you can mingle with top VCs, angels and entrepreneurs and learn about navigate through today's current funding environment.)

The heartless and ruthless response to the economic downturn on behalf of many in the VC community has created the perfect example of "the law of unintended consequence." The result has been to create a divide between the VC firm and the increasingly experienced entrepreneur. And stepping smartly into that gap is a new form of investor.

They're a new crop of early-stage venture firms, sometimes referred to as Super Angels or micro-VC's. Ezra Roizen writes about why he believes they're not a fad, but will be a source of seed funds for some time to come in his article: Super angels - it's just the beginning.

What was perhaps one of the ugliest chapters in the history of valley investment, is now changing the face of investment forever. What is the key component in this evolution... or is it a revolution?

Now the entrepreneur has the upper hand.

I coin this phase of investment as the "Age of the Entrepreneur," and I maintain that we are witnessing a change in the very fabric of investment synergy.

We now have a surplus of experienced talent who have raised capital, missed quarters, negotiated poor terms, faced economic challenges, corrected or (ugh) pivoted, and come out the other end smarter and wealthier. They are ready and waiting to join with eager young entrepreneurs to more effectively develop and bring product to market. They are a new form of Player-Coach who can help from afar or jump into the game when all is on the line. They speak the language, understand the culture and are able to give the entrepreneur more of what they want and need to be successful. This is happening so fast that we cannot even properly name the revolution. Is it Ezra's Super Angels? Business Accelerators? Venture Activists?

Whatever it is, it is here to stay. Now pay attention to the infrastructure. You will see the shift. Big banks who notoriously shine up to large VC's are now creating specialized groups to cater to successful entrepreneurs and micro investors. Teams of Angels are forming to take advantage of opportunities in certain sectors. We are just beginning to sort out the shape of the "typical" firm or partnership, if such a thing is needed.

Welcome to the angel cloud

I think the ultimate direction will be what I call the "Angel Cloud." Angels will align themselves in real time to market opportunities and provide their own research and insight to help entrepreneurs focus their considerable skills. Entrepreneurs will join the Angel Cloud as both investors and business owners, coming together to take advantage of new opportunities almost as fast as they arise. Vator is already doing a significant job bringing both angels and entrepreneurs together.

Following later will be "Cloud Funding" when banks and other "professional lenders" provide instant funding to pre-qualified plans. The result will be a scalable, global infrastructure for the identification of new business opportunities and rapid funding, development and deployment of new businesses that address them.

Whatever this part is, let's build it!

(Image source: Entrepreneurchecklist.com)