I am always surprised at the relative lack of firms with the ability and expertise to offer great engineering and strategic services (help with funding, business direction, and eventual M&A). I think some of the reasons have already been pointed out in previous posts, but I'll throw them out again...Must be run by an entrepreneur with a track record of success, must have a team of people who are entrepreneurial enough to be the expert for new start-ups, but also loyal enough to the "incubator" to not start their own company. At Originate, we combat this issue by hiring outstanding people, but also with the message that when they are ready to do their own thing, we will be the first to invest in their venture. So in this manner, we are not only incubating and partnering with outside entrepreneurs, we are creating and nurturing our own. Obviously this makes hiring an extremely difficult challenge to find the "right" people.

It's a difficult trick to pull off, but I expect that someday the VC model and purely cash investments will slowly give way to more service based investment offerings. It's leaner, meaner, and the success rate is higher than purely throwing money at an entrepreneur with an idea. When the Venture Resources/Services firms show how successful they can be, and how much more quickly a new company can be developed vs the traditional VC path, the choice will be easy for new entrepreneurs.

Thanks again for the post and discussion and to all the Venture Services firms...Keep Rocking! You're on the right path!

Cheers!

That said: from my perspective playing all sides of this game, it seems that those looking for help want money and not "help", almost all the time. And when they do want help they'd rather pay with equity than cash.

Do you see the real-world disconnect(s) here?

Jeff Yablon
President & CEO
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There are several what I would call traditional incubators that tend to be non-profits offering subsidized rent in a tenant landlord type relationship. Then there are the new mentor driven programs, that to a large degree invest their connections to funding sources by giving you some advice, stamping their seal of approval on you, and sending you down the line to the typical angels and venture capitalists.

But how many places are getting their hands dirty helping startups write code, or design a brand? There are a few dev shops or consulting companies that will do some work for equity, but in my experience, the equity work isn't the focus and gets ignored to work on 'paying' clients.

At SproutBox, in addition to mentors, we invest a team of full-time, talented and experienced professionals. We are for-profit, operate on a fixed 6month cycle, don't take outside work, and build companies that don't have to be fed into the funding ecosystem.

Why aren't there more people like us? I think there will be. When you were building a piece of software and sending it to stores in boxes, you needed money for packaging, marketing and shipping. But those days are gone. As the cost of distribution drops, the battle becomes over talent. The market has changed and so to must the funding mechanisms.

also jolie did you see marshall's FANTASTIC article putting the smackdown on soc nets that violate privacy by sharing data with the govt? how awesome was that??? i may have to get started on the verses to the song.....but your name is in the chorus, so i will need you to step up like marshall did in order to finish it.... ;)

Imagine it this way - salt vs. money - centuries ago out ancestors traded goods for goods - it was bulky and risky - same with services - it is not so convenient, not so easily measurable.

I totally agree and congratulate Warren on the excellent point he made - money get you drunk, you never have enough and at the end you do not even have a company :)

I will be very happy to see this poll repeated again in a few months with results this time in favor for the services :)

Serivces are indeed critical, and I tend to agree that a "general fund" often tends to get siphoned by unnecessary or expensive services.

ActSeed just launched and is focused on this issue - helping aggregate core services, capital and people who want to contribute to new business creation and seed stage growth, including the "mentor-driven accelerators" mentioned in the post above - both non-profit and for-profit ones.

I stongly believe a concentrated bit of preparation will go a long way. You shouldn't over-plan, but an ongoing preparatory framework for planning AND improvising when necessary is really valuable.

Again, a very informative post!

There is such a limited amount of mentorship happening that Venture Services is the inevitable recipe should any new venture hope to make in the current and to come landscape.

to hire or to sell? Sell and succeed.

D.I.K.W.

The reasons of failure are the same all around the world: little knowledge of the market, not enough research, the product changes the market in an unwanted way, too much cash is needed.

So creating a Venture services firm will be a lot of work and will requiere maybe a model that hasn't been created yet. For example I can see VC Services partnering with Coworking spaces to provide for office space while they hire part time consultants to guide the process. Also, many entrepreneurs won't value the services as the VC Services frim will do. While money is just a number....a service could be worth $1 million dollars to the VC and $250k to the entrepreneur getting the funding.

Not everybody starts a company for the sole purpose making money. When you give up the majority of shares, you also give up what your company stands for.