The peer funding of green ventures

We asked some questions to Marc Dangeard, founder of the Entrepreneur Commons:

“Q: Some people suggest that there is already too much capital chasing green technology and renewables, that it is the next bubble in the making, yet we clearly need to move massively in that direction. How does this contradiction in perceptions arise?

MD: The issue with Greentech is it is very technical, and so it is very hard for an investor to figure out whether the technology makes sense or not. So probably yes there is more money than there are viable project. And then when you have valuable projects, it is very hard to find an investor who knows enough to be comfortable with the opportunity. This is a case where there is money and there are projects, but the matching mechanism does not work as it is (relying on investor expertise or on the few expert to screen deals). This is one of the issue that the Entrepreneur Commons is trying to address by making the investment decision process easier, relying on the entrepreneur expertise and his peers judgement of who he/she is as an expert and as an individual.

Generally speaking, in venture capital, it is not a case of too much many for too few deals, it is again a case of the inefficiencies of the matching mechanism. I see a lot of waste with the VC model coming from many things. And while the model works for VCs, it does not work for startups or for investors (the Limited Partners who give their money to VCs).

The problem goes 3 ways:

– there is example above, which is a case of not enough experts to screen all the deals, and they can only be good at screening deals that fit their area of expertise which means that they are limited in the number of startups they can truly address.

– there is the fact that venture capital is only working as it is for deals that are $5M or more (the famous funding gap caused by the limitations of VC partners who are limited in the number a deals they can handle). Meanwhile starting a business requires less and less initial fund because the cost of infrastructure has dropped, so a lot of the flow of deals has moved below their radar in recent years, and it will probably stay that way. Some funds are trying to do “early stage” but it is still very limited and the model is unproven for these firms. The only one that seem to have something that makes sense is Atlas Venture with their Y combinator program, which is very close to what Entrepreneur Commons is offering (YCombinator is still very agressive and not as interesting as an option for entrepreneurs, but I am biased when I say this).

– there is an abondance of ideas that have no business legs too, so it is true as well that there is a need to mentoring of these people to turn an idea which is a beautiful intellectual construct into a cash generating machine. Today, the waste is that these entrepreneurs with ideas spend a lot of time (at least in Silicon Valley) trying to raise money from VCs or angels when they should be spending time trying to sell what they have to customers. This is another aspect that Entrepreneur Commons resolves with self help groups (peer mentoring), allowing entrepreneurs to share their experience, and allowing them to realize as they work with the group the true status of their venture, because other entrepreneurs will have no problems shooting holes in their business plans.”

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