While I have never (myself) invested financial capital in startups, I have worked in venture capital twice before. I have also invested a significant amount of human capital (time, resources) in early stage companies. I have expressed my thoughts about venture capital before.
Personally, I know (at this time) venture is not the industry for me to get into because, as I have seen in past experiences, the incentives are way off. This blog post, though, is not about my interest (or lack of interest) in working at some venture capital firm.
It is about this idea that it makes a ton of sense for “founders” to be at the front line of early stage investing.
Why?
Founders know future founders.
I think that model makes great sense and that venture firms (as well as other financial entities) should give founders money to give to their friends.
I have never been the biggest fan of the “scout program” – mainly because it forces students and others to search for deals where they may have not been previously looking. They are also not often well run.
I far prefer this “founder-driven” model because founders know other founders just by working and talking to people.
It is why so many people get referred to YC.
I think this may be a trend in early stage venture for funds to open up these “founder programs.”
Check out: http://www.spearhead.co/
Spearhead backs founders with a $200K fund to start angel investing.
Founders also receive mentorship, including monthly masterclasses from top investors. As they progress, founders receive up to $1M to invest. Founders already help new companies with startup experience and technical advice. Now they can also help with capital.
This lets startups raise money from some of their most helpful advisors. It compensates founders for their time. And it creates more high-quality opportunities for downstream VCs.
If we can abstract the challenges of investing into something more simple and pure, I think we can encourage more people to become investors.
YC is also working on something around this: https://blog.ycombinator.com/startup-investor-school/
I wish I had 100k to distribute among 10 people I know.
May not be any short term ROI but in the long run, I think it would be a great investment.