Recently, there has been much talk about real-time systems and enterprises. While it appears the economy has picked up, the Market is recovering, and venture firms are once again making investments, its seems only fitting that venture capital consider the effects of a real-time model as well. (RTVC: Real-Time Venture Capital )
A well-know VC friend to Outlook described a true RTVC system to our team recently. Here's how it works: Entrepreneurs would tap into an industry-wide platform for sharing information, running on distributed national grid system with a Linux kernel running over a distributed broadband network. Each company seeking funding would enter data on their founders, competitors, product and IP. Compeitors would be contacted and asked to keep data on their products, hiring and new customers fresh on a monthly basis. All market research firms would be asked to enter data on primary growth markets and keep the data fresh each week. The system would aggregate all this information, apply business intelligence and respones in real-time.
Each participating venture firm would have a dashboard (customized separately for Associates, Partners and Managing Directors) The dashboards would aggregage information on each company, automatically create a "go/no go" indicator (designed to look like the dashboard of a Ferrari GTS) for each company and provider red-alert lights if a competitor landed more than 3 new customers in a quarter or hired a new CEO. Decisions to fund a company could be made in real-time and the system would be self-healing: if reference checks on a company founder came back negative, the entire company could be automatically purged from the process.
The benefits of RTVC could be enormous to all participants: entrepreneurs would be able to get immediate feedback on their pitches and find out if they are funding in a matter of days rather than weeks and reduce VVCO (visits to VCs offices) -- hence reducing overall TTM (time to market) and AF (aggravation factor). Venture firms would be able to streamline decisions, allowing Partners to decrease KTF (Kentucky windage factor), increase ROI (return to investors) and reduce MGH (mean golf handicap). VCs participating in this model would gain a competitive advantage in the industry and increase returns to LPs by an estimated 40-50%.
Additionallly, an increased level of automation would be achieved in collaboration. Venture firms could choose off the dashboard from a list of FAQs (most frequently asked questions) such as, "What are your barriers to entry in 3-5 years?" and "what is your go-to-market strategy?". Entrepreneurs could select from a set of pre-configured responses, such as, "Attached are very conservative numbers, which show break-even within only 6 months following funding."
The RTVC may sound mildly fantastic given the present environment, but we'd encourage you to think twice. Although Outlook Ventures itself will never become an RTVC (we prefer to do things the old-fashioned way), word has it on Sand Hill Road that several VCs are moving in this direction and can be expected to raise new funds in the next 12 months using the RTVC model.
The Outlook Ventures Team
June 2003
