Question: Are you aware of any companies or sites that are applying a Web 2.0 approach to Venture Capital? I am envisioning some kind of online war-room with a structured system for inputting data, an RSS feed, an auction type method for VCs to bid on projects, etc.
Our Take: While technology VCs make their living investing in cutting edge technology, rarely are they employing best-of-class solutions in their businesses, themselves. New technologies can be difficult to implement and rarely does a VC firm have the support staff necessary to integrate new technology solutions. Most VC firms spend their management fee dollars to maximize their deal investing capabilities and this is usually a human, not machine spend. Back office, including IT staff spending is kept to a minimum. While we are clearly early adopters of the RSS-related technologies, we have a pretty standard infrastructure apart from that. Once a year, the NVCA general counsel group gets together with our counterparts from the NVCA IT group and it’s pretty clear from our joint discussions that the objective is stability and ease of use, not cutting edge performance.
As for an auction-type method for doing VC investments, there have been some attempts at this both externally and internally with fairly modest results to date. Externally, there were some attempts to create a network, whereby a company would essentially hold itself out for investment and have an auction create an investment clearinghouse price for VCs. None of the established VCs cared to participate, as they have their own proprietary deal flow and therefore the idea went away quickly.
What is a bit more interesting is the idea of a group of people getting together, contributing capital to a common pool and then investments being allocated by an internal auction on a case-by-case basis. There are a couple of folks trying to set up large angel networks to take advantage of this “decision making of the group” / auction theory. We’ll see over time how well this works.