Guy Kawasaki is an outspoken guy who helped Apple develop its fanatical following and has successfully built his own brand. He was on a panel in the UK recently at an event called “Learning Without Frontiers”. In the video, he describes why he loves the Y Combinator model and why the traditional venture model is broken.
I don’t completely agree with either point of view, but rather something in the middle. I’m beginning to bore myself with why I believe the Y Combinator model is merely a guessing model driven by hoped-for quick financial exit opportunities rather than true value creation. The bigger the tech bubble, the more the Y Combinator model will look genius, just like all the accelerators did in the dot.com era
I always thought the VC model works better than Mr. Kawasaki believes. Especially recently as the industry shrank and a little humility set in. At least traditional VC’s tend to be focused on building companies (some, I’m sure, as he points out are “stealing” money, but most are striving to build value in their investments). I do wish there were more funds focused on investing $500,000 increments in both tech and in life science. Start-ups that have begun building value through early customers, intellectual property creation, friends and family investments, etc., need $500k as a next step, commensurate with their valuations. The VC’s he’s referring to need to be bigger to justify the larger management fees he’s talking about and so an investment gap is created. The absence of VC’s focused on that size investment has led to the rise of more organized, “super” angel funds.
So, like usual, the market does take care of itself.
With more of these size investments available, we’d have a healthier pipeline of companies and better technology commercialization. And incidentally, investment from state governments in these companies also have proven to work (at least for us in PA at Ben Franklin) to tee-up companies up for these small venture or big angel investments.