Who remembers Erich Brenn? In these blog posts, I’ve occasionally tried to understand, and explain, the business world I see by comparing it to famous people you’ve probably never heard of. We’ve previously talked about Don Ho and Jim Riggleman. And today, an even more obscure celebrity helps me explain why the venture economy would work better with a bit more help from the government.
If you don’t remember Erich Brenn…it’s ok. You are not alone and in fact, you are in the majority. He was an occasional guest of the Ed Sullivan Show, but does not have his own Wikipedia page. If you’ve never seen the guy do his schtick, the only decent video I could find was in this promotional spot which shows the performer in a 1969 apearance.
I’ll wait while you watch it. It is only 3:14
Take a look at about the 3:00 mark. All the plates are spinning on the table and on top of the poles. I don’t know how entertaining it really is, but for me, that moment is the perfect representation of a perfectly balanced venture economy. All the companies, er plates, are spinning along…well funded and well supported by the well-heeled venture capital community.
But I want you to also look back to the 1 minute mark in the video. Mr. Brenn appears to be a bit more harried in his actions. Racing from one end of the table to the other, he needs to get all the plates up and running in order to achieve the perfection at the 3 minute mark. In your opinion, does the 1:00 minute mark or the 3:00 minute mark look most like the American economy of today?
I’ll wait while you think about that. Should take you less than 4 seconds.
Correct. Our economy today looks more like the 1:00 mark of the video. That is where TechonomicMan and dozens, probably hundreds, of government-backed technology start up investors come in. Dr. Josh Lerner, in his poorly-argued book “Boulevard of Broken Dreams” argues that government programs to stimulate the technology economy do not work (a blog-rant to come on this in the near future). Others have said that government efforts to stimulate the technology economy should be legislatively scheduled to disappear in a given, short period of time. The argument goes that if the private sector hasn’t stepped in to make seed-stage investments within 5 years in a given region, the program is a failure at creating opportunity. And if the private sector HAS stepped in…well, the program should disappear in favor of the private sector. I say that the work of a well-conceived, business-oriented but government-funded seed stage investment program is critical to keeping the flow of plates coming in our economy.
Many say that the slow down in venture investing, and the fact that VC’s are tending to only invest ever-larger amounts of money in more established companies, is evidence that there are only crappy seed-stage deals out there. No good companies to invest in and, therefore, why should the government “waste” taxpayer money to invest in early stage tech companies? Well excuse me, but as Mr. Brenn’s video clearly shows, companies will ALWAYS look crappy when they’re not spinning! I would argue that if the strategy of reduced government funding for seed stage tech companies continues, only a small handful of overvalued companies will get any support from the Bessemers, Andreesens, etc. of the world!
My experience with true seed-stage companies (ie., 2-3 people, little to no revenue, prototype almost done, etc.) is that they are ahead of their time. Too far ahead often. Certainly too far ahead for even angel investors to have a serious look. The private investors do not have the patience to limp along for 3 or 4 years while the company bootstraps its way into the market. I’ve seen it happen numerous times. In fairness, most of our companies are not social media/mobile app companies that can follow the “lean startup” methodology. Advanced materials, medical devices and even enterprise software take more time from concept to commercialization…it’s like the difference between lean and starving-to-death, or like the first minute of the plate-spinning video. This is the abyss into which reasonably sized investments by the government can help keep the entire venture economy in happy-spinning harmony. I’m not talking about one-time $535 million investments…I’m talking about $250,000 investments in hundreds of companies a year.
Like the spin of the plates on the poles, the speed of the economy comes and goes. The spinning slows and deals begin to look crappy. I feel that government funding of seed stage ventures is like the segment of the video covering 0:01 until about 2:00. The job every day for the government-funded programs like mine, and many others like it, is to try to get the plates up and spinning. We need to get them spinning and work constantly to find partners, usually in the form of angel and venture capital, to pick up where we leave off.
So Erich may not have been the Beatles or Elvis Presley. But, as Ed Sullivan occasionally said of the up and coming stars on his show, and as we seed-stage investors realize on a daily basis, “Of such extraordinary doings are champions made.”