bmartyna

It's pretty clear that VCs are more like hedge fund managers than their name would indicate. Hedging, trend following, even arbitrage are more important to maintaining the IRR of the fund than developing innovative companies. This is by necessity, rather than by preference, I imagine. No Managing Partner will or should allow significant bets to be placed on the roulette wheel of technology, no matter how interesting or exciting, when the entire fund, and the livelihood and reputation of the partnership could be at stake.

A possible solution is to expand the availability and amount angel/seed financing available to entrepreneurs by an order of magnitude, or more. This could be done by creating a quasi-public market (offshore, since the SEC wouldn't even consider it) that would allow individual investors to buy small pieces of early stage companies.

Individual small investors with a high tolerance for risk and a more certain knowledge of technology, innovation and particular industry sectors would form the basis for this new financing engine for startups. Companies would need to publish some kind of prospectus and they would also be rated by the number and quality of current investors, who would also be ranked.

This is not unlike the angel networks of today -- but would take the model to the next level by allowing millions of individual investors to participate in the $1,000 to $10,000 range in each venture.