August 04, 2010
Singularity University: Financing the FutureSingularity University, now in the middle of its second year of classes over the course of ten weeks in Silicon Valley, held a panel on Financing the Future last night at Kicklabs in SOMA.
Singularity University is an interdisciplinary university whose mission is to assemble, educate and inspire leaders who strive to understand and facilitate the development of exponentially advancing technologies in order to address humanity’s grand challenges. Singularity University hopes to stimulate groundbreaking, disruptive thinking and solutions aimed at solving some of the planet’s most pressing challenges.
Some observations from the panelists below, which included First Round Capital's Rob Hayes, Transmedia Capital's Michael Downing, David Rose with Rose Tech Ventures and Eghosa Omoigui, formerly with Intel Capital.
"When you're thinking of funding sources, think about your options very broadly. Think of alternatives -- companies as well. It's easy to get enamored with a new technology, but you can't get too far from Economics 101. You must keep economics in mind all the way through. In green tech or biofuels, ask yourself, what does it substitute? What's the pay back? You have to have a multiplying effect on investment return - always think in the back of your mind - how will the economics work?"
"Think of investors who have the capacity to ride and take you through a lot of ups and downs. Look for people who understand they need to ride it out. Intel would invest in downside times when things are cheaper. There's one ting that is certain in my view - the cycles are becoming more and more compressed. It used to be 10-15 year cycles and now it's closer to 5-7 years. Where there's finance frenzy, it's easy to get out of control. Be very pragmatic how you build things out."
In advice to students on raising capital for longer term investment ideas, "Venture capitalists don't like to make investments with ten year returns - they want a return faster than that. If you have an idea that will take longer than ten years, you probably don't want to go through a VC."
On where the future of finance is going, "You're going to see lots of little opportunities to make money, which will create opportunities for smaller investors. Every time a bell rings, a seed fund is getting started."
"The permanent shift of what is happening is in information technology. You needed $5 million to start a company and now you can start a company on a weekend with a credit card."
"Look at restaurant deals versus a synthetic biology deals. The restaurant deal is cool; it's a 'feel good' investment and you can get side benefits versus something that will take a long time to get an exit, like a synthetic biology venture."
In advice to students on raising capital for longer term investment ideas, "If you're working on something that will take longer than ten years to yield a return, venture capitalists tend not to want to look at those since it could involve $100 million and a long wait. If you have something that will change an industry 'forever' and if you want to do something that is a game changer, then you do have value in something that is that disruptive. If may not be clear how you'll be worth $100 million in a few years, but there is value in being a disruptor," or what he refers to as a "shift storm."
"To become more relevant, people are outsourcing more. Pharmaceutical and media industries are built on the outsource model now. Things have really changed - hedge funds, individuals, corporations, venture capitalists and more and more seed funds are now funding things - it's growing and making it so much easier for you to get your ideas funded."
"You'll see a decentralization of money now and a move in this direction more and more. The role of the broker is changing. Levels are coming down....it is so much easier to start a company today. You'll see an explosion of individuals investing. What happens when you have millions of angels and thousands of seed funds? Then what?"
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