Venture investors have a long history of scolding fund-seekers for their failure to relieve a real “pain” in the marketplace. Now a group of investors is planning to walk the talk with VenCorps, an online community built to relieve startups’ great ache: finding the financial and human capital they need to gain a footing and grow.
“The biggest problem since the dot-com boom is that entrepreneurs have needed less and less capital to launch their businesses, so VCs are out,” explains VenCorps co-founder Sean Wise of Wise Mentor Capital, a Toronto-based investor and advisor to startups. “And while angels have risen to the challenge to fill that financing gap, they have a different problem in that there’s no efficient way for them to syndicate.”
Enter VenCorps (www.vencorps.com), which is scheduled for beta launch this June. Wise and Doug Hewson, managing director of Ottawa-based venture capital firm Axis Capital Corp., conceived VenCorps last summer as a living, breathing replica of the real-world startup ecosystem that throws in mass collaboration to generate efficiencies its offline equivalent lacks.
At the heart of VenCorps is a monthly competition in which startups vie for funding, but thousands of community members — rather than a handful of investors — act as the judges. (Anyone can join VenCorps, free of charge.) Members earn points every time they comment about a company’s business plan or vote for or against it moving into a final round of judging. Finalists are determined using a weighted scoring system that assigns greater influence to the votes of senior members, such as VCs. In the next round, members wager their points on their favourites; the company assigned the most points wins. Pick the winner and you get more points in return; be the winner and you get 50,000 points plus $50,000.
Yes, real money is at stake: Spencer Trask Collaborative Venture Partners (STCVP), which is co-owned by Wise, Hewson and executives at New York-based private-equity firm Spencer Trask & Co., ponies up the dough in exchange for 5% of the winning company. To encourage other investors to participate in the community, STCVP allows them to buy into subsequent financing rounds or directly initiate deals with member entrepreneurs, provided they allow STCVP to partner with them.
All those points also will have value. Come fall, VenCorps members will be able to trade their points for goods at a virtual storefrontor for the services of other members, thus leveraging the community’s labour.
Will VenCorps work? Wikinomics co-author Don Tapscott has seen enough potential to sign on as vice chair, and STCVP’s recent acquisition of crowdsourcing software from, and post-transaction services by, Calgary-based Cambrian House, a crowdsourced software developer with 50,000 members who are being encouraged to transition to VenCorps, will help to seed the VenCorps community. “We think VenCorps will have as much effect on venture capital as Wikipedia had on sales of Encyclopedia Britannica,” says Michael Turillo, CEO of STCVP. Unlike most startups, VenCorps will at least hit the ground running.
This article has been amended to reflect STCVP’s acquisition of certain assets of Cambrian House; the original story incorrectly stated that STCVP had acquired Cambrian House outright.