Charles River Ventures Wises Up

A NYTimes piece this morning demonstrates that VCs -- at least some -- are wising up to the fact that new software startups are unlikely to come and ask for the millions that VCs are organized to dole out:

[from Venture Firm Is Giving Loans a Try - New York Times by Miguel Helft]

Charles River Ventures, one of the nation’s oldest venture capital firms, has come up with an unusual program to attract promising entrepreneurs: It will offer loans of up to $250,000 to help them turn their ideas into fledgling businesses.

Doling out small loans is an unconventional strategy for a 36-year-old venture firm that has about $1.8 billion under management. But Charles River said it hoped that the program, to be announced Wednesday, would allow it to tap into a new generation of entrepreneurs who are increasingly starting companies on a shoestring.

Those ventures are often backed by individual patrons known as angel investors, who typically take an equity stake before the venture firms have an opportunity to do so.

And this means that these VCs can start giving the entrepreneurs advice, which is something that they need as badly as money. That's the motivation behind my advisory capital service at A Working Model and now, the newly launched Blue Whale Labs. I have been getting involved with start-ups -- often before the angels are on the scene -- providing them with the sort of strategic advice that they might get from VCs. But I am only investing my wits, not dollars. Now it turns out that VCs are going to evolve to make it easier to hand out their money in very small piles, something that they had been generally unable to do.

tags: vc, venture+capital, angel+money, charles+river+ventures, miguel+helft, advisory+capital, blue+whale+labs, a+working+model

Comments

[Manoj Ranaweera]

Stowe

Very wise initiative. As I said many times, raising debt is easier than VC/angel funding. In UK, there is a government backed initiative called Small Firms Loan Guarantee Scheme, which let's you borrow up to £250,000 (£ not $). UK government guarantees for 75% of the loan. First bank needs to make a lending decision. If there is insufficient security, bank will request the guarantee from the government.

Best regards
Manoj

[George Zachary]

Stowe,

Thanks for the recognition.

Also, happy to tell you that CRV QuickStart also sets aside equity after a company raises the Series A equity financing to compensate the people who introduce us to startups as well as advisors like yourself. See more of the details about that at: http://www.crv.com/AboutCRV/QuickStart.html

We feel really strongly that all participants value should be compensated.
So the whole program is designed to compensate the entire ecosystem.

Sincerely,
George Zachary