Could a close-knit group of entrepreneurs effectively allocate a pool of invested capital amongst themselves? That’s the question that First Light Ventures is attempting to answer by launching Village Capital, a new model of early-stage investment run at startup incubators and inspired by village banking models (e.g. microfinance). First Light’s Investment Analyst Ross Baird and I chatted over Skype about Village Capital. Here’s what he had to say.
Video Interview Table of Contents:
- What is Village Capital in 30 seconds (0:01-0:30)
- What’s the inspiration for the Village Capital concept? (0:31-1:25)
- What’s the value for an entrepreneur participating in Village Capital? (1:26-2:29)
- What makes you think Village Capital is going to work? (2:30-3:51)
- You’re piloting Village Capital with four incubator models. Why is that? (3:52-5:01)
- When would First Light Ventures consider Village Capital a success? (5:02-6:24)
- What will be the implications of the success of Village Capital? (6:25-7:35)
Where Village Capital will be Piloted. Village Capital will be run over the next year at four startup incubators: DASRA in Mumbai, the Idea Village in New Orleans, The Hub Bay Area in San Francisco, and the Unreasonable Institute in Boulder. as incubator models replicate village-like conditions by providing entrepreneurs a space to live and work together.
How Village Capital Works. As an example, here’s how Village Capital will work at the Unreasonable Institute: a pool of capital ($150,000) will be made available to the 25 Unreasonable Fellows. At the end of the Institute, the entrepreneurs themselves will rank one another to determine who is most ready for investment. Entrepreneurs will benefit from the money available, no doubt, but the $150,000 is a small fraction of the potential investment capital out there for an entrepreneur. The real benefit for entrepreneurs will come from getting to sit in the investor’s and seat and determining who is ready for investment. As First Light Ventures CEO Bob Pattillo explains, “It’s about readiness, not worthiness. Everyone who participates in Village Capital is worthy of investment. Through this process, the entrepreneurs are selecting the one who is most ready to receive investment.”
Intended Impact of Village Capital. First Light Ventures will measure the success of Village Capital by the number of ventures outside of First Light who invest in Village Capital participants. Ross explains, “By sharpening each other’s businesses and holding one another accountable, the goal is for all Village Capital participants to become more investable enterprises.” If the pilots are successful, and their graduates become attractive investments, First Light will replicate the model with other incubators in the future and encourage other investors to do the same.
A little bit about Ross Baird. Aside from serving as First Light’s Investment Analyst, Ross Baird received the Truman Scholarship and the Marshall Scholarship, which he used to study comparative politics at Oxford. He served as president of his class at the University of Virginia, as a youth basketball coach, and a teacher’s assistant for a third-grade classroom. He also wouldn’t tell me any of this and I had to find it out on my own.
We’re very grateful to Ross for taking the time to speak about Village Capital on camera! Learn more about Village Capital at www.vilcap.com and let us know what you think about this Unreasonable Idea in the comments section below!
written by: Teju Ravilochan (Unreasonable Institute)