The Dark Web of New Venture Capital

Part 2 – Access Points and Attributes for Financing Sources That Are Hidden In Plain View

dark web - fishTwo weeks ago, I had the pleasure of being the featured speaker at the Houston Startup Grind, emceed by the fabulous Michele Price.

The topic – The Dark Web of Capital – came out of a brainstorming discussion Michele and I had about possible speaking themes for me that would be fresh or different for attendees.

It was a fun, interactive evening in Houston.

Afterwards, I posted a summary of some of the major categories for these sources of financing that I dubbed “hidden in plain view” in a Part 1 blog post on the Powershift Group website.

In this Part 2 post, I want to address the subject of access points to the dark web of capital. I also want to describe some of the attributes that make new ventures and their founders more accessible to these source of finance.

dark web - Time coverFirst, access points.

Unlike the requirement to download and run special software, like Tor, to gain access to the dark internet web, access to the dark web of capital is less clear cut. But, here are some starting points:

1 – Knowledge

Simple awareness of the sources, of course, is a first step towards accessing them. With better knowledge of the categories that we covered in Part 1, founders are better equipped to know where to look.

It’s a bit like Harry Potter, where simply knowledge that something like a port-key exists is the first step towards being aware to even look for them.

2 – Trusted Relationships

The cliché “it’s not what you know, it’s who” is especially relevant with dark web sources. Just accessing “weak ties” networks, like casual connections you have on LinkedIN, won’t cut it.

Since they are often less formal and may value their lack of public visibility, accessing dark web sources can require much “stronger ties” networks.

This means the presence of longer-term personal relationships that have been built directly with a participating investor or with a founder in whose companies they have invested.

3 – Get Outside

First-time founders can unintentionally insulate themselves from dark web capital sources by thinking they have access to all they need, through the staff and mentor networks of the incubator/accelerator program to which they gain admittance. It’s important that you be deliberate about going outside of your current network.

It’s kind of like getting into a habit of always going to the same neighborhood eating places. After a while, you’re not even seeing where others are eating. Doing that causes you to miss the long lines of hungry people coming out of unfamiliar locations. Instead, be intentional and watch where other are going; then follow them!

4 – Always Be Pitching

The best founders are like the best salespeople. They are always pitching, but are so good at it, you don’t even feel like you’re being pitched, even if you know you are.

This is Blink territory, wherein Malcolm Gladwell speaks about the minimum requirement of 10,000 hours of practice to achieve a basic level of mastery over an area.

1-Million-CupsPractice. Over-prepare. And, never miss an opportunity to pitch. Need a safe place to work on your skills? Try (or start!) the 1 Million Cups group in your community.

Now, on to attributes that lend themselves to greater success in accessing dark web capital.

Not long ago, Fred Wilson of Union Square blogged about three types of entrepreneurial ventures:

  • Lifestyle (which he also called “Cash flow” oriented ventures)
  • Indie (which he also called “Owner operated” ventures)
  • VC Fundable (self-evident)

Whereas traditional sources of new venture capital, from angels to institutions, favor VC fundable – hoping upon hope to discover the mythical “unicorn” (see: Uber) – dark web capital sources are far more comfortable and in some situations favor the lifestyle and indie ventures.

Venture builders like our firm Powershift Group, for example, often favor the owner-operated venture, where they can assign their principals to significant operational roles in the venture. What this means for the outside founder considering approaching them is that he or she needs to be very comfortable with the fit and chemistry with the venture builder’s team.

A documented pattern of good DIET and Exercise, which I discussed in a post about impact investing, is another collection of attributes that makes new ventures more qualified for dark web capital. Nothing novel here; just good, everyday habits for new ventures to live by.

On a final note, I suspect it’s clear by now that cataloging these sources of capital is an inexact science. In addition to the more obvious sources of dark web capital, there are many others. Examples include:

  • non-traditional syndicates (like Enable Impact),
  • contests & challenges (like Xprize), and
  • global entrepreneurship networks (like ANDE)

I’d love to hear from others on this topic and look forward to your questions and comments.

One thought on “The Dark Web of New Venture Capital”

  1. Brilliant and important topic area, highlighting that as always Steve is ahead of the game and that resourcefulness, not resource is what sabotages entrepreneurs more often than not.

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