There are many ways that investment funds seek to differentiate themselves. After all venture capital must compete for customers just like any other business. But VCs actually seem have two sets of customers: the limited partners (LPs) and the portfolio companies that the VCs invest in. Startups need to understand that the definition of customer is the person or business entity that pays you for your product or service. So in venture capital the real customers are the limited partners, like pension funds, the investment arms of large universities like MIT and Stanford, and wealthy individuals. Once a venture capital firm closes their fund, meaning they have hit their fund raising target, of say $100 million, those LPs normally fade into the background. The VC firm then must go out and finance enough startups so that the golden few will generate the 10X returns the firm needs to make up for all its losing investments.
Village Global raised $100 million fund to invest in startups. That’s not news! But the reason Techcrunch wrote the article Village Global raises $100M seed scout fund from Zuck, Bezos… is that Village Global claims that in exchange for equity portfolio companies will get not only investment but mentorship from Facebook’s Mark Zuckerberg, Amazon’s Jeff Bezos, Microsoft’s Bill Gates, Google’s Eric Schmidt, LinkedIn’s Reid Hoffman, Disney’s Bob Iger, VMWare’s Diane Green, NYC mayor Mike Bloomberg, and more.
Erik Torenberg, a founding partner of Village Global, claims that Founders get a ‘brain trust’ assembled to fit their needs and to introduce talent, customers and investors.
That all sounds great, but how much will these big names will actually engage with the portfolio companies instead of just being figureheads?
And who is just an LP and who are mentors – Techcrunch article conflates the two: Newly announced LPs and mentors for Village Global include Fidelity’s Abby Johnson, Activision’s Bobby Kotick, 23andme’s Anne Wojcicki, and Cleveland Cavaliers owner Dan Gilbert.
Josh Constantine, author of the Techcrunch article, adds a sprinkle of skepticism to his article: The program reminds me of Jay-Z’s Tidal, which signed artists like Daft Punk and Jack White as owners, but only a few like Kanye have actually done much for the company.
The other prime differentiator for Village Global is that they claim to have a ton of scouts who earn a portion of the returns if they bring in a great startup These “network leaders” include Quora vice president Sarah Smith and YouTube’s VR lead Erin Teague. But as Techcrunch itself writes, Village Global has a ton of competition for scouts – see their article Scout networks are latest VC salvo in war for founders.
It will take years to see if Village Global’s model will work as it takes five to seven years or longer for a startup to reach a liquidity event, an IPO or an acquisition by another company.
In the meantime if someone calling you claims to be Mark Zuckerberg don’t reject the call, as who knows, it could be the Mark Zuckerberg scouting you for Village Global!