by Kent Bernhard, Jr.
Apr 27 2012
Fred Wilson, the thought-leading venture capitalist, has a proposal for crowdfunding; use it to get investments flowing into areas likeclean energy and biotech.
Fred Wilson's latest blog post includes anidea for where the crowd should fundideas venture capitalists won't.Image: Fred Wilson
ant to see good things come to life? Hope aboard the crowdfunding train.That could at least be one way to see that innovation blooms in areas that are hard for venture capitalists to justify backing, wrote Fred Wilson ofUnion Square Ventures in
his popular blog Thursday
(http://www.avc.com/a_vc/2012/04/can-the-crowd-be-more-patient.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+AVc+%28A+VC%29&utm_content=Google+Feedfetcher)
.Wilson points out that while Internet and mobile companies are awash in venture money recently, potentially world-changing technologies from the areas of
o Good By Crowdfunding Well - Business News - Portfolio.comhttp://www.portfolio.com/business-news/2012/04/26/do-good-by-crowdfunding-well1 of 34/28/2012 10:44 AM
cleantech
(http://www.greentechmedia.com/cleantech-investing/)
and
biotech
(http://www.investorplace.com/2012/04/why-biotech-investing-is-so-hard/)
aresuffering from lack of investment.The reason’s pretty straightforward, as Wilson puts it:
VCs are professional money managers. We are provided capital to invest as long as we can return it to our investors with a strong return in a reasonable amount of time. A strong return is 3x cash on cash. A reasonable amount of time is ten years max.Internet and mobile product development cycles are measured in months not years. And the capital required to get a product built and into the market is less than $1mm. And the returns, when things work out, can be enormous.Contrast that with biotech. A new drug takes $100mm in capital investment to get to market. And that process can take a decade or more.
So what do you do if you believe the earth would be a better place with cutting-edge research in drugs and energy creating earth-changing companies? Gladyou asked.Congress has approved and President Barack Obama has signed a law that allows companies to raise small amounts of money over the Internet.Wilson points out that the law allows investors to make smaller, personal bets on companies that could take much longer to grow up, but that have a societalbenefit:
If we saw a promising technology that could prevent or cure cancer, we would be inclined to help fund that, regardless of the timing and magnitude of the financial returns it could produce. If we saw a promising technology that could store and move energy more efficiently, we would be inclined to fund that as well.
And Wilson isn’t the only person thinking in a similar way about crowdfunding. Already, Brooklyn startup
GreenUnite
(http://www.portfolio.com/views/blogs/money-hunt/2012/02/21/crowdnetic-launches-greenunite-to-raise-money-for-eco-friendly-projects)
is allowing companies to raise money over the Internet inexchange for goods. How many more will join the fray when companies can sell equity over the Web?
o Good By Crowdfunding Well - Business News - Portfolio.comhttp://www.portfolio.com/business-news/2012/04/26/do-good-by-crowdfunding-well2 of 34/28/2012 10:44 AM
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