This year there has been a lot of hype within the startup world about the gaps in really, really early funding for ideas in Europe. Seedcamp and YCombinator are perhaps the best-known, your friends here are part of OpenFund, but there are others sprouting up. Honestly, the conditions out there couldn’t be better for such initiatives, from their value-add, to what it means for the Internet entrepreneur at the end of the day.
In essence, these movements can create great value for anyone getting their company up and running. And I am not really talking about cheap offices, computers, or some cash for a small equity stake. Instead it’s the exposure in the media, the people you meet, and if you get selected, the fact that you now have a network of some kind or another that is paying attention to you and has some kind of interest in seeing your company go places.
It also gives the entrepreneur a kind of shallow end of the pool to learn to swim with investors, and the kinds of requirements that they have. You don’t drown trying to learn the in’s and out’s while at the same time trying to build your company and the technology behind it. And depending on the setup, you are placed with other like-minded people. You never know what kinds of inspiration will happen while you are having pizza with the guys that have the desks next door.
You are basically improving your chances, something that any startup benefits from.
These movements give good companies a chance in the overall race, without requiring that they become the next Google. Ok, every entrepreneur might have that occasional thought of how their idea is worth billions. We are calculated risk-takers. The reward has to be worth it. But then again, if you end up creating something that puts a few million in your pocket, are you going to say, “You mean I can ONLY afford one beach house? That wasn’t worth it.” I see a lot of ideas that are good companies, but they just can’t meet the requirements that the thing is worth €100 million or more at exit in order for me to check all the boxes for venture investing.
By being at a point on the spectrum where they are, these smaller funds can be satisfied with the fact that everyone walked away with a few million. This is also the reason you really only see a focus on software/internet. Sorry clean tech folks, but you have single parts that cost more than these investments. It is much easier for these groups to spread their risk, when the amounts are as small as they are.
All in all, these are great initiatives being brought onto the scene. They create another possible funding avenue, while bringing together the collective group power of the organizers. Whether they play out the way intended, or these initiatives themselves evolve into something remains to be seen.
Read next: How to do almost anything with Posterous