Monday, February 27, 2006
The Rise of the Advisory Capitalists
An interesting discussion's been going on lately about the emerging group of folks who are more or less Advisory Capitalists, kicked off by Stowe Boyd.
Since I'm on this list of people, let me add my 2c.
It's funny - though my clients also include incumbents from industries like media, advertising, telecoms, CE, even FMCG, for the last few months, when people in SF ask me what I do (which is always the first thing people ask you in the US, but never anywhere else in the world), I say "I'm like a VC, only without the C".
Which, uhhh, generally leaves people more confused than before, but does point to the rise of this semi-new niche of people, which, I guess, until now, has lacked a label.
Yes, I can certainly see the argument that ACs might have a reason for existence in a flat world - cheap information, cheap coordination, you know the score.
But I think that the rise of AC is solving a different problem: the VC competence trap.
Isn't AC what VCs should be doing? If not, what's their economic function? Simply to select investments, and then to leave advisory work to others? Isn't the fact that the expertise required to guide new ventures isn't separable from the capital required for them to create value the whole rationale for the existence of venture capital?
I think the rise of ACs is a temporary thing, which points to a deep, ongoing malaise in VC more than a real structural shift in financing of innovation (as I've been pointing out lately); namely, the fact that VCs are nearly as resistant to
change as Microsoft.