The Disruptive Innovation That Knocks You On Your Ass
These types of innovations often come from out of the blue. The more open the society, the more types of financing can be discovered to take a blockbuster innovation from new idea to trailbreaking enterprise.
Venture capital funding is one well-known approach to growing the seed of a business into a living money tree. From 2017 into 2018, venture funding has experienced a renaissance in the US. With the US government under new management — and showing a more friendly face to businesses of all types — investors are willing to take more chances.
The latest PitchBook-NVCA Venture Monitor report shows $57.5 billion invested across 3,997 deals for U.S. venture-backed companies thus far in 2018. The most recent quarter was the fifth consecutive with more than $20 billion invested.
“To say capital availability is high would be putting the true state of the U.S. VC industry lightly,” the report notes.
This follows a record 2017, when venture deal value surpassed $80 billion for the first time since the dot-com era. Pitchbook CEO John Gabbert said “the sheer amount of capital available across the entire venture landscape is reaching unprecedented levels.”
… Angel and seed-stage financing rounds are also seeing higher deal sizes… Exit activity is on pace to match results from last year … there is now a healthy IPO market, particularly for enterprise tech … __ Geekwire
Venture capital is most active in North America, Asia, and Europe:
… the world is experiencing staggering global growth. In 2017, we saw new records set in venture investing:
In the US, venture investments reached $84 billion
In Asia, venture peaked at $48 billion
European venture reached a new all-time high of $19.1 billion
__ Peter Diamandis
The stages of venture capital leading to an IPO are important for most companies that eventually break through into the big leagues. But many of the best ideas start out small, and for them it is useful to find small means of financing.
When first moving from concept to reality, it sometimes helps to approach a lot of small investors at a time. The internet is useful for this type of funding strategy. Crowdfunding uses the internet to find small investors for all kinds of early stage startup projects — from movies to small business to music to scientific projects to real estate to a political campaign to agricultural projects and more. The sky is the limit when it comes to crowdfunding ideas.
The total worldwide volume of crowdfunding, inclusive of peer-to-peer lending, was $34 billion in 2017, with 375 crowdfunding platforms in North America alone. But this too, like many digital platforms, is experiencing double-digit growth. Experts project crowdfunding to reach $300 billion by 2025. __ Peter Diamandis
And then there is the fascinating middle ground between crowdfunding and venture funding, where individual “angel” investors are matched to entrepreneurs and new projects based on definite criteria and vetting. A few examples of such financial matchmakers are listed here, near the bottom of the article.
A Surplus of Money is Chasing Likely Investments
Worldwide, large portions of populations of advanced nations are growing older and approaching retirement. Affluent people from all kinds of work backgrounds are looking for good places to invest their savings. Some investors are looking for a combination of safety and good return. Others are more concerned about “making a difference” in the world. Every type of investor you can imagine — and more — are out there. You can’t see them, but if you go on the internet with your idea, there is a good chance that they will be able to see you.
Where is the investment money going? The safest places to invest are places where the rule of law and the rules of investing are straightforward and universally applied. The Anglospheric countries, countries of northern Europe, some parts of East Asia.
Places to avoid would be high-corruption nations, where the rule of law is applied creatively, if at all. Africa, much of Latin America, much of the Muslim world, Russia, and China should all be viewed cautiously by smart investors.
Bigger is Not Necessarily Better
Columnist David Goldman has been quite bullish on China, based upon macro-statistics of numbers of STEM graduates and money investments in advanced technologies. A close analysis of Goldman’s reasoning reveals a man most impressed by “top-down” innovation-to-order, on a very large scale. Call it “The Manhattan Project” approach to disruptive innovation. But that is not how most of the world’s great enterprises began or grew into giants.
Peter Thiel has likewise taken an interest in China, and is considering ways that he might invest in Chinese tech/internet startups. Clearly someone will make a lot of money in new Chinese enterprises. But Thiel’s obvious caution and reluctance to simply leap into the fray, suggests an awareness on Thiel’s part that the Chinese game is rigged, and only insiders with clout will walk away with the loot.
China is big and in great turmoil beneath the surface. A lot of money is won and lost in China on a daily basis, with almost all of the winners being quite well connected with the Party.
What is true for China is true on a smaller scale for Russia, Africa, parts of Latin America, and parts of the Muslim world. Corruption rules those lands, and only one who is well connected with the ruling classes can expect to hold on to what he earns or innovates.
Why Do Men Dominate in Venture Funding and Crowdfunding?
The vast majority of venture capital goes to companies founded by men. Just 7% of the 2,005 founders on our list are women. Companies founded by women also get less money—an average of $77 million compared with $100 million for male-led startups.
… more founders of companies on our list dropped out of school than graduated from top universities. __ Bloomberg
The same dominance by men is also seen in crowdfunding. It is likely that the much higher levels of testosterone in males contributes to the higher sustained levels of time and effort which men tend to put into achieving their career goals over time — without the “mother pause” that causes so many women to step away from the rat race in the middle of the game.
Of course we see this phenomenon when looking at top levels of most careers where high-quality work and competence are the determining factors in top-level placement, rather than affirmative action or figurehead placement. Even in many areas such as fashion design, creative literature, and cuisine — where women might be expected to dominate outright — we see the hardworking male pushing his way to the top.
In the end it is hard work, competence, a certain level of vision and clarity of thought, and a logical working through of the possibilities, which allows one to move from a good idea to a workable project to a thriving enterprise. If one has all of those, the money is likely to be found.