An Alternative To Startup VC

The rate of venture capital investment in startups over the first three months of 2009 was down over 50% over the same period last year, according to stats released yesterday by PricewaterhouseCoopers.I'm not surprised. Who wants to take a flier on a new business idea in this economy, even if it's brilliant? Subsequent IPOs or buyouts are dicey. Add in the fact that lots of the most celebrated startups are proud to declare that they have no idea how they're going to make money, and you get an investment model that is probably more entertaining to read about than it is rewarding to risk money upon.

So I have an idea for an alternative to funding startups, and it would involve you.

How many IT projects has your company put on hold recently? Probably quite a few, and many of them arguably quite important; we're not talking improvements and enhancements, but upgrades/extensions that are required to maintain service levels. Even when your business cases have all but guaranteed payback, the dollars just haven't been available to fund all of the necessary projects.

Why not figure out a way to get some of that VC funding?

I'm sure the details of doing so are incomprehensibly complex, but the broad benefits would be obvious: a startup-type project embedded in an already-running business is probably more easily implemented, managed, and provides a more reliable path to sustainability (and payoff), doesn't it?

It's "new," but not as in "unknown" or "untested." Running a project as a truly stand-alone activity, at least from a financial perspective, might energize your employees, and help make it more successful. There could be some sort of marketplace for internal IT projects, in which VCs could shop for investments while letting you find money to get things done.

If VCs underwrote specific technology projects in your organization, it might fund a level of intrapreneurship during these difficult times, and thereby put some teeth into all those exec exhortations for more risk-taking and innovation.

Again, it's probably impossible, but desperate times call for creative thinking. I just don't believe that startups have the monopoly on breakthrough thinking. And, according to the rate of investment so far this year, VCs don't think so, either.

Jonathan Salem Baskin writes the Dim Bulb blog and is the author of Branding Only Works On Cattle.