Investment strategies · Fundraising

Do you think Indie.vc can work?

Thomas Knoll Executive Advisor & Business Coach. I help entrepreneurs survive and thrive at building their teams and businesses.

June 2nd, 2015

I've been watching Indie.vc for a while now, because I think the people behind it are great, and more importantly, I appreciate their motivation for this little experiment of theirs.

Short story is: the folks from O'Reilly AlphaTech Ventures have created a new vehicle for funding founders who are trying to build a company that doesn't fit traditional VC paths.

WHAT DOES THIS MEAN?

Good question. I think the partners would be the first to say, "I don't know." But, they are pulling together a "Declaration of Independents" to figure out what an Indy Company is or isn't:

  • Independent businesses are majority owned by their Founders.
  • Founders should maintain full voting control of their board of directors.
  • Independent businesses should provide equity or equity-like profit sharing to all employees that should be reported in percentage of company/profits vs. number of shares.
  • Independent businesses provide a real time view into companies financials and make that available to all employees.
  • Independent businesses should provide the same level of benefits for all employees as they do for their Founders.
  • Independent businesses respect their users by not selling their data to 3rd parties or opting them into spammy offers.
  • Independent businesses, who've raised outside capital, put in place a distribution plan for their investors to share profits and relieve pressure to go public or sell out.
Personally, I hope this experiment goes well. Do you think it can work?

Alison Lewis CEO/Creative Director

June 2nd, 2015

This looks really interesting. I am a big fan of O'Reilly Ventures because they understand people are hacking every system, even the funding one. I wish I had more to add, but my general response is wow, what a great idea!

Jessica Alter Entrepreneur & Advisor

June 2nd, 2015

I'll be honest, I don't really get the goal OATV aside from some press.  Do a lot of companies bootstrap, yes of course. Is that a great model - 100% if you can do it. I don't get a) how OATV will ever really make a ton of money from this unless these are venture style returns and b) what $100K will really help with for companies that are a going concern if that is all they raise. Most of these companies seem like they could eventually be VC backed businesses and so if that's the case this seems like a way to say - you could be, but you don't have to be? 

Alison Lewis CEO/Creative Director

June 2nd, 2015

Great points. As a hardware start-up, bootstrapping doesn't cut it for long. We require funding for engineering and physical product making. Things like tooling, manf. set-up, and more. These are still 10x higher than a software start-up. So, my feeling is they are aimed at the makers and inventors out there. Alternatively, most VC's are not in the hardware world or only in energy or medical. OATV has a history of understanding convergence of multiple sectors that include design, art, and social applications in hardware. 

What I don't understand is the salary to 2X ratio they are talking about on their page. 

Thomas Knoll Executive Advisor & Business Coach. I help entrepreneurs survive and thrive at building their teams and businesses.

June 2nd, 2015

Unfortunately, I have watched (and experienced) companies who get forced into certain expectations and trajectories because of the optics of the venture backed model. It doesn't mean that there isn't room for capital investment to be part of the way they grow.

Daniel Austin Founder and CEO at GRIN Technologies, Inc.

June 2nd, 2015

Hi Thomas, It looks like an interesting approach to solving the 'ramen profitability' problem for small offbeat companies, closed now however. Did you apply? R, D-

Jessica Alter Entrepreneur & Advisor

June 2nd, 2015

@thomas but does $100K really help?

Sandeep Bansi

June 2nd, 2015

A lot can be done with 100k if in the SaaS space or mobile apps space. Depends on the business and the operational expensed.

John Seiffer Business Advisor to growing companies

June 2nd, 2015

I sure hope this experiment can work. There's a huge need for a vehicle to fund companies that A) aren't bankable, B) Need cash beyond the founders' 2nd mortgage and C) aren't likely to have an exit. By the way, most companies that go for angel or VC money aren't likely to have an exit - but they convince themselves (and investors) they will because they don't see any other way to start.

I love the indie.vc experiment as a new funding mechanism. I'm a little put off by the "manifesto" aspect of the definition of "independents." Open book management can be a wonderful thing for many (but not all) companies. And equality of benefits as well. However, I'm of the opinion that those things should be separate from the funding mechanism - not a requirement of it. But then, I'm not running the experiment.

I really appreciate the offering the docs to people and being so open with their process. 

Daniel Austin Founder and CEO at GRIN Technologies, Inc.

June 3rd, 2015

Maybe I'm a little biased as an O'Reilly book author, but the point about hardware development made earlier by Alison L. strikes home. $100K is a huge amount to a small company financed on your credit cards, and may mean the difference between life and death for the company, or between having to do all the work yourself instead of being able to hire or attract others to join. 

Camille Leon Founder of the Holistic Chamber of Commerce

June 30th, 2015

I have to add that, as a Founder that keeps doubling revenue, $100k would allow us to 'quantum leap' into some more high-level scalable SaaS technology and take care of a few other expenses to shoot from 'covering costs' to full profitability. I hope that the Indie.vc experiment goes well for those involved!