.: on the frontiers of venturing and venture investing :.

Wednesday, July 11, 2007

Seed venturing toward systemic interventions - deal funnel: screening, conditions, and structuring.

Seeding ventures focussed on systemic interventions needs to be come at with an approach that is grounded in systems thinking. Conventional wisdom in venture investment has come from theory and experiences often based in working with business systems that are working within and dependent on the current system itself. What I've found is that the earlier the stage of investment and the more oriented the venture is toward a systemic intervention the more 'gut instinct' is used a guide to making investment decisions and supporting the growth and success of those ventures.

My thoughts have been going toward what would something that focuses on seed venturing toward systemic intervention look like and how would it work. What I'll be posting on for a few posts is going to be my emerging ideas in this.

First off... what would be the filter for projects that it would take on? What would the 'deal funnel' be?

I would approach it as follows:

  1. Is systemic intervention the goal of the venture?
  2. Are the readiness indicators favorable?
  3. Are the conditions for accelerated growth present or practically possible?
From that stage the deal funnel would move into deal structuring which focuses on what is necessary to create the conditions for growth:
  • Basic
    • Basic financial stability
    • Core competency coverage
  • Catalytic
    • Venture alignment
    • Active and appropriate network
A key intersection point is that a financial investment is a powerful catalytic moment in the emergence of a venture. That catalytic power can be most productively harnessed if it is focused on encouraging the conditions as opposed to ensuring rigorous controls are in place. It also hopefully leads to much simpler deal documentation that focuses on establishing and orienting the relationship that is being created and how this investment can be used to create the conditions that will most accelerate the growth of the venture... the intensification of the vortex.

That felt good. Let's see if makes any sense.