Entries in venture capital (1)

Wednesday
Oct282009

A venture capital alternative for early financing offered by LaunchCapital

Access to loans and funding for entrepreneurial small businesses is abysmal right now. Low access to credit at reasonable terms due to the financial crisis and limited action by venture capital firms are creating few opportunities for entrepreneurs to gain early funding for their ventures. Perhaps its due to regulatory challenges, but there has been surprisingly little innovation in financing such activities.

I've been interested by the possibility of p2p loans to help fill some of the gap, but as a personal loan maxing out at $25,000, this is an option really only for a small set of small businesses who already making money. Crowdfunding like they are doing at Trampoline Systems is perhaps even more exciting, but as I know from a nice lunch that I had with founder and CEO Charles Armstrong, the regulatory challenges took months to sort out and that was in the UK.

With this backdrop, the new offering of LaunchCapital is particularly welcome. The firm announced yesterday that they have launched a new small business opportunity that recognizes the current funding challenges and VC focus on hi tech and biotech, seeking to empower "main street" entrepreneurs. Through the past year of developing the product, they have come to three major insights that describe the businesses that they seek to serve:

  1. Main Street businesses are not interested in taking on expensive equity at the seed stage of their development
  2. Main Street entrepreneurs have little trust in venture capital
  3. Main Street entrepreneurs take on personal risks that are uniform regardless of industry or experience

Their product is a small business loan up to $150,000, with a small common equity ownership of less than 15%. I would be interested to know if entrepreneurs see this offering as an exciting new option.