Entrepreneurship Conference: The Future of Entrepreneurial Finance

For a report summarizing the conference written by Matt Burns, Click Here.

Click Here to view the video.

Conditions of extreme uncertainty and information gaps create unique challenges in financing new ventures. Silicon Flatirons’ Annual Conference, The Future of Entrepreneurial Finance, analyzes the efficacy of existing solutions to startup finance. Several recent developments – including the rise of super angels, passage of the JOBS Act, critiques from within and outside of the venture capital industry, and the expansion of secondary markets for private securities – suggest that today’s solutions to startup finance are not static. Join Silicon Flatirons in Boulder, Colorado, on Thursday, March 21, 2013, as entrepreneurs, academics, policymakers, and startup financiers discuss how the future of entrepreneurial finance will look different than today.

Our Conference’s discussion analyzes three primary topics.

The Conference’s first panel, When Should Capital Be Bundled with Outside Management and Oversight?, examines two broad countervailing trends in today’s entrepreneurial finance. One model of outside finance, venture capital, bundles outside capital (e.g., money) with expert management oversight (e.g., a board seat and regular involvement with a startup). Emerging models of entrepreneurial finance present new approaches to how and whether management expertise should be bundled with outside capital. Accelerators, for example, provide direct oversight (and often physical facilities) to startups as well as capital. This appears to be an even closer coupling of outside money with expert management assistance than the traditional VC model. In contrast, Super Angels and on-line platforms for outside investment – such as Angel’s List – often unbundle intensive management oversight from the provision of outside capital. Along these lines, the proliferation of Super Angels raises questions about whether capital investment can be successfully decoupled from active outside management and oversight. The Conference’s first panel analyzes these trends and provides insights about when money should – and should not – be bundled with outside management and oversight to startups.

The Conference’s second panel, Sizing Up the JOBS Act, analyzes the impact of the 2012 JumpStart Our Businesses Act. The Securities and Exchange Commission (SEC) is currently enacting rules to implement Congress’ legislation. JOBS Act supporters herald the legislation as an opportunity to expand the flow of much needed capital to entrepreneurs by enabling crowdfunding and updating the little-used Regulation A exemption. Skeptics express concern that state regulations will frustrate crowdfunding efforts and that other reforms are unlikely to have great effect. The Conference’s second panel assesses the likely effect of the JOBS Act as the SEC completes its rulemakings.

Finally, the Conference’s third panel, Future Fund Structures for Entrepreneurial Finance, examines the traditional ten year limited partnership model which prevails in venture capital and, increasingly, is adopted by super angel funds. Under the traditional model, a limited partner commits to providing money to a fund for up to ten years and, in turn, the fund’s manager is obligated to return the limited partner’s investment after no longer than ten years (often subject to a few one-year extensions). Alternative fund structures, such as evergreen funds, may address certain shortcomings of the ten year fund, however, they also create new challenges for limited partners and entrepreneurs. Additionally, the different lifecycles and product development times across industries – say, software versus biotech – suggest that perhaps fund structures and duration could be better tailored to industry sector. The Conference’s third panel analyzes what future fund structures between the sources of entrepreneurial finance (e.g., limited partners) and those who make the actual investments (e.g., venture capitalists) will look like.