Posted on September 30, 2010
In my effort to launch LION here in Madison (WI), I’m meeting regularly with potential member/investors and locally-minded business owners.
Which is how I found myself sitting across the table from the founder of Sector 67 at La Brioche last Friday. After a few opening pleasantries – he’s a brilliant geek committed to doing something great in Madison, and I’m a mid-career entrepreneur similarly committed – we explained to each other our concepts.
His explanation was concise; Sector 67 is a take-off on the HackerSpace model – a member-oriented workshop for tinkerers to make cool stuff, a “center for prototyping, technology, and advanced manufacturing.” Sector 67 is going to be a great fit for Madison.
Then it came my turn to explain LION. Two sentences in, he intercepted. “So, it’s a VC organization.”
Nope, it’s not.
I explained what I perceive as the differences between LION and VC’s.
- LION members invest an average of $10,000 – $300,000 per deal. VCs invest millions.
- LION members offer “patient capital.” They are willing to accept lower returns on their investment (2-6%) in return for the community benefit that comes from helping local business owners. VCs, on the other hand, offer capital for which they expect 2 and 3 X returns in just a few short years.
- LION members generally invest in established businesses with ties to the local community. VCs invest in unknown companies, and often require the founder to cut ties to their home community and relocate to (usually) Silicon Valley.
I’m still not sure I communicated effectively. But it was great practice. I’m sure I’ll have to explain this difference again and again. Truth is, for many entrepereneurs, the VC model is so predominant and alluring that they have difficulty wrapping their giant brains around alternative, “slow money” funding models.
“Venture capitalists have great enthusiasm but short attention spans. We are stuck in a nineteenth-century way of thinking that leads to large-scale, centralized production and power generation. We don’t have the mind-set to really invest for the long-term in small-scale solutions that would improve life for billions of people.”
LION is in many ways a small scale solution, a counterpoint to the VC’s “go big” mindset.
Rebecca Ryan is a Madison, Wisconsin based entrepreneur, investor, and writer. She facilitates the Madison/Dane County LION group, and launched LionInvesting.com to help educate others about LION and Slow Money concepts.