The Real Risk Takers… Bureaucrats?
According to wikipedia, modern venture capital goes back to the post-World War 2 era when weary American soldiers needed support to help their business ideas take flight. This was a key factor in the 1950s US boom and economic dominance which lasted until recently.
Of course, venture capital goes way back in time. Columbus famously lobbied the Spanish crown for years before they gave in and funded his vision to establish a trade route with India by sailing West, at the risk of falling off the face of the Earth. His voyage provided hard evidence for our planet’s roundness, and also happened to introduce Europeans, Africans and eventually Asians to the Americas on a large scale. For better or worse, venture capital is generally a full half of the equation in any successful discovery or invention.
Every venture has associated risk. The more developed an endeavor is, the less risky. I.e., a company which is making money is better proven than a company which hasn’t yet seen a penny of revenue. Of course, higher risk may imply higher reward. If you invested $10,000 in Google when it was founded in late 1998, you would see a greater return on investment than if you invested the same amount in Google yesterday.
Venture capital geared for unproven businesses is called early stage or seed stage capital. Investors at this stage mitigate their risk by looking for things such as impressive teams and working prototypes. What if a team doesn’t have a working prototype just yet? Institutional venture capital is then a highly unlikely source of funding. Angel (individual) investors are one option, the other is government. If your idea is truly awesome but unproven, there are a number of big-spending governments which will give you money to realize your vision.
Organizations which invest at this stage include Defence Research & Development Canada (DRDC), the United States’ Intelligence Advanced Research Projects Activity (IARPA), and Britain’s Defence Science and Technology. All these agencies are concerned with having a leg up on their “adversaries”, and all are interested in spending large sums on high-risk, high-reward research projects. According to IARPA,
“Failure is completely acceptable as long as…
- It is not due to failure to maintain technical and programmatic integrity.
- Results are fully documented.”
The British Ministry of Defence accepts funding proposals for systems which are at a Technology Readiness Level (TRL) of 3-5. This means the tech is at worst still being proven feasible, and at best is just mature enough to be demonstrated. Despite some initial reservations one might have about working directly with the military industrial complex, the solicitation/RFP process is open. Further, 21st century Western governments don’t have the gall/cojones/chutzpah to ask for exclusive rights to a piece of tech. In other words, they will fund open source projects if it means they can avoid being surprised by the unexpected arrival of novel, disruptive technology.
If you are in the midst of building something “not just evolutionary, but revolutionary”, and are being turned downed by risk-averse investors, then look for government defense contract money. They’re blowing so much cash on BS these days, they might as well spend some of that on a good cause like your idea.