A VC Pivot: The New Sinbad Ventures Model

It has been five months since I started raising the first fund for Sinbad Ventures, and it’s been tough. More details about it can be found in my previous post: “Thoughts About My Fundraising Experience So Far”. Now, after attending the Kauffman Summit, especially the amazing LP panel, in addition to talking to potential LPs in the Middle East and USA, I learned much more about how LPs think, and what do they want. Conclusion: I believe it’s time to pivot.

I realized that I am currently working on my first professional VC fund in a top-dowm approach. I am so focused on raising the fund so that I stopped doing anything else! With such a little experience in VC (less than 5 years), I better work on a bottom-up approach.

VCs have so much in common with entrepreneurs. When they learn more about their customer’s behavior, they start to think of new ways to offer value or solve costumers’ problems. In other words, they pivot, and do some changes to their products or services.

My Target Customers

For VCs, who are actually service providers, the main costumers are the LPs (in addition to entrepreneurs). For me, I started with few assumptions about my target LPs, who in my case are Angel LPs not institutional LPs. I developed a proposed service. Then I went out of the building and talked to my costumers. I analyzed their feedback, and learned much more details that can help me serve them better.

I learned that my target LPs (Angel LPs), usually want to keep the investment decisions for themselves, get early on, and get involved as mentors. They don’t want an Angel Fund to invest on their behalf and be an intermediary between them and startups.

But Angel LPs still would like to get the services of such a fund! Services like: support in evaluating opportunities, researching markets, conducting due diligence, facilitating the investment process, following up with founders, monitoring the performance of their portfolio, and sending them periodic reports about all this.

So Angel LPs don’t need the traditional VC model. They need a new service or technology that will enable them to perform better in managing their own portfolio, and scale up by investing in more startups without losing control.

Moreover, in the near future, equity crowdfunding will be legal in USA, and it might also become a global trend. Technology news websites are talking about more than 50 crowd-funding platforms lined up and ready to take the license.

While people are crazily competing on who to become the hottest crowd funding platform, the most important question for crowdfunders or angel investors will soon become: who are the hottest startups to fund? no matter where they are listed!

Angel investors and crowdfunders will need a social recommendation engine to utilize the “wisdom of the crowd” in deciding who the hottest startups are, and when to invest in them.

As for my target Entrepreneurs and Startups, I am passionate about global startups that are started outside Silicon Valley/Alley. My aim is to help less fortunate yet high potential startups from around the world to get properly funded, then make huge returns out of this, because such startups are usually undervalued and their founders are underestimated.

So What’s The Pivot?

To start with, and inspired by Brad Feld’s new book: “Startup Communities”, Sinbad Ventures should be a “VC Community” before being a “VC Fund”!!! It would be an “Investment Community” that gathers all angel investors and crowdfunders who are interested in funding global startups, to share and learn together.

Something like Angel List but more investor-focused and with a different business model (explained below).

Second, on this community, there should be lots of social educational activities. It would be something like Startup Plays or even like General Assembly courses but for investors and crowdfunders, and it might be virtual utilizing Google Hangouts.

Third, in such a community, sharing knowledge and experience should be an essential gene and should be encouraged. To do this, we should work on something similar to “This Week In Startups” and “This Week In VC” but again for angel investors not entrepreneurs.

Fourth, then we can introduce a Global Startup List to source the best deals for this community to consider and involve entrepreneurs in it. Sourced startups will mainly be selected by us from graduates of accelerators around the world who are ready to get Angel Investments.

This would give some kind of assurance to investors that these startups went through a good acceleration program and selection/filtration process.

Members will be encouraged to show interest and share their reviews inside the community to figure out who the hottest startups are.

Fifth, we can then introduce a Private Pitch Pad where Founders decide who to pitch-to on their own from the investors who showed interest in their startups. And Investors also decide what startups to receive a pitch from and what startups to invest-in on their own.

Investment transactions then take place on any investment or crowd funding platform outside our community. Then they both manage the process without any intervention from our side.

What’s The Business Model?

It would be a freemium model. Meaning that it will be free to join the community as an investors, free to list your startup as a founder (after being selected), free to interact, and free to directly communicate and fund/get funded no matter where without any intervention from our side.

However, if angel investors would like to scale up and get our value-add services, then we will charge them some fees for it. Services will include: evaluating opportunities, researching markets, conducting due diligence, facilitating the investment process, following up with founders, monitoring the performance of their portfolio, and sending them periodic reports about all this, etc…

Our services will be done manually in the first phase. But as we serve more investors, we will be creating a tracking and analytics technology that enables us to scale in providing such services. Something like Google Analytics Dashboard but for startups performance monitoring and investment follow up.

This technology will enable us to serve more investors, and will enable investors to scale up and invest in more startups while keeping everything under control.

How Long Will It Take?

Building and scaling such a community and a technology could take as short as only one year, or as long as 5 years. But anyway, I am in it for the long run, and I already started working on it.

Legally speaking, this will turn Sinbad Ventures into a company instead of a fund. This would be less expensive, much easier to fundraise for, and much faster to implement.

In Summary

The new Sinbad Ventures is disrupting the traditional VC Model by introducing the concept of the “VC Community” instead of the “VC Fund”. This will empower our taget LPs (Angel LPs) to make their own investment decisions and keep all the upside of their investments for themselves, while still benefiting from the VC Firm’s services utilizing our new startup tracking and analytics technology.

This will help our LPs to scale up and do more investments without losing control over their portfolio, no matter on what investment platform those investment transactions take place. We cooperate with all other crowdfunding and angel investment platforms and clubs.

Sinbad Ventures strategy is to help our LPs make huge returns by sourcing the top global startups graduating from international accelerators outside Silicon Valley/Alley, because such startups are usually undervalued and their founders are underestimated. While doing this, we will also be helping less fortunate yet high potential startups from around the world to get properly funded.

Goes without saying, Sinbad Ventures is open for collaboration with any institution who believes in this new concept and want to help in implementing it.

So stay tuned for more details and some wonderful announcements inshallah,