(Editor’s note: William T. Clifford is CEO of Spencer Trask & Co. He submitted this story to VentureBeat.)
In the aftermath of the economic meltdown, investment firms are under a more intense level of scrutiny than ever. And the private equity and venture capital sectors are working to efficiently transition out of a deep and widespread crisis through onerous legal and regulatory constraints.
Navigating a labyrinth of SEC laws that date back over 70 years, while pushing venture capital and private equity into the 21st Century requires the flexibility of a yogi, creativity of an artist and attention to detail of a corporate finance attorney. The combination of talents demanded by firms that will reshape the future of our industry is not unlike the unification of talents that enables portfolio companies to become tomorrow’s game-changers.
As the financial industry attempts to adapt to all this change, it’s worth looking at the future of the investment and how it can be used to optimize existing technologies. Along the way, can it also break down the barriers to solving the world’s most critical issues?
Social entrepreneurism has become widely adopted across many industries, but it’s a concept that deserves a second look from venture firms. Specifically, they should be looking at potential portfolio companies that have the potential to both improve the way people live today (and in the future) and yield profits for investors through the commercialization of these breakthrough offerings and strategies.
The most successful ventures are often the ones where the teams learn the importance of collaboration. A Harvard research study showed that complex problems are often solved by groups of people with expertise that is six disciplines away from the original focus of the problem. In other words, an outside perspective can be critical to success.
Public and private sectors can benefit from opening up the toughest challenges to the wisdom of the crowds – tapping the collective IQ of the community to find the perfectly prepared mind.
The Internet is one of the best tools for doing this. Online platforms tailored specifically for one-to-many and many-to-many competitions and collaborations can help solve previously intractable issues.
Investment firms need to embrace the willingness to employ strategies that include crowd sourcing and open-innovation. Often, the best solutions to the toughest challenges come most quickly from bright individuals that look at those issues with a fresh perspective.
Recognizing this and applying a methodology that lends itself to transparency and direct involvement of entrepreneurs and investors is an antidote to industry-wide skepticism. It’s just what today’s investors need in the post-meltdown/post-Madoff environment. Leveraging collaborative tools and practices for new venture acceleration yields not only transformative innovations, it also creates unprecedented transparency that investors increasingly demand.
This collaboration for innovation coupled with transparency delivers an optimized environment that produces outstanding returns – as well as an edge in the increasingly competitive global landscape.
The Internet and crowd sourcing platforms allow the brightest minds all over the world to communicate in real-time, forming a “global brain.” Forward-looking investment firms who embrace this have the opportunity to break traditional barriers of innovation and venture creation and achieve global missions at a formerly unheard of pace.
This is the venture model of the future.
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