There has been a lot of recent discussion in the startup community about the funding community. There has been much speculation on whether traditional VCs are stepping up and investing or whether startups need to move beyond the venture capitalists.
There is a broad trend toward newer sources of capital for venture capital in the $50MM – $1Bn investment range. The following sources of capital are becoming more viable for funding startup ventures like new casino sites which in turn provide more funding for more investment and expansion:
Access to academia is increasingly important for startups and small companies with large market potential. In a sector such as biotech, research that is carried out in academic settings creates the groundwork for a startup that can become the industry standard. In other industries such as transportation and financial services, an active academic research infrastructure is even more critical, as the strength of the venture capital community in those industries is less than in others.
Academic institutions typically also provide significant access to domain-specific expertise and facilities. Many academic institutions also have strong networking and mentor networks. They also have a built-in support system for maintaining healthy development teams and projects, because their researchers (and professors) often work on similar projects as the startups in the sector.
However, the academic community is not without its own challenges. The academic community does not always deliver on expectations of the startup community. Academics may struggle with meeting demanding timelines, but this is often a product of resource constraints rather than due to the academic environment itself.
In addition, the academic infrastructure is often outsourced to a third-party IT consultant rather than built by the academic staff themselves, creating some risk. Academic institutions may also struggle with delivery of outcomes for a particular stage of an education or research project, particularly as the stage of an education or research project changes from inception to market maturity.
Because there is typically a higher barrier to entry to an academic environment, it is difficult to convince academic researchers to work on a startup instead of completing their original research project. Additionally, academic entrepreneurs are usually already well-funded, which makes it challenging to justify their risk in a startup venture.
Enterprise foundations provide startup capital to support startups that address an industry or solution gap that may be overlooked by venture capitalists. Some enterprises within an industry also have strong industry expertise and are ideally suited to support startups that may have specific application requirements that cannot be met by a startup investor.
They are also known to provide valuable assistance to the startup, such as setting up a company, finding office space, hiring talent, marketing, investor relations and accounting. The enterprise foundation provides startup funding to offset their financial risk.
Typically, they have a long-standing relationship with the startup and know its business model well, giving them more confidence in investing in it. Some enterprise foundations also have significant incentive to invest in startups because of the great need for new technologies in their industries, such as healthcare, education and retail. The enterprise foundation may also want to diversify its portfolio, diversifying their cash flow and also positioning themselves for the types of startups that it wants to invest in.
The Enterprise Foundations model is different from the corporate-affiliated, community-affiliated foundations, since the company and its executives participate as stakeholders in the enterprise foundation. For example, Deloitte serves as a key strategic advisor and capital partner to start-up businesses. To achieve success, they provide the necessary guidance and support to help startups complete their business models, products and go-to-market strategies.