A recent profile of Momentum Venture Management LLC in MarketWatch highlights a particular trend happening today in early-stage venture investing. To address a perceived funding gap between an idea and a prototype, Momentum and other firms are popping up that offer mentoring as well as small rounds of capital that larger firms can't deploy cost-effectively.
In reading the article, two things struck me. Momentum, which invests seed capital into startups and expects its partners to work only on two deals at a time, will invest only in companies that can break even at $10 million in sales. That is fairly limiting, and I wonder whether startups might instead go with an angel investor who could offer a similar amount but would provide undivided attention.
But the really odd bit in the article is that venture firms wonder how well Momentum's work-intensive model will scale. I understand the economic benefits of scaling up, but at the same time, the idea that you can truly scale early-stage investing is beyond ridiculous to me.
VCs know this, so why the emphasis on whether a model will scale? Okay, a reason other than increasing management fees. --Stacey Higginbotham
See Oct. 10 story from MarketWatch
For more on Momentum Venture Management, see TheFunded.com, paidContent.org and Digital Media Wire