Chatting with the folks at Acquia yesterday, CEO Tom Erickson rhapsodized about "super seed capital," the hot new venture capital (VC) trend.
"I'm on the board of TaskRabbit, using super-seed financing. These firms only specialize in small rounds of a quarter-million or a half-million. The idea here is they're a lot more patient. Smaller amounts lent over longer periods create more patience."
Cool, I guess. The question came up because I have become doubtful about standard venture capital financing as a vehicle for open source. Growth rates on even the best companies (like Acquia itself) aren't enough for a VC who needs a good shot at a 10-1 win to justify his investment of money and time.
Of course, as is the way of these things, even super-seed looks headed for a crash, writes Paul Kedrosky. This prediction has Always-On pulling out its sad angel, it has Fred Wilson pushing back, and it has reporters watching the show.
It also has me ROFLMAO. Because I don't know if either the VC community or those anxious start-ups have noticed it right now, but money today is essentially free.
Of course, the way to get those cheap rates is to not need the money. But if you're rich money right now is not a problem. And you shouldn't need a 1,000% return to justify an equity investment, either.
The world is awash in capital, and what was once considered a modest return can justify the investment. Even open source can get new financing in this environment.
All we need is a working model for how that cheap money gets paid off. Turn debt into equity, get a modest return on the equity, pay off the debt. Rinse, repeat.