Introduction To New Intermediaries:
Because the intermediary role in the venture capital field is extraordinarily new there is a variety of companies attempting to create value through a variety of services targeted at different segments of the industry.
The most basic level of service, and therefore one of the most
numerous, is exemplified by The Elevator. The firm derives its name from
the scenario of an entrepreneur having a minute's time with the venture
capitalist trapped in an elevator, and therefore, the initial minute's
sales speach is posted to the site where interested investors can view
at their own discretion; the site functions as an investment bulletin board.
The Elevator - Vertical hub or functional hub?
The company is a vertical hub, in that the services it provides and
its success will be measured against by the criteria
specified for and by a vertical hub.
What is the business model of The Elevator?
As a whole, the Venture Capital intermediaries fit into the Information
Brokerage and Trust Services model. The Elevator
provides enhanced operation/opportunites to both investors and entrepreneurs
through lowered transaction costs and
traditional intermediary overhead. The service is provided primarily
for entrepreneurs seeking seed funding.
How does The Elevator make it market?
The Elevator, as a very basic value-added service provider, is
inherently, a match making service between investors and
entreprneurs.
Benefits and Marketing
The Elevator offers the buyer, in this case, the investor, an expedited
method to access possible entrepreneural
investments. It provides access to a greater number of opportunities
from an expanded entrepreneural base. The
entrpreneural offerings are presented in a more standardized format
that allows for efficient selection of specific candidates.
The Elevator offers the seller, in this case, the entrepreneur, an expedited
method of access to possible investors. It
provides access to a greater number of investors than the entrepreneur
could solicit individually. By providing an upfront
level of acceptance for entrepreneural offerings, it helps the entrepreneur
refine the offering. By screening investors,
entrepreneural confidence in the site is improved.
Creating a sense of community is the latest undertaking of this company.
An entrepreneur-to-entrepreneur "Networking"
site has just been added to the web site. By sharing information,
opinions and experiences the company hopes to foster
loyalty amongst its entrepreneural base.
How does it sell to new customers?
A venture capital intermediary has two separate
customer bases and addresses each new customer type differently.
Investors are charged an annual subscription
fee since they are in need of a continual supply of new investment
opportunities. In contrast, entrepreneurs are
a engaged only until financing is achieved for their project, therefore
they are allowed free listing to the site, but are required to pay referral
fee for any actual investor contacts.
The Elevator - Overcoming e-Intermediary Obstacles:
How does it overcome problems of asset specificity, product rating,
product descriptions?
Asset specificity is not an issue in the venture capital intermediary
space, particularly for The Elevator, because its primary
function is that of match maker.
In this particular case, they are matching an investor with an entrepreneur
looking for capital - it is more an investment in an
idea and the possibility of future returns. In the case of rating
the entrepreneurs' offerings, it is the investors' responsibiliy to
perform proper due diligence - this service simply provides an introduction.
The company, however, does provide
some enhancement of the "product description" by setting acceptability
standards on the offer's presentation.
How does it handle payment issues?
Annual subscription fees are handled by traditional
billing mechanisms, while the collection of the more numerous referal
fees is accomplished by credit card billing on
the web site via Secure Socket Layer.
How does it lead to trust between buyer/seller? The
entrepreneur's perception of trust is also enhanced by an
intermediary that is linked to well respect investors in the industry.
Attaining Critical Mass:
The company is targeting entrepreneurs first by
allowing them to post, via the standardized format, their offerings to
the site free
of charge. The volume of offerings, in
the new easy to analyze format, will attract a larger number of traditional
VC investors
willing to pay a subscription fee. The
increased number of investors will increase the probability of matching
buyer and seller
and thereby the likelihood of collecting a referal
fee from the entrepreneurs. Beyond the free posting, the access to
community information and resources will engender
loyalty to the site that will keep membership numbers from dwindling.
Technologies:
What are the current leading edge electronic
commerce technologies employed in this niche?
The site utilizes JAVA 1.0 as the programming language for the website.
SSL is used for transaction security. Public Key
Infrastructure (PKI) is not utilized because it would introduce a level
of complexity that could hamper the company's attempt to
streamline the front-end process.
What are the payments mechanisms, agents,
trust mechanisms, special software, etc...?
Standard industy mechanisms are employed to ensure payment security
and increease the trustworthiness of the site. Secure
Socket Layer (SSL) is utilized for credit card payment of referal
fees while membership fees are handled via a traditional billing mechanism.
Password protection prevents entry into the membership areas of the site,
while another password controls the editing of offering imformation on
the site.