Can The Crowd Be More Patient?

One of the most noticeable changes to the VC business over the past decade is the movement of investment allocation from capital and time intensive sectors like biotech and clean tech to capital efficient and fast moving sectors like internet and mobile.

This makes total sense if you think about it. VCs are professional money managers. We are provided capital to invest as long as we can return it to our investors with a strong return in a reasonable amount of time. A strong return is 3x cash on cash. A reasonable amount of time is ten years max.

Internet and mobile product development cycles are measured in months not years. And the capital required to get a product built and into the market is less than $1mm. And the returns, when things work out, can be enormous.

Contrast that with biotech. A new drug takes $100mm in capital investment to get to market. And that process can take a decade or more.

If you were a professional money manager, where would you invest? Where has USV invested our investors' capital for the past eight years? It's not even a contest. Internet and mobile wins hands down.

But internet and mobile will not and can not solve all of society's problems. We need new medical approaches to preventing and/or curing disease. We need new scientific approaches to generating, storing, and being more efficient with energy. Maybe we need more space exploration. Maybe we need more undersea exploration.

Enter the crowd.

When the Gotham Gal and I allocate our personal capital, we do it broadly. We give it away to good causes. We invest in things we want to see in the world regardless of whether there is a good return on it. We are driven by the outcome as much as the return.

I suspect that many people approach the allocation of their personal capital similarly. And that is very different than a professional money manager behaves.

So the advent of crowdfunding, for equity, for philanthropy, and for patronage, seems like a great fit with these capital and time intensive projects that the VC business has largely abandoned.

If we saw a promising technology that could prevent or cure cancer, we would be inclined to help fund that, regardless of the timing and magnitude of the financial returns it could produce. If we saw a promising technology that could store and move energy more efficiently, we would be inclined to fund that as well.

I can feel the crowdfunding movement coming. It's in the air. And I think it will be impactful and helpful in many way. And I hope that its impact will be most felt in the sectors that have been starved for capital, not the sectors that are awash in capital.

#VC & Technology

Comments (Archived):

  1. Michael

    Right on. But to make this work better, I think we need better platforms that track progress towards meeting important societal goals. This would help identify the most promising opportunities that are in the works for the crowd to dive into. For the time being, me thinks it is all a bit too ad hoc. The TED “wow” game is a good example — Lots of “wow”, but not much tracking. And BTW, these platforms should be linked to policy making discussions too. So we don’t get SOPA’d so often.

    1. fredwilson

      two different issues and two different approaches. we are working on the latter. hacking society was pretty much all about the latter one.

      1. Michael

        not sure I agree that these are different approaches. You need the “wow” to get the crowd activated (vision). You need the tracking so that the activation isn’t wasted — and avoid exhausting the crowd. I thin that platform design (digital or otherwise) should combine these to reduce learning barriers and empower informal networks (ecosystems). Here’s a bit more on that idea if you are interested

  2. jason wright

    The dawn of a new enlightenment?The penny finally drops. People should be more willing to sacrifice for the greater good.

    1. andyswan

      Everytime I hear that phrase I check to make sure my wallet is still there.

      1. kidmercury

        it’s the timeless scam…..”come one, come all, give me all your money, it’s for the greater good…..what, don’t you want to save the children?”

        1. Kasi Viswanathan Agilandam

          Yep. Emotional funding.

        2. jason wright

          I wouldn’t necessarily give to the savior. I would give to the cause that attacks the reason why their appears to be the need for a savior.

      2. jason wright

        Sacrifice the things that they really don’t need. Like yesterday’s post, eliminate the ‘noise’.

  3. John Best

    I see crowdfunding like a voluntary societal tax, or a charity donation – you assign a portion of your disposable income towards building a “future” you want to see. It’s less about financial returns as societal ones.

    1. laurie kalmanson

       nicely saidbuy another something at the mall or make a gift to kickstarter — the latter is a much greater psychic good, plus it does some good

    2. William Mougayar

      I think that’s one kind of bucket. It’s definitely rewarding to participate in societal changes but there is more.

      1. awaldstein

        Question for you and others not in the US.avc is a global community but when we talk change and the power of the market place to impact how laws are created and behaviors evolved, it is mostly US focused.Canada. UK. France. I’m interested in how social change within these societies and cultures are being impacted by the power of engagement and the long runway of the social web.

        1. William Mougayar

          Canada is quite influenced by the US and sometimes vice versa. We don’t always share the same urgency on the issues and we certainly don’t have the grass root anger that sometimes engulfs the US crowds. We’re a nice gentle even-keeled nation that likes to be in the middle ground on most things. That’s why I get out of there often and do business with and in the US. That’s where the intensity is greatest and where things get shaken and stirred often. The US has this great ability to re-invent itself every 15-20 years, although this current reinvention cycle has been a bit more challenging than past ones.

          1. awaldstein

            Great response William. Since I spent a bunch of time in BC, I find your description very apt and true.As much as we are globally connected community, we are most influenced by what goes on on the street outside our doors.Engagio is a very disruptive idea and product. In Canada although your adopter community is in the US certainly.I bet as the CEO, this has cultural challenges. Be interesting to hear from you and Sound Cloud and others that have to bridge this as a local culture with a predominantly US user base.

          2. William Mougayar

            I have to think and act like a US company every day. It’s a natural instinct. If you want to swim with the sharks, be one.

          3. JLM

            Within 50 years, the US, Canada and Mexico will be a single nation.

          4. William Mougayar

            I wouldn’t mind 😉 but am not sure I’ll be there to see it

          5. Matt A. Myers

            I know there’s a semi-secret push for it, though I don’t see it happening unless some major things change.

          6. Otto

            That’s if they’re not a single nation now, metaphorically speaking. Perhaps my view is biased since I grew up in Southern California, close to the Mexican border, and now live in Oregon where I don’t feel far geographically or culturally from The Couve, BC. The only thing that seperates people into these arbitrary border terrorities is the political narrative. I see decentralization being more likely than centralization.

          7. Andrew

            That’s only been predicted every few years for the past 200.

        2. Michael Elling

          For some reason the English speaking world is made up of societies that embrace change.  Being a dual citizen I’ve appreciated this since birth.  Interesting that you throw France into the list, as they are closer to Germany, Italy, Spain, Hungary, etc… wrt to their homogeneity, extent of multiculturalism and adaptability.  I think the topic of social change is a huge one vis a vis social media and new technology and worth devoting a weekly or bi-weekly track to on this thread. Entire societies and cultures, not just institutions and industries, are being disrupted by what we all are doing.

          1. awaldstein

            Nicely said.I work to think globally every day and my networks are strong within Europe. But my thoughts are usually US centric.That jumped out at me in this thread.

          2. JLM

            There is something to be said for the notion that the original American bloodstock was enriched by adventurers — folks who took a journey that literally killed about 15%.  A pretty tough screen.A new land carved out (well, stolen from the Indians, really) and immediately known as the New World.Being a nation of immigrants is a powerful way to replenish the blood.Because we had no infrastructure, we had to create it and that creative endeavor suggested that everything was dynamic and subject to change.Then throw in the American Revolution, the Civil War, slavery and woman’s suffrage and America is a place where big ideas are contested — some supremely stupid ideas like slavery indeed.This sense of adaptability and change is the constant and we ignore it at our peril.

          3. Michael Elling

            When I am in Sydney, Toronto, London or NYC I have a feeling of sameness, which I don’t feel in Berlin, Paris, Moscow, Tokyo, Mexico City, Budapest, etc…  And it’s not just the language.  It’s the multiculturalism; the daily openness to new ideas, people.  Spanish, German, French, English were all colonists.  I wouldn’t say its the the deprivation filter nor the lack of infrastructure or prior cultures as causality.  There is something else…

          4. FAKE GRIMLOCK


          5. fredwilson

            so what does that say about australia?

          6. JLM

            @fredwilson:disqus Australia did not have the western European immigrants in the same proportions as America did.Much has been said about the number of English prisoners who were sent to Australia but, in actuality, more were sent to America.I think of the Australians as an equally hardy bunch and they have had a very large piece of dirt to control.Australia reminds me of Texas — another place populated in great measure by criminals but at least fleeing criminals.

          7. Ciaran

            France has the largest Muslim population in Europe. Their World Cup winning football squad was predominantly of African descent. I’m not saying they’re handling multi-culturalism particularly well, but it’s wrong to suggest that it doesn’t exist there.

          8. Michael Elling

            Shades of grey.  Relativeness.  Not absolute.  As a big soccer/football fan I appreciate what you are saying.  When you get to cycling (also a big fan) it’s interesting to see less of it.

          9. FAKE GRIMLOCK


          10. Jonathan Whistman

            great book!

        3. Brandon Burns

          canada, uk and france all have similar societies and economies. most of the same things apply. and when it comes to social good, i’d say canada is a better leader. gay rights, fair immigration, women’s rights, etc. and with medical achievements, france kills it. discovery of HIV, the first face transplant… merci á france!and a lot of “american” examples are globally applicable. kickstarter is u.s. only, but is global. jump on and donate to someone in another country.

          1. William Mougayar

            Indiegogo is great.But Canada’s society is a lot closer to the US and to some degree to the UK than it is to France. If you want to talk about a country in need of change, pick on France. They change leaders routinely well, but that’s where the change stops more or less. Their systems are gridlocked and change averse, and they still see government institutions at the center of everything.

          2. Brandon Burns

            everyone loves to pick on the french! c’est dommage… when it comes to social good, i’m not picking on any of you. specifically, i think both canada and france do a better job in that area. and france may have a rocky political culture, but they’ve always been at the forefront of medicine, and doctors doing noble deeds. the red cross and doctors without boarders are both french-founded organizations. 

          3. William Mougayar

            i love the french, france, everything french from wine to foods. i owe a lot to them, but their system needs a major tune-up.

          4. Matt A. Myers

            Thinking this is bad, in the case of France especially, is backwards.France is very far ahead of most other countries in terms of social engagement with politics. They understand ecosystems, and on the holistic level – they did create/lead the European Union afterall.Systems where there are dozens of political parties, all with some power, are the best and most productive IMHO as it forces conversation and compromise (where possible).”2-party” systems are the most destructive because it ends up being “us vs. them” and “he said, she said” and there’s no one there to call people out on the negative/bad argument tactics.Why does change need to happen so quickly anyway? This seeming gridlock has a purpose. It makes things hard to change that should be hard to change.Gridlock forces conversation – and for voices to get louder, for more people to hear it – for things that are important. Conversation increases understanding, gives people more time to learn facts, gives more time for people to get used to ideas and understand how it would affect them.The French are famous for their strikes. That’s the voice of society speaking.And unions do make compromises. They mostly just want what is fair based on what everyone else seemingly is getting. And they make compromises because if they don’t then you’ll start pissing off other French.. and you can imagine what happens then!When things can quickly change in all areas, you increase the odds of something happening that people didn’t understand the consequences of – and that the consequences of are different than expected.

          5. William Mougayar

            European Union = European bureaucracy. Couldn’t they create a union without the baggage with it? There are stats on the costs of that infrastructure.

          6. Matt A. Myers

            @wmoug:disqus – I’m not an expert on the EU, though it’d be nice to be – however I’m sure there’s method/purpose to it all. And like everything new and untested, they perhaps will have to evolve structures further.

          7. FAKE GRIMLOCK


          8. Donna Brewington White

            Brandon — I see you are in UX.  Can I ask your advice about something offline?  donna AT bwasearch  Thanks.

        4. Fernando Gutierrez

          Regarding Spain, the social web is not as important in society as in the US. People use the tools a lot to communicate with friends, but most prefer to leave social change to other people. There are a couple of big counterexamples, though:1. Around 18 months ago a harsh antipiracy law was stopped at the very last minute beause of the opossition it found online. In the end it was useless because after the elections, and before the new government took charge, the law was passed. Now government officials can shut down a site without previous control from courts.2. Around a year ago we had a big protest similar to OWS. It was organized through Twitter and FB mainly. One of the organizations that lead it has recently split, one faction kept the FB account and the other the Twitter account. It was all over the news.

        5. fredwilson

          great question

      2. John Best

        Yup. Its all centred around enlightened self interest to a degree.

  4. Rohan

    Patience? This is the age of the instant. This is age where everything happens in real time. This moment. This instant. If it’s not NOW, you are behind.The biggest tech companies of this age are those that emphasize this – Facebook, Twitter, Foursquare. In fact, even the name ‘insta’gram is symbolic)I tweet/post, I get a response. Instant gratification. Kind of like a ‘high’.. with how many likes/shares/retweets/comments being the source of the high.Patience is out of fashion… for now. That said, with all the ‘new’/instant stuff going on, the old stuff is going to soon be seen as deep and meaningful. Kind of like handwritten notes. (If I were a bit more of a fashionista, I might even have termed it ‘retro’. )

    1. Michael Elling

      I sense many Austrians on this thread, so let’s not forget that in creative destruction (funny that it was initially a far left concept that became viewed as far right) there are lots (90s%+) of mistakes.  History tends to only focus on the winners, not the losers.  And I’m not talking about the losers that were winners; I’m referring to the losers that never got anywhere.  Patience means take a step back.  Put things into historical context and look at what the latter losers did wrong.  Look at ManU’s success.  Maybe it’s because SAF could arguably be one of the most patient coaches out there.  Keep those notes coming.

      1. Rohan

        Cannot agree more on Man United and Ferguson.In my early days as a supporter, I used to find it frustrating when Fergie brought in youngsters into the first team who screwed up and seemed to keep destroying value.Over time, most of these annoying youngsters became THE matchwinners. Nowadays, every time I see him introducing a bunch of youngsters (eg: this season), I hear so many cat calls and find myself smiling – wait till we win the champions league next season. ;)Phew. You got me on a very passionate topic Michael! 😀

        1. Otto

          Only if he puts six defenders in the box like Chelsea just did.



  5. Fernando Gutierrez

    The issue here is that for the crowd to be able to fund something some previous achivements are needed. That promising drug or technology has to be, at least, drafted. If nobody finances the draft there will be very little room for the crowd.

  6. awaldstein

    The power of a simple idea like Kickstarter that sparks the possibility that the world can be changed collectively by the willpower of the people themselves. 

    1. markslater

      i absolutely f**kig love the power of kickstarter and the potential of skillshare. unbundle the incumbents i say. 

      1. William Mougayar

        Great line Mark. Unbundle the incumbent.T-shirt, re-share, ^10.

  7. Fernando Gutierrez

    For this to happen researchers need to turn themselves into really good communicators. They will need to get the money and then keep their crowdfunders engaged. If someone is not offering returns, the least he can do is make it an amazing feel-good experience.

    1. fredwilson

      or there may be a new service business helping people market their projects on crowd platforms. already happening with kickstarter

      1. Fernando Gutierrez

        I can see that, standing out inside Kickstarter is not easy at all!

  8. Stu McLaren

    My favorite part from your post was “We are driven by the outcome as much as the return.”I think a lot of us can relate to that.  We too allocate a certain amount to projects we believe in but don’t expect a return.There is a “movement” of sorts towards this even if it’s on a micro level ($10, $20, etc.).  We’re all realizing that if change is going to happen in certain areas (education, healthcare, environment, etc.) then we as the public are going to need to take some responsibility as well instead of just relying on the government to figure everything out (they’re just as distracted and overloaded if not more so).My only question is where do we draw the line between calling it an “investment” vs. a “donation”?

    1. John Best

      The line between investment and donation is blurring, certainly.

      1. Fernando Gutierrez

        Only in the mind of the one who gives the money. For the one who receives it there are huge implications if it is one thing or the other. In order to make this kind of investments/donations easier legislators should create something in the middle. A new legal figure that made possible to give some returns but without the burdens of having a few thousand investors.

    2. Donna Brewington White

      “My only question is where do we draw the line between calling it an “investment” vs. a “donation”?”Does this depend on how we define these terms?  Or are you thinking this is based on whether or not a return is desired?

      1. JLM

        Every donation is an investment in the ideas and causes we personally support.  It is also often a proxy for time which may not be available.I have served on a lot of charity boards — arts, medical, educational, social, neighborhood — and was always the guy taxed to go raise the money.  And I did it and I was good at it.I am used to asking for money and I will justify it with facts and outcomes.  I know people.I am probably not the best boardmember in a formal board setting because I am impatient.  Not in a rude way, but I want an agenda.  I want a plan.  I want measurable progress.  I will speak my thoughts.Don’t get me wrong, I am sly, cunning, thoughtful and look for my openings carefully.  I always give the other guy the credit even when it is absurd.  It is a game I play with myself — can I make myself disappear but still get stuff done.These “wants” may make others uncomfortable though they still want me to go raise the money.In this manner, I have realized that my little gift is just to raise the money and maybe not too much more.

        1. William Mougayar

          And a great depiction of yourself JLM. As someone who met you and know you a little, I attest to that. I would add that you know how to “read people” quickly which is another good trait to have which is only gained by experience.

          1. JLM

            Wm, you’re just saying that because I led Grimlock to the buffet quickly to keep him from eating you.Too bad about the party and the redhead at the next table but a growing Grimlock has got to be fed.

          2. William Mougayar

            ha. no, i was being serious. grimlock wouldn’t dare eat me. i’m undigestable.

          3. FAKE GRIMLOCK


        2. Brandon Marker

          I hope to get to a point in the near future where I can start serving on NFP boards. My grandmother is one of the most generous people I know, and has established a couple of them (one of them has grown to one of the larger causes in the nation). I admire this and am working to perhaps one day be in a position to do the same. I figure a good start is minor seats on the board. In the meantime, crowdfunding is allowing me to donate smaller amount regularly. This is great for young people like myself. I do not have thousands to dump at one time. I really hope to see crowdfunding get more youth actively donating.

        3. Donna Brewington White

          “I am sly, cunning, thoughtful and look for my openings carefully…”As in the AVC comments, so in life…

      2. awaldstein

        It’s neither to me.Kickstarter works because ‘the’ projects become ‘our’ projects. We don’t get back if we win or get tax deductions, we participate in change. I feel like the the Low Line is mine as a New Yorker because I contributed. It is. I felt a sense of pride that the funding closed. 

        1. Donna Brewington White

          Forgot to put the quotes around that sentence — was repeating @twitter-14202781:disqus I understand fully what you mean — I still think of what you are describing as an investment even if you don’t participate materially in the “return”  — same thing with investing in a future that you will not be a part of…I just “invested” on Kickstarter for a game I will never play but I remember the CEO from when he was a product manager right out of biz school —  I’ve watched his career and it was gratifying to feel like I have some small part in his next venture.My way of saying “I believe in you.”

          1. Stu McLaren

            You’re right @donnawhite:disqus  , I think we do view it in our minds as an investment even when we know “we” won’t necessarily get the return.We still want our money to “grow” into something bigger.

          2. Donna Brewington White

            Exactly, @twitter-14202781:disqus !

        2. panterosa,

          Wow that thing looks so COOL!! Can’t wait to visit it!

    3. JLM

      A donation is really an investment.  The outcomes are not measured in the same currency.  Perhaps personal satisfaction being a common denominator of “return”.This is a reason why the US Tax Code is such a powerful force for outcomes, in this instance perhaps social or medical or cultural outcomes.  Not saying I advocate that thinking mind you.An interesting cultural phenomenon in the US is to measure the support of “causes” of all kinds.  American conservatives are substantially more generous in making real cash contributions to “causes” as compared to self identified liberals.The not so funny thing about all of this is that this is just another instance of people doing something entirely different with their own money while advocating support of all kind of “causes” with the taxpayers’ money.

      1. Donna Brewington White

        I rarely make a donation without thinking of it as an investment.  Now if I can just get to that place with paying income tax.

        1. JLM

          The percentage of one’s labor that is confiscated by the state, in all forms, is obscene.If you added up everything it is north of 70%.An obscenity that we allow to exist because we never add up the cumulative impact.Sheeple.

          1. Fernando Gutierrez

            Yeah, that’s why they hide taxes everywhere. The last three years I’ve been travelling to the US monthly and got to know the country better. The biggest surprise to me was how hight taxes were. I had always thought about the US as a paradise of freedom, but I found a much bigger government than I expected…It won’t make you feel better, but if the leftist candidate wins French elections in 10 days they will have a 75% income tax for anything above one million euros.

          2. William Mougayar

            What taxes are you referring to? Sales taxes? In Europe it’s built-in inside the price and hovers at 15-21% in reality, right? Income & Corporate taxes? That’s lower than most if not all Western European countries.As for our beloved France, an employer has to account to pay roughly +75% more than the salary they give an employee in taxes and overhead stuff. That’s TAX with CAPITAL LETTERS. If the leftists win, more french people will leave France to escape that. It’s already happening.

          3. Fernando Gutierrez

            @wmoug:disqus I was not saying that taxes were higher than in Europe (they aren’t… unfortunately it’s difficult to have higher taxes than around here), just that they are higher than what I expected. I had the idea that they were really low, but when I talked with friends and they showed me the numbers I found that in places like NY or Boston the total amount they pay is in line with what I pay in Europe.You are right about sales taxes in Europe, they go around 15-21%, but it’s not exactly a sales tax, it’s a value added tax, which means that only consumers pay it because businesses can ask for a refund. Income and corporate are less homogeneous, so it’s more difficult to compare.What you mention about what employers have to pay is one of the reasons why we have always a higher unemployment. It’s not only France, in Spain for low wage workers it can be around 60-65%.How is Canada in term of taxes?

      2. fredwilson

        i agree with you more than you agree with yourself

        1. JLM

          Hahaha, good one.  Well played!

        2. Jonathan Whistman

          My experience is that even the most pragmatic investor really wants his money to multiply but at the same time create a greater good.

  9. William Mougayar

    Is there anything that’s even close to doing this “grand scale crowd sourcing”? But the old paradigm that big problems need big expensive solutions may be out of date. Everything can and should be decomposed into smaller chunks that are more easily tackled. Also, the big co’s are sitting on piles of cash and most are not aggressive enough in killing their own products to make room for newer better ones. Where is the Apple of the drug industry? But it’s not just product development that needs to get crowd funded. The policy side has to be addressed too. The right environment paves the way for the right pace of innovations. I’m encouraged too by your HackSociety aha on early warning systems & Stack Exchange-like discussions. Crowd sourcing the influence of public opinion is as important as crowd funding research & development. 

    1. awaldstein

      So true…but of course, the beauty of crowd funding is that the crowd needs to want to do that.The mechanics are invented. This is a leaderships issue as most everything is. 

    2. Michael Elling

       The ticker tape had a tremendous impact.  Throughout history technology has increased information velocity.  We just seem to forget both relative and absolute impacts.  More of what we discuss here should look back in time to draw on parallels.

  10. Tom Evslin

    Our granddaughter was born with congenital hearing loss (detected before she ever left the hospital).  Out of a combination of hope and helplessness, we contributed “angel funding” to research on using the patient’s stem cells to grow new hair cells in the inner ear being done at Stanford http://hearinglosscure.stan…. In this case the long shot seems to be paying off in very promising progress towards treatment which may lead to treatment for most genetic and even some environmental hearing loss. It won’t directly help our granddaughter (who is doing great because of early detection and hearing aids) , but should help many others.With this as a model, we’re trying to put together an “angel” group to support the excellent cardiac research being done at Fletcher Allen Hospital in Burlington. The model is that researchers present their proposals – which may well be longshots – to the group of potential donors and donors individually provide seed funds for the projects which excite them – no group decisions because we think that discourages radical innovation.I keep putting “angel” in quotes because these are donations and can’t give us a financial return – but, of course, any success is priceless.

    1. Alex Murphy

      What you are describing here Tom is the real definition of “angel.”  The term angel came from rich people that funded plays, generally off off broadway plays.  They didn’t expect a return either.Today’s web angel is really an investor with an extremely high tolerance for risk, trying to solve for the likelihood of the company being funded downstream given current market conditions. I think it most closely resembles betting in on a suited 8 10.I hope things work out well for your granddaughter.

    2. ShanaC

      I don’t understand why a part of you isn’t angry at this being the state of funding and research.  Some of what you are talking about is basic research, which should in part be governmentally funded.Where is the ACT-UP of these sorts of diseases?  Why should you feel helpless?  

      1. Tom Evslin

        I’m not angry a bit. I feel helpless only relative to genetics. Fred’s post and my comment are about real things which real people can do. We’re fortunate to be able to help.Many of these projects will qualify for federal – or commercial – funding once they have demonstrated a bit more. I’m glad to help them get there and wouldn’t want research limited to only what a bureaucracy might be willing to take a chance on.

        1. Kasi Viswanathan Agilandam

          I understand your helplessness relative to genetics and emotionally attached to what you are saying.But do you think there is no one single emotional buddy sitting in the scientific community who approves such projects for federal funding.Crowd funding for future benefit of mankind is not a good thinking i believe… they (crowd) already are funding these projects through their taxes.

          1. Tom Evslin

            There’s a place for both government and private funding. I get a deduction, of course, for my contribution, which effectively lets me substitute my judgment on what gets funded for the governments – and cuts out the middleman leaving more net for the research

          2. Donna Brewington White

            Yes! Yes! Yes!

    3. fredwilson

      these are true angel investments because there is no financial returnour good friend’s daughter was born with the same issue your granddaughter had. they also detected it early and treated it with hearing aids and special education. she is heading to harvard this fall. and she is an amazing young woman.

      1. Dave Pinsen

        Fred,On the subject of financing for biotech/drug discovery, a couple of links you might find of interest, if you haven’t seen them already: – FT columnist John Gapper on using ‘Collateralized Drug Obligations’ to finance drug R&D: “Pharma needs an injection of financial engineering”. – A letter writer who offered a simpler solution — extending drug patents to increase the potential ROI of drug R&D investment: “Extend drug patent life to rejuvenate R&D”.

        1. fredwilson

          ooh. thanks Dave!

          1. Dave Pinsen

            No problem. Incidentally, I quoted you and included a link to this post (as well as the 2 links below) in an article I submitted to Seeking Alpha last night.

          2. fredwilson

            disqus is eating links in email notifications. maybe also in the comments themselves. i will see if i can find it on seeking alpha

          3. Dave Pinsen

            It hasn’t been published by Seeking Alpha yet, so I couldn’t include a link to it in my last comment. I will link to it in a separate comment in this thread if and when SA publishes it.

          4. fredwilson

            got itthanks

          5. Dave Pinsen

            They just published it, Fred. Here it is: “Hedging Biotechs as R&D Investment Declines”.

    4. Create a New Lab

      —why be patient?-the crowdfunding may create millions of new jobs that the World needs now—

    5. Dave W Baldwin

      Bless you Tom and sorry for the late entry… I’ve been taking care of an “Angel” investment of my own, taking a Rookie Team to the FIRST Robotics World Championship this past weekend.What you are doing in Burlington is great.  I’m sure you know that there are other Angel seeded projects moving over into Genetics and matched with Nano/Femto matters will deliver something as we move into the latter half of this decade.  And the only reason this will happen is due to people like yourself.

  11. JimHirshfield

    Crowd funding will be interesting to watch. Lots of great things on kickstarter now. But as regards funding start ups at the very earliest stages, would ideas like instagram or Google have been funded this way? Honestly, I wouldn’t have funded these when they were all whiteboard and listed on a kickstarter site.

    1. Humberto

       exactly. i find it very hard for science to be funded by the crowd.

      1. William Mougayar

        I disagree. It’s all for grabs with new models.

        1. Michael Elling

           History repeats itself.  Is crowdfunding really new?  Or is it just the manner in which the tools are used to start manias.  Anyone remember the ticker tape?  In a digital world the value and quality of information at the input, process and output stage is even more important to discern.  Let’s hope the new tools developed appreciate and reflect this.

          1. JimHirshfield

            here. here.

        2. Humberto

          i disagree your disagreeance.. :D. people have short-term needs and desires. they can invest through kickstarter because it allows them to lock in a product in a “close” future. that will be very hard to happen in the long term.even those who will invest in crowdsourcing long-term ideas (like Fred) are moved by a short-term need. they are not investing in a product, but in a belief. close to an informed charity.

    2. Cam MacRae

      And that’s a good thing! The beauty of crowd funding is that by definition it requires a crowd, and crowds are diverse (otherwise it would be mob funding!).Don’t know your markov chains from your elbow? No problem, there are plenty of other people who do, and that Pebble thingo looks pretty exciting anyway.That said, I don’t think that Kickstarter’s model is directed towards funding a Google. Maybe an Instagram, though…

      1. JimHirshfield

        I understand Kickstarter has a different focus and we won’t see start-ups seeking funding there. But others are out there ready to provide crowd-funding to start-ups and the presentation and dynamics will be similar.Also, I agree that the crowd is wise, provided it’s a large diverse crowd AND it’s blind to the rest of the crowd (i.e. uninfluenced by others in the crowd). And the online marketplace of crowd funding (again, think Kickstarter) does expose how the crowd has behaved to-date. When a project or a start-up is taking off on these platforms, that fact alone will be a strong signal and many will blindly follow the money. Thereby making the crowd appear stupid.Again, I think much of the criticism of “wisdom of the crowds” ignores the important fact that the individuals in the crowd need to be isolated from each other. If I can see all the other people’s guesses as to how many marbles are in the jar, it will throw-off my guess.

  12. Brian Pfistner

    I agree, but unfortunately if your project doesn’t get accepted by the Kickstarter gatekeeper it’s not an option. “Thank you for taking the time to share your idea. Unfortunately, this isn’t the right fit for Kickstarter.”

    1. Brandon Burns

      then use it’s an open model when anyone can post anything (and get all your donated funds even if you don’t reach your goal), and they use an algorithm to figure out which products to highlight based on how much effort the creator does to promote it and how much steam it picks up.options abound.

      1. Brandon Burns

        wondering: is it uncouth to talk about a kickstarter competitor on a usv investor’s blog?

        1. fredwilson


        2. JamesHRH

          But quite proper to ask the host this question – well played a la JLM

    2. fredwilson

      there are other markets for your project. kickstarter is not for every project

      1. panterosa,

        Actually, this post coincided with the domain buying for just such an alternative! A discussion had been going on particulars for a while, but this discussion crystallized our mission. #AVCstartups

  13. William Mougayar

    The wisdom of the crowd wants to go bizurk and on steroids.It had a taste of it and it likes it.Crowd Xing everything 2.0

  14. Humberto

    generic investors are dumb that’s all.GDP vs. total market cap (the stock market listed companies) is again reaching 100%. coincidentally enough (or not) this has happened again in the dotcom bust and in the financial crisis. in general, a ratio approaching 1 means the market is overvalued, or on average companies are being overvalued. why?  to me, the generic investors of the internet and financial companies are to blame. these are industries with huge scale or network effects, and complex transactions. How do you correctly value these, plus the value of algorithmics, bundling, portfolio risk, “active user value”, teams and their loyalties,..? as all companies reach for scale and domination, then some will fail. simply put, if there are not more new goods being produced, or scale doesnt lower their prices so that people can consume more (because definitely we arent getting richer) then some of the market will simply have to be destroyed. for the market not to implode, we need new ways to produce and distribute the same things (making them cheaper) and crazy innovation (new products). that’s more science than tech. we need to invest in those long cycles, that’s for sure.but if investors are dumb and won’t go for it, then the crowd won’t too.. that leaves good old state to invest in hardcore science. as always has been

    1. Michael Elling

       I think the term crowd funding might come back and bite some; as in bad capital crowding out the good.

  15. Cam MacRae

    What do you think of the Andreessen Horowitz announcement re: giving half their carry to non-profits / philanthropic causes?

    1. JamesHRH

      Their LPs must already be happy?

      1. Cam MacRae

        It’s the partners, not the LPs. But yeah… if your portfolio contained Facebook, Foursquare, Airbnb, Pinterest and Twitter you’d be pretty happy, no?

        1. JamesHRH

          They are obviously top flight humans, as GRIM would say.My point was that they would likely not make an announcement like that unless the return profile was strong…so the LPs need to be happy before A16H make announcements about donating…

          1. Cam MacRae

            You may well be right, but managing OPM is often a case of “Heads I win, Tails I win”.

          2. JLM

            The train is departing “often” and pulling into “always”.When you have talent, you can access money.When you have money, you can access talent.Performance — real or imagined — is the glue that makes the money stick to certain people.

          3. JamesHRH

            @JLM:disqus An investor and a finance guy are arguing ‘what makes the other dance – capital or talent?’. Until today I never had an answer – they dance old school – together – and switch partners every now and then!

    2. kidmercury

      i found their choices of charities to be disappointing and sub-optimal, but it’s their money (or at least it was!) so that’s their business, i suppose…..

      1. Cam MacRae

        We’re of a mind. Now if Fred were to set up a hacking society fund…

    3. fredwilson

      might be better for them to invest it in for profit ventures with more societal impact. i like to invest in outcome.

      1. JamesHRH


      2. LE

        A thread on that issue was a real lighting rod on HN. Paul Bucheit chimed in with his two centsIt’s sad to see so much misplaced cynicism here. If the partners had decided to keep 100% of their carry (as is typical) and used it to buy a bigger house or jet or something, nobody would comment or care. Instead, they’ve pledged to give half to some of their favorite charities, and some of you are acting as if it’s a crime against humanity. Put away your Ayn Rand books (or whatever it is that drives you to such opinions) and go make some money of your own. Perhaps you’ll discover that Andreessen and friends aren’t as foolish as you imagine…. and continue to scold everyone on the thread for not thinking it was model behavior. It’s amazing how being 28th employee at google makes you think you are hot shit. “Columbine” photo of Paul that appears on his linkedin profile attached below.

        1. Cam MacRae

          Poorly done. Play the ball, not the man.

  16. Mike Kijewski

    Crowdfunding will be fine for high profile indications like cancer, but those suffering from rare diseases will be waiting a long time for the medical innovation required to make them better. 

    1. Brandon Burns

      not true. it’s all the power of story telling. once upon a time, hiv was “rare.” the gay rights movement made people care. statistically speaking, in this country, it still is (africa is another story though…)lupus is a “rare” disease that consistently does well raising money. they tell their story well. when there’s a will, there’s a way.

      1. ShanaC

        The story behind HIV and AIDS is truly a unique story about a group of patients and allies changing the way we do medicine. I admire the people of ACT UP!  I wish I was a member of Gran Fury.Gran Fury didn’t tell a story per say.  What they did was make AIDS victims seem universal, as if it could be you next.  They also made art/ads that made you incredibly angry through their shock value.  In the process they rewrote some of the book on activism and advertising.  Example below:…I think they’re still right.  We need to get pissed.  We need to be shocked.  And then we need to do.Though a note: Not everyone was gay who was involved in ACT UP!.  In fact, many people were not (especially because there were issues involving women and infection).  

  17. JamesHRH

    This requires a lot of people to feel very secure about their source of income.I could see what you are talking about as a hack of non-profits – that is a capital inefficient process.

    1. fredwilson

      Obama raised hundreds of millions in $10s and $20s

      1. JamesHRH

        True…..arbitrary deadline helped (reason to act now, which is harder for the topics you listed in the post?).

  18. Kasi Viswanathan Agilandam

    Crowd funding is going to move eventually to “Emotional Funding” and will fuel Healthcare and Education.A wonder pill to cure cancer … making needs 100 million from 1-million people 100$ each …I will put my $100 and convince 100 people to put. A Stanford university on the CLOUD needs 50million from 50,000 people $1000 each … I will fund this project without thinking throwing my $1000.

  19. kidmercury

    i think it is the other way around, the mobile and web apps should be crowdfunded and professional investors should be going for the capital and time-intensive stuff. from the perspective of disruptive theory, crowdfunding should enable small businesses that accredited investors are not interested in. i think that is actually what the internet is supposed to be — many small businesses, not a few winner take all businesses and one world internet. bubble 2.0 has pushed us towards one world internet because valuations require every company to pursue such a strategy, foolish as it may be (for all but a few exceedingly rare exceptions). when bubble 2.0 pops we’ll see professional funds less interested in the internet because it will be apparent that small market caps that will come to be characteristic of the vast majority of internet businesses cannot provide the returns big funds are looking for. select internet funds not able to transition to a differnet sector will need to focus increasingly on amassing a large portfolio of these small market cap companies to generate the returns they’ve grown accustomed to.   anyway, almost all the good stuff requires political breakthroughs. cancer and aids have already been cured. bing it. #changetheratiowith that said, i think the biotech sector could experience a massive bubble… caps are pretty small and central bank money printing has to go somewhere, biotech hasn’t been bubble-ized in recent history yet…..its almost up there with natural resource exploration stocks as one of the best bubble candidates, in my opinion. but you will see the same stuff there, you’ll see the flipping, not like anyone is going to hold out once the money comes rushing in. flipping is a by-product of bubbles which is a by-product of monetary policy. failure to solve the monetary policy problem will only ensure further misallocations of capital towards meaningless endeavors (i.e. facebook widgets) while also exacerbating the income inequality problem. ignorance is futile. only the truth can set us free.9/11 was an inside job,kid mercury

    1. Brandon Burns

      your perspective is the opposite of fred’s, yet makes just as much sense. professional money makers should make money fast. vs.professional money makers should be patient for the big stuff.i’d like to see a debate. livestream, anyone?

      1. JLM

        The real issue is what do the folks behind the curtain want — the LPs who provide the money.I imagine that they can be talked into anything that makes sense.But they will have to have returns.When you consider that a VC typically gets a 1% mgt fee and a 20% carried interest, the VCs may be quite willing to manage $2B for 25 years.  Why not?The money will make the decisions.

        1. Brandon Marker

          Andreessen Horowitz

          1. JLM

            OK, I am lost.  Help me.

          2. Brandon Marker

            Just on the willingness to manage large amounts for extended periods of time. Andreessen Horowitz just keeps adding to their fund, massive amounts

        2. AgeOfSophizm

          Sure money will make the decisions.  But I think society still can have a major impact on the money (LPs) in terms of how they make their decisions by putting significant amounts of pressure on investors.So, investors that make a bunch of money investing in companies that produce negative externalities (think McDonalds, Monsanto, Coca-Cola – obviously these are corps and not LPs but just for illustrative purposes) should be ostracized by society.  “Great, you made a bunch of money for yourself, but it has ruinous effects on society – not cool”.  Then these LPs will be all by themselves with a big pool of gold – Scrooge McDuck style.Alternatively, society can grant non-monetary benefits to those who aren’t seeking $$ based returns as a priority, but rather long terms gains to society that have real impact.  “Dude, you just created a disruptive business that solved a real world problem! (Think Craigslist)  I will follow you on Twitter, I will tell my friends about your business, I will shower you with attention b/c you truly rock!”The point is that the crowd has more power than it thinks, its just not measured in terms of the almighty fiat dollar.  We need to channel our energy appropriately, its that easy.  I believe its already happening – look at SOPA.  The crowd said “no, that’s not cool” and it was shut down full stop.  Very little cash money required.

          1. ShanaC

            I think that is more and more likely to happen.  Occupy wall st left people pissed.  There has already been a history of activism as a positive movement towards treatment of diseases.why not?

          2. JLM

            Don’t ever lose that charming idealism.  I remember once upon a time when it was my natural thought.Nobody in the LP crowd gives a shit about McDonald’s — other than their stock price.McDonald’s will introduce salads and pay lip service to calorie counting but if I were a cow, I would steer clear of Mickey D as he is going to be harvesting a huge number of cows for a long, long, long time.In many ways, you are way too insightful, smart and engaged for your own good.  The world is not.

          3. LE

            Idealism never takes into account the way masses of people or even any particular individual acts. The crowd said “no, that’s not cool” and it was shut down full stop. It should be interesting to see how that strategy works long term. As a runner, there is a technique that I’ve used to scare off a dog which runs toward me. I run toward the dog acting crazy and the dog runs the other way. But it only works the first or the second time. After that the dog realizes nothing happens and isn’t scared off. 

          4. FAKE GRIMLOCK


          5. JLM

            @FakeGrimlock:disqus As you well know, you cannot eat idealism but I guess YOU can, in fact, eat idealists.Win win?

          6. AgeOfSophizm

            I may be an idealist but I’m also cynical enough to know that the big money *basically* only cares about the share price.  But the big money ALSO craves and cares about power.  Power over people, not machines.  The problem for these folks is, that they are losing power over people.  The internet gives the crowd all kinds of ways to a) make transparent who the major shareholders/executives of these value destructive companies are  b) identify all of the ways that these companies are privatizing gains and socializing losses and c) ways to completely dis-engage with these people and maybe even ostracize them ….Paging Mr. Steven Colbert!!

          7. JLM

            @AgeOfSophizm:disqus Big money does not CRAVE power, they have power.  They take power.  They wield power.While there is much, much merit to the social responsibility that you proselytize, the world is crass and doesn’t really care.The power brokers are cynical but the people are ignorant. The people want their Big Macs.  And fries.You will not win many confrontations if the end result you seek is prying the Big Mac from the public’s hands.You have made me hungry, maybe I need a Big Mac? 

          8. FAKE GRIMLOCK


          9. AgeOfSophizm

            I 100% agree…and this exhibits how truly powerful the internet can be in changing the way a society thinks and operates.  We are all in this together.  FB would be worth exactly $0 without the network.

        3. Brandon Burns

          i think fred is speaking from the perspective of what the LPs say / think they want.kid mercury is getting at what he believes the LPs should want. as i see it, the money has a choice between two viable decisions. but which one is better?

          1. JLM

            The LPs are not using their own money and have a very real fiduciary duty but also a practical obligation to fund their — in most instances — pension obligations.I don’t see too many of this crowd going social conscience on the money both because it is not their bent but also because they may view it as stepping on their fiduciary and real world obligations.These folks are investment folks who did not seek to do it in the civilian world and bean counters and actuaries.This is not Michelangelo’s part time job.

          2. LE

            not using their own money and have a very real fiduciary duty but also a practical obligation to fund their — in most instances — pension obligations.Exactly.  Imagine if the public found out that their bank mm and cd returns were near zero because the banks decided to take some of the returns to depositors and spend it on social or charity causes.  

          3. Yaniv Tal

            While there is all this opportunity to make easy money, institutional investors will and have to continue to take it. It’s a better value to mine for gold where there’s a vein than to explore for platinum in the proverbial desert. We’re in a gold rush and there’s a ton of gold still in the ground ready for the picking, but I wouldn’t build a life time strategy or thesis around this vein always being there. After all 5-10 years is just a single fund in the end.

          4. Brandon Burns

            take what’s good now vs. work toward what’s better long term. an age-old argument. you can pick the side of the former, but it would behoove one to be aware that it’s only one side of the coin. 

      2. Yaniv Tal

        Smartphones, cloud computing, and specialized hardware all had big advancements during the recession. These big technological leaps that required a lot of capital investment and research have created a lot of opportunity for business. It’s akin to when the PC got big, or the internet caught on, where suddenly there were a lot of brand new opportunities for businesses. It just so happens that writing mobile apps and cloud based web sites/services is cheap and easy, so we’re seeing this big wave of innovation now, but this can’t be a long term trend. I give it 5-10 years max. At that point we’ll have solved all the easy problems. It won’t always be possible for a high school student to start a business that nobody else has done. Society doesn’t work that way, people elevate and fill holes and things become competitive. Let’s not think it’ll always be this easy and that all you’ll ever need to know to start a big billion dollar company is some HTML and javascript!

        1. Timothy Meade

           Could be with all you need is HTML and Javascript. Watch the video. (And it looks like they expect to make their money as a cloud provider for their own platform, interesting gamble, as their core software is open-source.)

    2. ShanaC

      Cancer has not been cured.  It is treated by poison.  Large doses of poison.   Preventative treatment of cancer also involves large doses of poison.  It is not a sustainable cure, it doesn’t work on everyone, and frankly it annoys me that we’ve accepted this reality.

      1. kidmercury

        want a world without cancer? here you go: http://www.worldwithoutcanc…

  20. PleaseFund.Us

    I think we are just touching the tip of what can be achieved through crowdfunding. Kickstarter have been incredible in leading the way and just last week we saw their big push into making crowdfunding social.This doesn’t mean just spamming your social networks, but letting people that will be interested in what you are supporting know about it. The other key step that they have introduced is to make the whole site feel more local, this is something that in the long term will help people feel like they are part of a community.In terms of great achievements and scientific breakthroughs, there are many things that we are going to get from crowdsourcing and crowdfunding, but sometimes it is simplest things that will be the most welcome. We quite enjoy the fact that a local theatre can now easily raise £20k to refurb itself without having to get a government grant. 

    1. William Mougayar

      Yes. What’s even more profound is that INFLUENCE is also being crowdsourced. When you propagate your beliefs & what causes you are supporting, it sets off a chain reaction that amplifies that objective & increases the speed of its realization.

  21. Dave Pinsen

    There might be more capital available for biotech research if other countries that could afford to pay market prices for drugs were compelled to do so. It’s one thing to offer drugs at a loss, at cost, or cost-plus to some impoverished country, but there’s no reason why wealthy countries such as Canada should be free-riding on drug research financed by American patients.

    1. William Mougayar

      What! I don’t believe you’re right with this one.The opposite could be said – the world doesn’t need to inherit the high cost structure burden the US has. Financed by US patients? US patients are getting ripped off by the high cost of health care there. They aren’t financing anything. Per capita cost is 40% higher than the next place. Generic drugs and cheaply manufactured drugs are saving a lot of lives and making people healthier anywhere in the world.

      1. Dave Pinsen

        We could pay less for drugs if you paid more. You are free-riding on our R&D.

        1. leigh

          FYI you know all of Canada is the same population as California right? The entire marketing budget for GM Canada (including all 47 vehicles) was the same as JUST Chevy in the US.I think you might be exaggerating your point…….

        2. William Mougayar

          Do you have links related to this? I’d like to better understand the facts behind it.

          1. Dave Pinsen

            Here’s one for starters: Pharmaceutical Price Controls in OECD Countries: Implicationsfor U.S. Consumers,Pricing, Research and Development, and Innovation.

          2. William Mougayar

            There is a warped logic in this argument & report. It’s like saying why is China manufacturing clothes cheaper than Italian designers. They are ripping off R&D from the design of these high end suits. Or that Hundai & Kia are taking money from Lexus and Mercedes-Benz & hurting their R&D for even more expensive cars.

          3. Dave Pinsen

            At the risk of oversimplifying, let me illustrate the problem with cost-plus pricing with an example. Let’s say a drug cost $500 million to develop, and after that, it costs $1 to manufacture each pill. Cost-plus pricing ignores the $500 million in drug discovery costs and offers to pay $1 plus, say, 10%, or $1.10 per pill.Now, if every molecule a drug company conducted R&D on turned into a marketable drug, cost-plus might provide a modest, though sufficient profit margin. But, in reality, drug research includes a lot of dead ends — it’s sort of like venture capital, where higher returns on successful investments are required to offset the losses of the dogs.

          4. William Mougayar

            But the reality is that other countries cannot afford these higher prices. I understand that would help to subsidize the research, but if the market can’t bear it- that’s a reality that has to be faced.

          5. Dave Pinsen

            Your country can. Other first world countries can. As I mentioned in my first comment on this, it’s understandable to offer drugs at below market prices to poor countries that can’t afford them otherwise.

          6. William Mougayar

            Is the US where most of the drug research takes place?

        3. Cam MacRae

          That’s provably false. Refer: Kanavos, Panos G. and Vandoros, Sotiris (2011) Determinants of branded prescription medicine prices in OECD countries. Health Economics, Policy and Law 16 June 2011 6 : pp 337-367

        4. JamesHRH

          Dave – I have always thought that the dynamic was more the ‘gold plated treatment on the insurance tab’.Certainly, my retired MD mother was stunned by the amount of tests she received for her appendicitis procedure in California.She felt that 90% of the tests were not required.

          1. Dave Pinsen

            In your mother’s case, some of those tests may have been examples of defensive medicine.

        5. William Wagner

          It looks like Euro beats US on drug discovery, even with lower drug costs:…(I realize this is out of date – maybe you have more recent stats)It seems to me that if big pharma in the U.S. took on a more ambivalent price structure, like consumer products do (lower cost / higher volume) instead of the “your life depends on it” premium they take now – they might have greater throughput with greater earnings as well.

          1. Dave Pinsen

            Bear in mind that European drug companies sell to patients in the US, and to that extent American patients are financing some of their R&D costs as well. European drug companies often have research facilities in the US as well. For example, I have friends who work at Novartis, which is headquartered in Switzerland but has research facilities here in New Jersey.

          2. William Wagner

            So since these are global companies – and they sell products worldwide – doesn’t that mean that all the drugs sold after they recoup R&D and regulations are icing?  Wouldn’t they be marketing drugs worldwide in the first place – accounting for the fact that U.S. patients will pay more here?  Seems like the whole world’s health pays for the R&D – the U.S. just has a bloated insurance industry that is willing to pay a premium.

          3. Dave Pinsen

            The point is that some countries that can afford to pay market prices are paying below market, cost-plus prices which are not high enough to offset drug companies’ R&D costs. If the US did the same thing, there would be a steep decline in R&D and drug discovery.

    2. Sean Moore

       Canada has a single-buyer system meaning that it has the power to bargain with pharmaceutical co’s for lower prices. That is not free-riding. It’s basically what the entire PBM industry in the States aspires to. BTW you’re the first I’ve heard that treats phrama’s as victims.

      1. Dave Pinsen

        It’s free-riding because the prices Canada pays aren’t high enough to support R&D. Canada’s cost-plus pricing is designed to cover only manufacturing costs plus a small profit margin, but the cost of manufacturing drugs is negligible compared to the cost of discovering or developing them. That money has to come from somewhere, or the drug discovery doesn’t happen.

    3. fredwilson

      good point

      1. William Mougayar

        Not so fast. That argument doesn’t hold water.

      2. Dave Pinsen

        Related to this discussion, a good book about the making of a biotech startup is The Billion Dollar Molecule.

  22. leigh

    There was this article that blew me away about a 17 girl who has a breakthrough on cancer —… Bc of the system, academic, funding through big pharma etc. will we ever see this come to light in our lifetime?Maybe.  But i can’t stand the idea that funding systems and really, lobbyist groups get to decide our collective health future.And if anyone sees this girls project on kickstarter, let me know.  I’m in.  

    1. ShanaC

      She innovated on the delivery systems, not the drugs themselves.  We’re still not sure completely about how dna encoding affects protein pathways.  There are tons of switches that can go on and off in your dna that can be affected by outside forces.  We don’t really understand how that works.At least this area gets funding.  It is somewhat helpful to know that, but labs for basic research seem to be shrinking.Boo.

  23. William Mougayar

    You all heard about the Goldcorp Challenge? They couldn’t find gold after millions in investment. So they made public thousands of pages and Megabytes of their existing research & geological data as part of a contest with a 1/2 million dollars prize. Dozens of outside submissions were received and they found the gold and prospered thereafter.http://crowdsourced.tumblr….

    1. Tom Labus

      Never underestimate the motivation of finding cash.

  24. Brandon Burns

    i agree completely. can’t wait to see not only what crowdfunding blossoms into, but crowdsouring help in general.once upon a time, monetary donations went mostly to non-profits. now thanks to kickstarter, the money can go to anyone for anything. imagine what would happen if that same change were applied to volunteering, people physically helping other people achieve great things…wouldn’t it be great to extend the crowdhelp movement?

  25. Brandon Marker

    I have another field that I think could benefit greatly from crowdfunding: space exploration. Our future depends on further exploring space and what is around us. Undiscovered/untapped resources + new knowledge is out there, but it will take cash to make them accessible.More cash than the American government can provide is what we need. Perhaps in the future we will be able to assist in this process. Obviously this is not a timely thought, as we will not be ready to do something like a Mars mission, with men and women, for some time. But, perhaps in the future we can finally gain the capital resources necessary with help of crowdfunding. annnnndddd I am a dreamer–this is true. 

    1. ShanaC

      agree, but that is easier to market, lots of people want to go into space 🙂

      1. Brandon Marker

        Yes, but I am not referring to sending people into space like Lance Bass. I just mean helping to fund Nasa’s efforts. Hundreds of billions of dollars needed in the future 🙂

  26. Donna Brewington White

    Crowdfunding is an extremely exciting (and important) development.Seems like a step toward creating an investment culture. Which of course should be the flip side of an entrepreneurial culture.I say strengthen both and we have a stronger economic future.#electmeforpresident

    1. Robert Thuston

      Just got your first vote : )

      1. Donna Brewington White

        Think I’ll use Kickstarter to fund my election campaign.

    2. Albert Hartman

       “Investment culture” I like that line. Goes well with “Innovation Culture” or “Entrepreneurial Culture”.

      1. Donna Brewington White

        Thanks.  I like the concept and what it represents and promotes — especially as opposed to a consumer culture. 

    3. fredwilson

      two sides of the same coin

    4. Kasi Viswanathan Agilandam

      I appreciate your positiveness in seeing half-filled glass … but 30% tax is not enough … and we want to suck their savings as well?. Not good at all in my opinion.

      1. Donna Brewington White

        I’m not comprehending…

        1. Kasi Viswanathan Agilandam

          What I meant was …People are already paying their taxes to the government and the government should fund such projects. Short term, small projects, simple donation of books, kids education, mobile app can be assigned to crowd funding. But not the big one’s which require 100’s of million. That is like emotionally draining their wallets … which they worked hard and earned after paying taxes (in India 33% is the tax).We should not encourage in the form of ‘crowd funding’ again to tax the people. They may fund with emotions filled in there and not looking at what they are funding. A simple word like ‘cancer cure’ or ‘new alternate petrol from wheat’ … may fetch few million dollars … even before people know what is that the project is all about.Bottom line is “we should not encourage … leave alone the acts … not even those thoughts”.

          1. Donna Brewington White

            I believe that the act of investing is empowering.  

  27. markslater

    God i hope you are right. i am reminded of the story about the young girl who died on mile 25 of the marathon in London 2 weeks ago. She had raised 500 quid for her charity as of the start of the race. Her story went viral.  A little know twenty something just trying to  do her little bit to help others. as of yesterday, she had just broken through 400,000 pounds. RIP claire – you left your mark i’d say.Not sure if this is crowdfunding in the traditional sense – this is absolutely the power of the internet at work though. This simply would not have happened without it. 

  28. jimmystone

    Interesting. Nice counter to Dan Isenberg’s recent crowdfunding blog post. I too am hopeful.

  29. Tom Labus

    How about crowd-governing?Even when a candidate gets elected by crowdfunding, they’re subject to the sames forces once they are in office.It maybe sloppy but it beats a few companies controlling energy, etc.

    1. JLM

      What the world desperately needs is leadership.  Principled leadership which can set goals and draw people along to accomplish them.At the home of the Infantry at Ft Benning, Georgia, is a statue of a young officer with a .45 caliber pistol and the motto — “Follow Me”.When you look at that statue you are transfixed a bit because it obviously implies leading from the front — where the killing and dying takes place.I will admit that I was looking for option #2 when first I saw this statue.  I never found it.If you are going to be a leader, then you are going to have to be in the front.What we need is something that may be very, very, very difficult to find in America — a principled leader with life experience and wisdom who can provide leadership to what has become a tangled disordered mass.As I reflect back on things, I am only able to see Truman, Eisenhower, Kennedy and Reagan as even approaching this standard.Oddly, my favorite is really Kennedy because he was a pragmatic tax cutter and a visionary.  His challenge to go to the moon was probably the single bravest manifestation of leadership in US history.And then we did it.

      1. Cam MacRae

        “Gentlemen, we are being killed on the beaches. Let us go inland and be killed.”

      2. Tom Labus

        Would any of those guys go near the current political process?We just had presidential “debates” where 7 of the 8 candidates refused to acknowledge the science of evolution.  1840.Bold ideas have been banned for partisan reasons.  I do admire Obama for trying with the Affordable Care Act ( I know you’ll go nuts).  What we need is Jobs “reality distortion field” to get people to try and believe they can do the improbable.

  30. Phillip Trotter

    What about the possibility  of a hybrid bond/vc model where crowd funding  invest in the fund – but the lifetime of the fund is much longer term, say 20/25 years and the return on investment is measured in both monetary and societal benefit? Potential funds go through a kickstarter like experience. They present their aims, they expertise, the types of projects they will fund…. Its a managed transparent process. (not that different in reality to given to charity or signing up for an insurance bond..)You sign up and make your investment – and if the fund raises enough to go live –  you are issued a bond/share for that fund. The maturity period is 15 to 20 years (long enough to ride out any  boom/bust/boom cycle and long enough for time it takes for medical, energy research to be funded and  fully commercialized into a financial return) .  The target financial return is slightly lower than a traditional vc fund (say 2x) but there is a commitment to a  measurable societal level return as well.  Professional VC’s and domain experts (ie. proven money managers with experience of innovation, start ups and domain expertise) manage the fund on behalf of the investors. The fund invests only in projects that can potentially deliver both societal level  benefits in defined areas(health, education, energy) and financial returns to the fund.  The fund’s LP’s (ie crowd funders) know in advance the fund is risky, long term but professionally managed..  the model is a little like charity funded research – but where you get something back for your money, you can track the investment over time and its transparent and accountable in terms of investments and benetits attained.sounds a lot like the  current stock, bond  and vc market – but tweaked to have an explicit commitment to improving society, transparent ethics and and a  financial return. 

    1. fredwilson

      seems a bit complicated but it could work

      1. Phillip Trotter

        Overly complicated brain dump. Simplified:  Like but with crowdsourced LP/shareholder model rather than donation model Benefit for shareholders: rewards and involvement in solving big society problems – and if solution is financially successful stakeholders benefit.Benefit for researchers/teams: long term fund relationship beyond petridish timescales.Benefit for fund management company: % income for managing fund, % ownership of commercial solution

  31. Sean Moore

    Do crowdfunders have rights? Can they influence contract design? Is there any oversight of investee’s actions?It seems like moral hazard is a big concern here.

  32. Leigh Drogen

    I think is a perfect example of this. In many cases, I think people will be willing to donate money for research that is hard to get funded either via investment or public grant. I’ll definitely be spending a few dollars to fund projects on that platform, even if the scientists doing research commercialize it and give me nothing.

    1. fredwilson

      petridish is super interesting


        I’m one of the founders of — thanks for thinking of us with this post!  We couldn’t agree more that science and research are great candidates for crowdfunding.  Professional investors can’t make good returns for their LPs investing in basic research, and existing government grant processes are slow, bureaucratic and political.  Funding success rates for scientists are declining, and funds are increasingly flowing to safer more established projects rather than those with the highest return potential.  Furthermore, certain areas (i.e. stem cell research) are simply out of favor with the government for the wrong reasons.We’ve heard this time and time again from scientists, who end up spending most of their time fundraising rather than doing important science. Hopefully, we’ll be able to change this (or at least supplement it), by allowing people to pick the projects they want to see happen on our website, and become a part of the research and discovery process themselves.- Matt Salzberg

    2. Andrew Ice

      Petridish and (from a different angle) are both great starts to getting more research done 

  33. John Minnihan

    I’d say yes, the ‘crowd’ can be more patient – one person at a time.Any single investor, putting his/her own money into something, is unlikely to have others on the sideline to whom s/he must answer wrt outcome of the capital.  This reduces (eliminates?) the time-pressure of needing a specific return w/i a narrow time window.

  34. Dave Goldberg

    Fred, did you read Chris Dixon’s post on the risk posed to small investors?… I had been a huge advocate of allowing individual investors to put money wherever they want to. For example, I was supremely annoyed that I couldn’t invest a small amount of my own money in Facebook 2-3 years ago, when it was fairly obvious that it was going to go through the roof. However, Dixon’s post opened my eyes to some potential risks of very early stage investing for small investors. In your post, you are explicitly advocating crowdfunding for things that require massive amounts of capital, like biotech. I am certain that without regulation, this would lead to the small investors getting totally screwed once it became apparent that a drug/product was more likely to succeed. What is the best way to prevent that from happening?

    1. fredwilson

      he’s right, but there are risks and rewards in crowdfunding

    2. LE

      “when it was fairly obvious”Not much opportunity once something gets to the fairly obvious stage. The key is getting in on something before it gets to that point. I bought domains back before it was fairly obvious to most others (but obvious to me) they would have value with almost no downside. But Facebook 3 years was obvious to > tipping point of people.

  35. Guest

    Fred- It’s the same on the other side of the table.  If you were an entrepreneur, where would you invest your time and energy?  I live with a guy who is smart enough and well trained enough that he could spend his time on tougher problems, like how to cure/prevent Parkinson’s, Alzheimer’s, MS, etc.  Instead he will likely spend the next year working on an event planning or photo-sharing start-up.  I know this is anecdotal, but I have a feeling he’s not the only one.  I was wondering if you are seeing this on a broader scale.  Are these sectors also starved for talent by internet & mobile?  

    1. kidmercury

      nuclear physics…..all you college kids reading this, if you’re not passionate about anything yet and want a promising career with big bucks and big impact on the world, go into nuclear physics…..comp sci is a crowded trade, and it’s also something you can learn at home and through internships……if you have rich parents that can afford the comical tuition costs of schools these days nuclear physics will get you real far. demand is far outpacing supply. just try to have a moral compass and don’t use your knowledge to build bombs…..power plants instead……

      1. William Wagner

        Don’t bother so much with nuclear physics – just study engineering and go work on Thorium reactors with Kirk Sorenson.  Or, go into bio/ag-tech and grow the next crude oil.

        1. kidmercury

          IMO thorium is going to be like betamax was to VHS — a product better in many ways but still not the industry standard……but nuclear physicists will be needed anyway to help plan and operate current nuclear reactors as well as continue developing modular reactors, which i think is the big breakthrough energy technology within reach….. 

          1. William Wagner

            Actually Thorium is more like the VHS to the Betamax of Uranium.  Just have to look at the quantities of either element existing on the planet – and you see that fissile Uranium is in short stock while Thorium for the liquid-fluoride fuel cycle is bountiful.  That, and Betamax came out early to attract a professional crowd (think professional crowd = nuclear bombs) while VHS stuck around for the general public.     Also, nuclear physicists research nuclear physics ~ they don’t plan or operate nuclear reactors, that would be a nuclear engineer

          2. kidmercury

            you’ll need engineers too, no doubt, although i think physicists will be needed to manage waste/reprocessing. reprocessing is already underway in many reactors in the world outside USA. there is a remarkable amount of uranium in the sea, but it will require a market price of at least $109 before it becomes feasible to pull it out. or, it will have to be subsidized by getting something else from the sea too. thorium is far more abundant in the earth’s crust, as you suggested, but the vast majority of the world’s reactors and the nuclear economy as a whole are geared around uranium as the fuel supply. that is why i compare it to VHS, which also was an economic keystone, in spite of being inferior in many respects to betamax. 

          3. William Wagner

            If you want to see some really whacky shit:  http://www.lawrencevillepla…Saw these guys at an investor-pitch event at NYU recently.  Cold fusion in a 2-car garage.Of course – I was just saying physicist / engineer from an occupational standpoint.  From a scholarly standpoint anybody could feasibly work in the nuclear industry.

          4. kidmercury

            the plasma stuff is amazing, totally world changing technology…..once we solve the energy problem so many other problems will be easier to solve (transportation, clean water, lack of resources, etc)

          5. William Wagner

            The real energy problem is that there is not one energy problem. There are billions of them, and they are all intertwined with resource problems.  So a plasma reactor if it worked could charge your laptop and light up your house – but can you make a laptop, light bulb, or house out of plasma energy?

    2. Otto

      If you can make a cool billion developing something like Instagram, why work on real world problems?

      1. Michael Son

        Suppose you could make a cool billion and THEN use the proceeds to help solve real world problems.

        1. FAKE GRIMLOCK


          1. Brad Lindenberg


    3. Richard

      This is a brilliant comment. I call it the crowding out effect.

    4. Renee

      Fascinating comment. I’ve seen this argument applied to Wall Street for years, but this is the first time I’ve seen this thread begin with ‘unimportant startups’ as the drain on human capital. 😉 

      1. Guest

        I didn’t mean the other start-ups were unimportant, but I guess I implied it.  Our companies impact people’s lives in a positive way.  They make life better, but they do not save it.  

        1. FAKE GRIMLOCK




      1. Jonathan Whistman

        I believe in the better nature of mankind. We’ve created LiveOn with the belief that families should have a safe and secure place to tell their stories, educate their kids about the past and share the wisdom of their tribe.  The great majority of people are good, honest and decent…even the finance sector:)

        1. FAKE GRIMLOCK


      2. Guest


        1. FAKE GRIMLOCK


    6. fredwilson

      i am saddened but not surprised by this comment

    7. Kasi Viswanathan Agilandam

      Great question.Forget about cure/prevent all that shitty diseases…people don’t want to become even a doctor treating your fever but instead want to be a guy working on puter.

    8. slowblogger

      Good point. Talent is even more important resource for startups than money.

    9. Robert Metcalf

      I’d say about 80% of my classmates from Caltech (that I stay in touch with) are all high-frequency traders now. It’s a shame that all of their problem-solving prowess has been funneled into wealth extraction instead of wealth creation.That’s what crowdfunding is all about to me. Creating opportunities for people to make value-investments in their friends, families, and communities to make steady, long-term gains. 

    10. Chris Holt

      Hi KellyI can appreciate your friends issues and interestingly enough we are crowd funding a system which could help your friend study Alzheimer’s or other brain illnesses much more cost effectively than current procedures. We’re launching an online system called the NeuroScienceAccelerator. Check out our campaign and let me know what you think.…ThanksChris

  36. celestus

    I guess I’m not following.  John Smith, multimillionaire with little to no knowledge of biotech, can either invest $5 million in(a) a biotech VC fund(b) a biotech company (or, say $1 million in each of 5 biotech companies) he found on Kickstarter  [similar logic for alternative energy and the like]Fred’s argument for doing (b) is that maybe it’s less likely to make money, but it’s more likely to “cure cancer”? It seems to me that the probability of investing in the thing that cures cancer is higher if you go with the VC fund because curing cancer would be big money, they want big money, and they are probably more knowledgeable than you. I think the best argument for (b) would be that VCs are too focused on home run hitting things like curing cancer when there are many smaller problems that would be nice to solve but could never be an IPO so VCs don’t do them.

    1. celestus

      Obviously if you only have $10k or so to invest (b) is your only option but that’s an entirely different reason to be excited about crowdfunding.

  37. Mike Baumwoll✌️

    I’m not sure how I feel about this. Financially, I agree with your stance and it makes logical sense. However, it takes the onus off of the largest and most talented “Money Managers” to invest in “good causes”. Crowdfunding is a brilliant concept, and I hope it becomes as prevalent as we all hope, but, in the case that it doesn’t, I don’t want the cure for a lesser disease to go unnoticed.  

  38. Donna Brewington White

    Hmmm… is income tax a form of crowdfunding?

    1. kidmercury

      lol no that’s a form of theft 🙂

      1. William Wagner

        It’s only theft because the money goes into the pockets & control of politicians instead of you 

      2. JLM

        Haha, you are right about that, kid.  Theft!

        1. fredwilson

          i don’t see it that way personally, but i enjoy the fact that you guys do

        2. Donna Brewington White

          Maybe it’s more like kidnapping.

    2. William Wagner

      I like to imagine a government where I can actually go shopping with my taxes.  Like, oh, there’s a pothole on the way to work?  Just toss $400 of my municipal taxes that way to fix it. Instead of politicians doing the shopping for themselves with my money.

      1. Donna Brewington White

        Personally, I have wondered what would happen if these types of decisions were left to the populace.   Theoretically, they are, but not really.  I am concerned that certain vital needs would go unmet — but I also wonder if  this is how it should be, for better or for worse.  

  39. Eitan Hochster

    I think this is the dynamic that Yancey Strickler mentioned during Hack Society when he talked about shifting from funding for financial return to funding because you want the project to exist in the world. On Kickstarter, the crowd replaces gatekeepers whose job it is to discern what it is the crowd desires (what movies they will watch, what albums they will listen to). So Kickstarter is making these markets much more efficient, by replacing the crowd’s representative with the crowd itself. The model for funding scientific research is broken in the US, but I’m not sure crowd funding is the solution. The gatekeepers for scientific funding are not determining what the crowd wants, but which projects and researchers have the highest likelihood for success. Its hard for me to see how the crowd can determine that. 

    1. fredwilson

      i was very inspired by that comment by Yancey. it was one of the inspirations for this post. a comment by JLM yesterday was another

    2. JamesHRH

      UNHW people do this all the time, IMO

  40. Jack Pincus

    Attempts to crowdfund life science proejcts to date have not raised enough money to move them from the lab bench to reality. So far, the crowd has not related well to funding the scientific experimentsthat are needed to make life sciences discoveries a clinical reality.

    1. fredwilson

      the new laws may change that

      1. JL Shane

        Crowdsourcing for cures is about more than funding.  It’s about energizing broader populations to contribute information.  It means activating people without a condition as well as those with it, which right now is hard.  And, it means getting people to contribute broader information than their medical histories, in fact, except for their genetic information, non-medical information about environmental and personal activity may be even more valuable to untangling epigenetic contributors to disease.  As pointed out in earlier posts, and cancer is the best example of this, drug regimens increasingly are targeted to very small subsegments of tumor and patient populations (meaning many other drug regimens won’t work in these people, or won’t work as well).  This means populations of people with a particular condition are too small to base conclusive research.  Fighting HIV/AIDS is the only large-scale effort in the US (and Africa) where people have been motivated to participate in contributing health and behavioral data BEFORE they become patients, i.e. got infected.  HIV drugs advanced so (relatively) quickly in the late 90’s and early 00’s b/c gay activists came together with researchers, gov’t, and pharma, to solve an existential threat.  (And, it is important to note, trial lawyers have been virtually absent from anti-retroviral discovery — when was the last time you saw a TV ad to join a class action against an anti-retroviral?  Right, never.)  The greatest possibilities to crowdsource cures are conditions like Alzheimer’s where middle-aged people, not yet OUTWARDLY affected who have seen parents fade away, decide they do not want to go through this.  And so, a mechanism needs to exist to enlist and activate them to begin contributing data over much longer timeframes long before they’re symptomatic.  (And you will need large datasets since there are so many confounding factors and co-morbidities).Crowdsourcing in medicine that’s about money alone will feed the current research and clinical trials infrastructure that is to slow and too narrow.Crowdsourcing in medicine that’s about personal data (anonymized as much as possible) + money — where people are invested financially and personally — has a much higher possibility of success.

  41. Jim Parker

    It would be cool if there was a specific type of VC that handled such under-capitalized and maybe non-profitable sectors.  What would that be called?  A Social Venture Capitalist? Investing in Social-Profit businesses?  (Rather than for-profit and non-profit businesses)Though, I guess there’d have to be some sort of accrediting body for a “Social-Profit Business”.  Or not, actually.

  42. baba12

    Mr.Wilson is clear in what VC’s look for as money managers. I am glad that at least he is willing to be open bluntly about the returns expected.I would he would also clearly state that VC’s are most risk averse folks and the bets they make have no rational explanation other than the usual i.e. know the people, believe in the team etc etc.What he is writing today about things that require higher capital investment and the returns may take longer to be achieved being funded through crowd funding, may make sense to a degree.But fundamentally the highest amount of risk that is taken in terms of venutre capital is by the Government, between the various funding channels be it NIH or DARPA and NSF the government has and shall be the sole provider of funding for research that may not deliver any returns whatsoever but without that state backing many of the technologies that the USV’s of the world have funded would be possible to take advantage of.Crowd funding can only go so far and even then it is more of a way for getting a network of people to invest and spread the risk. FOr many people not knowing the technologies that are looking for funding there is always going to be room for unscrupulous nefarious activities and it may go on for a while until a time comes when a significant number of folks loose a sum total of money and feel they got shafted. Then there shall be a desire for regulations and monitoring and the whole saga shall continue once again a Catch 22 situation.What is the right balance is something to be determined, and maybe there is opportunity for a product/service that in a way that gives comfort to the people who wish to invest and support.

  43. ShanaC

    No, I shall not wait.  As a patient already waiting, I’m already upset about my lack of options.  I’m upset that the basic research isn’t available to turn different cancers into chronic, managable diseases because we don’t know enough about pathways.  I’m upset because the tests I need are unhelpful and patented.  And I am even more upset that the organizations I am sent to to deal advocate patience, prescreening, radical surgery, and preventative uses of chemo in order to deal.  This is a bit nuts to me.  There are lots of mes running around too, and I often wonder why I am the only one upset.  It is as if everyone is resigned that this is medicine in the US now.  There is the proper behavior and attitude you must have while waiting to become sick, while sick.  And it is all very pink and happy, which I hate.I’m sorry, that isn’t the case. I can be an angry bitch at very rare times, and this is one of those moments where I am definitely an angry bitch.  I’m tired by my lack of options, and I’m tired by the lack of knowledge about my future, and I am even more tired that preventative care with insurance is so crappy as to give me the WRONG TESTS.It is unacceptable.  I feel like running around with stickers that repeat that grand old motto “Silence = Death.”  I really want to do a sit in on venture capital meetings as a known way of pushing them to invest rather than hold their purses.  They need to see the patients up front and personal, and know that this is not a group that is going to accept what is given to them.  And the day I make my FY money, I will invest in pharma and basic research because it is my life and I want to live it, worry free.</rant>

  44. MartinEdic

    A group of us in Rochester have built out a site called that will be a network of higher ed research universities utilizing crowd funding to bridge the tech transfer gap, i.e. to raise funding for the development of prototypes and proof of concepts for inventions derived from academic research. The model is Kickstarter but for things like a device that helps parents of autistic children with toilet training (a big and personal nightmare). The University of Rochester, RIT, Cornell and Clarkson have joined us with more on the way.This has been an amazing process putting this together, very much like a startup. We have elected to become a B corp which allows us to raise equity while pursuing a social mission (this is not a pitch), which, in itself, is a very interesting process. NYS just made this legal in December 2011 so it is a very new concept. And our board are all entrepreneurs and investors rather than academics which helps us cut through bureaucracy.

    1. MartinEdic

      And, btw, we are not currently using crowd funding for equity. That looks like a pretty hairy path at this point!

  45. Suraj Jain

    This is an ideal use of crowdfunding. Professional investors (VC / PE / HF) tend to ignore the social impact a company can have and are reticent to invest in capital intensive projects that do not provide outsized financial returns. For example, there are several clean energy companies that are unable to gain capital from traditional investors due to the inherent riskiness of the new technologies.Until now their biggest hope was to try and get government funding, but this has recently come under increased scrutiny and become part of partisan politics (see Solyndra). Hopefully,crowdfunding can become a new way to fund companies (or causes) that seek to have a big social impact.For example, I think it’s a joke that our train systems are so far behind Europe. When I was in 3rd grade I did a project on Mag-lev trains, and thought for sure we would would be well on our way to having them in place. I would love to be able to invest or donate some of my capital into something like this, especially since the government lacks resources and professional investors seem to lack interest in its profitability.

  46. Jack Pincus

    The cause of slow translation of life science labo findings into treatments is not the fault venture capitalists.  The fault lies in how medical research is organized and funded.  The National Institutes of Health spends more than $40 billion annually on medical research, most of it in universities.  University faculty are rewarded for publishing papers,not finding treatments for diseases.  Many faculty are more interested in building monuments to themselves through publication in top tier journals and peer recognition than helping patients.  Venture Philantrhopies like the Myelin Repair Foundation ( and Faster Cures ( have made a good start to sseeking better ways to translate research findings into patient treatments.As Fred points out, life science companies do not really fit the venture investment model.  Crowdfuinding may not raise sufficient funds to move technologies from bench to bedside.  It will take a partnership between venture philanthropies, government, and venture capitall firms, each accepting different risk at different stages of product development to move beyond the current dilemma.

  47. Richard Exley

    In life science investment with long term funding horizons , are not the major research charities a proxy for the crowd? Eg in the UK, Cancer Research UK, the Wellcome Trust etc. They crowd source their funding and then invest in grant programs, or as LPs in sector specialist funds.Richard Exley @DrRichEx

  48. sigmaalgebra

    Research on cancer and energy storage? Compared with Web 2.0 venture investing, you’re talking a whole ‘nother ballgame.For the the grad school education I got that is the crucial foundation of the crucial core of my Web 2.0 project, I never paid even one penny of tuition which is good since there’s no way I could have paid for it.There is a reason, a big, huge, elephant sized reason, the US can make serious attacks on cancer, energy storage, and more super hard problems and why the US is the unique, world-class, grand champion of research, and that reason is big bucks spent well via the US NSF, NIH, DARPA, ONR, Air Force Cambridge, Army Durham, Department of Energy, NASA, etc. “Spent well”? Nearly always well and sometimes brilliantly well. DARPA did, let’s see, here’s the envelope: Right, the Internet! Sorry Al!Size of the big bucks? That funding has for decades covered a fairly stable 60% of the annual budgets of the top few dozen US (and, thus, world) research universities on the list we know so well — Harvard, MIT, Cornell, Yale, NYU, Columbia, Rockefeller, Princeton, Johns Hopkins, Georgia Tech, CMU, Chicago, U. Washington, UC Berkeley, UC Davis, Stanford, UCLA, Cal Tech, etc.Reason for the big bucks? Starting early in WWII, the US via V. Bush, J. Conant, etc. saw the need for research and its results for the war. By the end of the war D. Eisenhower concluded that “Never again will US science operate independent of the US military.”. Or in the words early in the movie about J. Nash, “Mathematics won the war.”, not much of an exaggeration. Leading characters in that drama are in…One side effect was Silicon Valley.Later Congress decided that research might also do good things for medicine.So, we’ve got NSF and NIH.I’ve seen a lot of gumment that is a total, non-stop, all go, won’t stop, all day, all night, agonizing, retching up-chuck worse than more Mafia, but from all I’ve seen the NSF and NIH are remarkably effective and currently crown jewels of civilization.For some of the challenge, results, and excitement of such research, can see video…of the lecture April 19, 2010, Eric Lander: “Secrets of the Human Genome”For some of the challenge of cancer, there is the recent http://www.sciencebasedmedi…with ‘Why haven’t we cured cancer yet?”So, in part this article explains: Find a cancer. Take a biopsy sample. Sequence the DNA. Compare that DNA with that of healthy cells from that patient. Look for the differences.The idea was to focus on the differences as a start on the cause and, then, cure.Tilt! Didn’t work! The cancer DNA was a total mess, looked like a bomb had exploded inside the cell. So, there were far too many differences to focus on. Moreover the evidence is that in one tumor there can be many different ‘cell lines’.Research like that is difficult, very difficult, world class difficult, grand challenge of civilization difficult, why did God make things so complicated for us difficult, why is there a chance we are up to the challenge difficult. Did I mention difficult?That from the Watson and Crick work we understood DNA at all is amazing. The polymerase chain reaction (PCR) was amazing beyond belief, nearly a gift of God. That we could sequence all of DNA was beyond belief, a crown jewel of civilization. The first DNA we sequenced cost — if you have to ask, you can’t afford it. E.g., just the money to Perkin-Elmer likely gave a nice boost to the economy of Connecticut. Now the cost has come down so much we can sequence a frog just for the heck of it, or maybe also for a good purpose. Now all that progress with DNA is just routine foundation of looking at the DNA from a cancer patient, and that work didn’t really give us a solution but gave us many new research problems to attack.The way the US Congress pursues science is: Get science noticed in K-12. Have top science programs in undergraduate schools in the best research universities. Have by far the best graduate programs in science, and take in and support the best students and professors, with money, lots and lots of green money. Yup, that’s why I didn’t have to pay tuition in grad school!Have severe competition within departments, within universities, and among universities, and expect the students and professors to work their fingers to the bone and their brains to confusion, fall over, get some rest, and start again, seven days a week. Deliberately develop and support whole careers of the brightest, most ambitious, most dedicated, hardest working people. Put many of the biomedical research facilities next to the wards where cancer patients are dying and the physicians see the disasters daily. Out of the whole system, expect something pretty good about each 10 years. It’s by a huge margin the best work the US Congress has ever done, a crown jewel of civilization. That Congress could do such good work, considering much of the rest that they do, is beyond belief.One way to help is to join in the work. Another way might be just to send a check to the head of the NSF or NIH. Or send a check to relevant departments of your favorite research university.Yes, a single, young man with money can have his thoughts turn to a woman, love, marriage, home, and family. So, if a daughter likes horses, or at least the people, at least the men, she meets at horse shows, and wants to enter a horse show, then find a nice house with some nice horse facilities near the show, buy the house for $5 million, $20 million, whatever, and let the daughter, her horses, and the whole family use the house during the show. After all, she’s an angel, so treat her at least like a princess! Poor man that would marry her and have to be compared with her father! Or as we learned from Daisy, “Poor boys don’t marry rich girls.”.Later a man with money can have his thoughts turn to a big plot of land maybe also with samples of all the wildlife, saving the environment, solving the world’s social and economic problems, curing cancer, heart disease, arthritis, Alzheimer’s, etc.!Eventually a man with money may conclude that his best chance at immortality is to put his name on a university building!

    1. LE

      I always like any story that details how war and evil lead to progress for society and how much we have benefited from military spending. But you lost me at this paragraph “single, young man with money”? 

      1. sigmaalgebra

        > I always like any story that details how war and evil lead to progress for society and how much we have benefited from military spending.Well, I didn’t claim that the spending or results were all good or were the best possible in principle for society, but that military spending and its results are what happened, and some of the good results were some of the best ever. Some of the best of those results that were put on the shelves of the libraries are terrific for a wide variety of purposes, especially for exploiting current and future computing, whatever reason the results were funded.> But you lost me at this paragraph “single, young man with money”?From that point and below in what I wrote, there are some famous and fairly old examples, e.g., on the Forbes 400 list or nearly so, but I didn’t want to name names but just mention a fairly common situation, i.e., how a person’s interests can change once they become wealthy.For one more, there have been suggestions that one of the reasons Congress votes about $40 billion a year for biomedical research is that many Members of Congress have gray hair and would like to see a cure for cancer!This afternoon I watched the Lander video a second time; it’s amazing; have fun and watch it. It’s an example of some of what TV could have been and a great example of some of what the Internet is.

  49. Patrick Dugan

    A million people could be inclined to give $100 to a promising cure for cancer, though I prefer cooking with tumeric and ginger. 

    1. fredwilson


    2. Kasi Viswanathan Agilandam

      I am not sure whether I should ROFL or put a hammer on your head in support of the guys who are burning their ass out to get a cure.A nice comment to be liked.

      1. Patrick Dugan

        I have total respect for scientists and engineers taking career risk and putting their living energy on the line in pursuit of a nobel goal. However, sometimes the most cost-effective solutions come from lowly technique, not high tech. Consider climate change. We could try geo-engineering our way to patching the problem, potentially (and probably) opening up new problems, and at great expense, or we could proliferate grass-based agriculture and let the thickening of windswept blades sequester carbon faster than any machine yet devised. The same may or may not apply to managing incidence of some medical problems.Related news, Nutrition blogger claimed to have cured his diabetes in 1 month using paleo-diet free of refined starches and sugars, is sued by North Carolina government: http://www.carolinajournal….My entrepreneurial thesis: if there are unincorporated individuals being sued by the State for doing something that seems like it solves an essential need, there’s an opportunity for an interaction model coupled with an economy of scale to disrupt moribund oligarchies.

  50. Luke Chamberlin

    You were wise to invest in the communication and community-building platforms of the internet first. It will lay the groundwork for all of the other changes that will take place.Look at the role Twitter, YouTube and other communications platforms have played in social change around the world. Without the core of social media I don’t think Kickstarter would work, and this is true of many secondary platforms.This is important because the other challenges listed here like health, energy and education are largely political problems.The reason it costs so much to bring a new drug to market is more political than technological. We have political systems that favor the incumbents and also allow the incumbents to fund their favorite politicians to make sure the status quo is preserved.I don’t think crowdfunding alone is enough to change this. Let’s say everyone wants to fund education, and a massive fund is raised. That won’t instantly change the way in which textbook content is chosen, or teacher contracts are negotiated, or how standardized testing is used.

    1. fredwilson

      yup. totally agree

      1. Jonathan Whistman

        I was at an event last night and met a young guy who had just left his job to work on his startup full-time.  He has created an app.  he has 400,000 users 35,000 paid.  Some users (high percentage) use the app every day.  I’m in no way related to him…but thought you would be a good connection.  What would be the best way to have him reach you..if you are even interested? in the education space…that’s why I thought of you with your work in NY

        1. fredwilson

          he should email me

          1. Jonathan Whistman

            I mentioned you to him at lunch today and he said he would reach out via email. 

        2. LE

          “I’m in no way related to him…but thought you would be a good connection. “If you had a pretty sister, and I was dating, the fact that you were related wouldn’t stop me!

  51. Herman Chandi

    Side point – but when it comes to finding creative, and market based sustainable solutions to pressing problems in the developing world (poverty, lack of access to clean water/ clean energy, education etc.), you are seeing a small fraction of all that available capital being allocated towards social change organizations such as Acumen Fund, Root Capital and Bamboo Finance.Acumen has coined the term as “patient capital”, and that represents the tip of an iceberg with respect to a pretty interesting movement that is growing rapidly, Impact Investing.   Also, check out SOCAP.     And then you have philanthropic capital going towards social entrepreneurs that go through really interesting incubators such as the Unreasonable Institute.  Combined with the rise of crowd funding, there is goodreason to be optimistic!

  52. Otto

    One issue is that many people, Americans in particular, see themselves as members of the employee class. Many people do not see themselves as entrepreneurs or investors. Their perspective and world view is based on dependency to big systems, institutions, etc. Until the mainstream intellectual culture shifts away from this I see crowdfunding as a niche, albeit a noble one.

  53. Richard

    Just 27% of Americans have a college degree. Can we really rely on the wisdom of the crowd in the the basic sciences? If VCs, NIH, big pharma cant win the war on cancer, it doesnt seem likely that crowd funding will be a solution.

    1. jason wright

      100% of people know someone who has been touched by cancer – wisdom and education are not the same thing.

      1. Richard

        I’m in the young cancer survivor club, advanced testicular cancer during my junior year of college.

        1. jason wright

          Do you think it is your personal experience of cancer or your education that informs, as a guide to how the 73% of the crowd might think? 

          1. Richard

            Fred and kickstarter are obviously onto something very big, I think however that we will see some refinement for Basic R&D. The good news is that the experts seem to get it wrong also.  Look at diabetes for example,  as of 2010, an estimated 285 million people had diabetes, with type 2 making up about 90% of the cases. Yet it is for the most part a lifestyle issue, but the politics of the disease dont allow this to be on the table. 

          2. LE

            “Yet it is for the most part a lifestyle issue”Agree and sorry to hear about your early health problem.

      2. fredwilson


  54. jason wright

    Sometimes it seems like words such as ‘cancer’ have become political totems used to serve the needs of vested interest.Cancer rates increase, big pharma get bigger, and yet cancer rates continue to increase. Isn’t that a negative correlation?Perhaps crowd funding should be going into clean water, natural food production, and electric cars.

    1. William Wagner

      In an abstract way, crowd funding does go to those things:- My tax dollars go to support the aqueduct that supplies my clean water- My food dollars go to the food I want – if I want natural, then that’s what I get- My car payment goes to the car I want, and if that car is electric, then my electric bill does tooIt’s just that there’s an establishment sitting between my dollars and those things that makes it harder to connect them to the crowd

      1. jason wright

        There is hope :-)If cars were a function of crowd sourced funding I’m guessing that the internal combustion engine would have been replaced by the electric motor long ago. The tax establishment denies our good sense the chance to reign.

        1. William Wagner

          I think the critical property of the function is the “ask” – i.e., we have this technology, it will improve your life, please give us money and we’ll make it consumable for you.  Who/what has had the ability to make that ask on the basis of a factual life improvement? Electric storage in a car can only take you so far before it needs a charge – so that technology can’t “ask” of consumers because it wouldn’t be an improvement in their lives.  In the heyday of the american automobile, there was no improvement to be made – all the car does is go from point A to point B – so instead car companies and their executives asked consumers if they wanted garish tail fins on their cars – and they answered.  Now there may be a reasonable ask for electric cars.  Nissan, Tesla and others are providing it

          1. jason wright

            Doesn’t crown sourced funding flip the contract between provider and consumer?This is what we want, here is our money, who will provide it? 

          2. William Wagner

            Think about how it works on Kickstarter.  Somebody with a technology/product/whatever “asks” the public.  The public doesn’t “ask” the technologists.  Someone has to come up with the thing in the first place and then lead the crowd to it.  I don’t think that contract will ever be truly flipped:  and it applies to government, technology, media, basically anything.Although now, that possibility is more apparent, because the crowd can seemingly come up with new movements out of thin air.  But if you look into it – there are always leaders in the crowd.That leadership, if it were to come from something like a computer, we would call it Artificial Intelligence – so that theoretical leadership of the crowd could be called Crowd Intelligence.

    2. fredwilson

      them too

  55. Prat

    Have you heard of We are working on helping donors get a lot of transparency, accountability, and feedback, while putting in more emotions, and social features to giving.Would love to get in touch!

  56. Albert Hartman

    Interesting take on the different psychology of crowdfunder’s patience. Maybe you’re right, maybe not. But I totally agree that the entrance of a new large money source with a very different viewpoint from all the existing money sources is going to change the entire environment. Exciting times!

  57. Albert Hartman

    The most exciting part of crowd funding is the first word – crowd. The emergence of the ability to reach and engage enormous crowds is the biggest thing that’s happened to business these days. It used to be that getting a high price per product was very important to success. Now selling stuff to someone at $0.99 is actually a fantastic business – if you can reach 100M people, and today you can.So figuring out the potential of crowd funding is really centered on how big you think you can get the crowd to be. A few numbers: VC is about $32B annually, angel is $22B. The presidential election campaigns crowd-funded $1.7B in 2008 and will likely do $4B this year. If you could get 60M people to participate in crowdfunding (afterall 70M people belong to a gym today) at $100-$200/yr then you are looking at $6-$12B in new funding. This is a big deal. Their returns expectations are likely different and need to be thought out. But there’s no denying the huge financial firepower currently on the sidelines that could be brought into the game.

  58. jonahcrane

    but can crowdfunding raise the kind of capital you point out is (or is at risk of) not being provided by the angel/vc crowd? $100M, or even a reasonable fraction of that, seems like a stretch based on experience to date. so maybe crowdfunding solves a problem that doesn’t exist? we’ll see … if nothing else, equity crowdfunding adds a dimension to this new experiment in leveraging networks. may a thousand flowers be funded and bloom.

    1. fredwilson

      i think it will be able to raise a lot of money

  59. jason wright

    Tax is crowd funding with a big stick.

  60. HowieG

    Isn’t this what the Non-Profits are already? Like the American Cancer Society? Crowdfunding minus the profit motive.

    1. scientre

      Charities distribute donations based on their mission. I have not heard about American Cancer Society funding drug development/clinical trials. However, some charities have speciic drug development programs, such as the Leukemia and Lymphoma Society…Here is a recent article on charities and drug devleopment from Luke Timmerman at Xconomy. The piece includes some examples of other charities in this space.

  61. LE

    The idealism that posts like this bring up is so thick you can cut it with a knife. It’s nice that Fred and Gotham Gal do what they do. But don’t loose track they do this because they can. Before Fred had it made I would guess (but of course I don’t know for sure) he wasn’t able to do some of the things he has mentioned or even think this way. Stick to the knitting in terms of making money and then you can be like Fred if that is what you want to do and you can help the world at that time. 

    1. fredwilson

      same volume less magintude

  62. Andrew Ice

    Software startups raised $1.7B in startup capital in 4Q 2011. US Biotech startups raised $1.2B. Industrial/Energy startups raised 884M. The VC business has not “largely abandoned” these industries – they are just a totally different crowd than USV.

    1. fredwilson

      how many companies received investment in each category?

      1. Andrew Ice

        238 in software, 111 in biotech, 58 in industrial/energy according to PWC Moneytree. With the inclusion of things like Techstars and Y Combinator which I’m guessing aren’t counted here the numbers would be even more weighted to software. Your thesis on internet/mobile being more efficient is clearly true! My only issue is you saying VCs have abandoned other industries – its clearly not the case.

        1. fredwilson

          i suspect what you are seeing in the number is a massive amount of follow on investing by VCs in existing portfolio companies in the capital intensive sectors and not a lot of new investing

      2. Richard

        You are spot on with a twist. The Burrill Report (met him at the Milken Conference) is THE best resource for Life Science VC. From this months report:  (Within Life Sciences) Themedical technology sector also drove much of the 22.2 percent increase in U.S.venture financings in the first quarter of 2012, compared to the first quarterof 2011; it accounted for 39.1percent of the total $1.95 billion raised, versus44.8 percent for the biotech sector. This was a dramatic change from. The firstquarter of 2011 when biotech companies accounted for 51.9 percent of the totalU.S.venture capital raised with medical technology companies making up just28.2 percent of the total raised.

  63. Berkshire

    Hi Fred,You wrote: “A strong return is 3x cash on cash. A reasonable amount of time is ten years max.”Is my math correct in calculating that this is a 12%/year compounded rate of return or am I missing something?Thanks!

    1. fredwilson

      not exactly. a venture fund calls the capital over three to five years in roughly 20%/year increments. and returns the fund over years three to ten, increasing in the latter years. 3x net to the LPs generally means around 30-40% annual returns.

      1. Berkshire

         Thank you!

  64. M Elayan

    I hope you’re right. If we’re talking about crowdfunding platforms that will/have poppped up in light of the JOBS Act, I fear that most average folks will try to invest in the “next big thing” which, according to the headlines these days, is internet and mobile. I hope people will look out on a much longer horizon with respect to crowdfunding investments.

  65. Carl Rahn Griffith

    Re: Energy/changing lives for the better and in a sustainable/eco friendly manner, for emerging countries, remote/deprived regions, emergency zones, etc – that’s exactly what I am working on in Vienna this week with an amazing team of people – the scale prototype will be up and running in a few weeks time – a very brief intro is here:…More detailed information is available upon request and there is a animation of the solution available on the Rope Ventures Ltd Facebook page – if you want to know more, please just drop me a line at or carl-at-ropeventures.comWe are all very passionate about this very worthy project, so – sorry – I have no qualms about plugging it here! 😉

  66. panterosa,

    I would love to see an aggregator of these sites where you could ‘shop’ for making investments, and have ‘seller’ ratings for those investments. Like Ebay for crowd funding, for long term energy, medical, science development, etc. If I want to invest, and I have only finite time and money, such a service would make my participation much more likely. I wonder who would provide that service – aggregating causes needing crowd funding which fall outside VC and the other sources you mentioned.Some of the med/tech things Charlie Crystle mentioned in comments are examples among many.

  67. Ticket Stars

    Let’s face it most VC’s are money hungry and couldn’t give a rat’s ass about the next cure for anything. 

    1. jason wright

      Stop pussy footing around and tell us what you really think.

    2. fredwilson

      can’t argue with that assertion

  68. Veritas

    How about putting money into clean water for all.  Water is essential for life, cleanses the body of toxins,and quite frankly leads to a healthier life overall.  But who has access to water that is actually drinkable out of the tap?  Not many… we pay for water but can not drink it.  Of course filtration systems are available at a cost but with unemployment at the rate it is and everyone trying to cut costs, who can afford it.A great way to help our people get healthy is to provide a real solution.  Clean water. What kind of world do we live in when this simply request remains unobtainable to most?

  69. Don Jones

    I think the Achilles’ heel of crowdfunding is how does a bio/pharma/med device company attract top-tier talent?  How do you get A+ quality researchers when you say “we’re getting our financing from crowdfunding.”

  70. Robert Metcalf

    It’s confusing to me how often people equate crowdfunding with charity. I realize that charity is currently the primary way that the “crowd” is allowed to directly give their capital to someone other than a bank, but that’s why these crowdfunding bills are important. They allow the “crowd” to invest in wealth creation, without the requirement of a bank as intermediary.For example, I’d like to build privately-financed solar power plants. I’d like to raise this money from the crowd, so that regular people can own equity in part of a solar utility. And with the “patient capital” of these crowd investors, the profits from the projects can be reinvested in more solar, so they initial equity investors end up owning a large power- and cash-generating portfolio over time. There’s nothing charitable about it, but it does a huge amount of environmental and financial good. Win. Win. Win.

  71. Sekar Vembu

     There are 334 comments already when I saw this. Not sure if anyone else made the point I am making here: Have you wondered about the effect of Fiat Money, Fractional Reserve Banking and the banks’ ability to create credit out of think air in all this. I think all this free money created out of thin air is what is fueling all these sectors and all the easy returns of the last two decades. So the free money, which has ended up with a few elites, is fueling a fictitious economy which probably will not exist in a true free market with real money. This free money is diverting the resources and capital required for the real problems we need to solve. So until we have true free market with real money we will only solve real economy problems by accident rather than by any planned effort. Any comments?

    1. ShanaC

      @kidmercury:disqus I think you’ve found a friend: re: gold.Sekar – the kid tends to agree with you, though I don’t now what he thinks in terms of if fiat money is fueling technology.  Kid, care to comment?

      1. kidmercury

        yup i agree…..monetary policy is the only problem, from which virtually all other problems stem. 

        1. Sekar Vembu

          Hi ShanaC & kidmercury,Thanks for the response. I tend to agree with kidmercury’s statement above. Most people seem to accept the current fiat money based, central bank driven economic system as axiomatic and base their arguments and solutions to problems etc. on that. But for some of us it is obvious what the root cause of many of the issues we have today. The current system is actually doing a lots of long term damage, one of them being creating a very homogenous global society without any diversification. Without diversity we will all be doomed one day or other.

  72. jason wright

    The crowd as a collective consciousness, with the web as the projector of this mass thought. That’s quite scary for certain incumbents. Bring it on.

    1. fredwilson

      yes bring it on

  73. JamesHRH

    That is true, but they might care about GPs who are making announcements like this when the portfolio is in the toilet……

  74. William Mougayar

    But those VCs that also do these extra things are the ones that excel the most in the money management part.

  75. fredwilson

    i do all of those things that you say i am not hired to do. and our firm has top performing funds because i do them

  76. JamesHRH

    Paul, I am a little concerned about this thread….so, just to be clear:- I am joking- the joke is that you only make this kind of stmt after you are 1000% sure you are going to create significant carry, otherwise you set yourself up for serious embarrassment- it is a little inside baseball, in that the joke requires the acceptance that only a capable, concerned about reputation & professional person would think this way- & we all know that is the case @ A16Z, as well as the fact that we all know they are super smart, totally prepared & their portfolio is terrificMaybe not the most broadly accessible humour, but I thought it was pretty good when I wrote it……although….

  77. William Wagner

    You’re  right – except they are called Quantitative Biologists – and they’re more than just catalyst (thats a pretty deep metaphor there) they are the reactants

  78. panterosa,

    can you repost that link?

  79. William Mougayar

    Exactly. That was my point.

  80. panterosa,

    sorry, not link still not functional.