The following is an excerpt from the Fundamental Financial business plan that we completed last fall. It serves as our thesis – a look at the opportunity we see in the marketplace and the types of companies we back.
“The entrepreneurs that are building many of the emerging and high growth companies in our economy today have been left without reliable access to capital. For years now, traditional venture capital has migrated towards what they consider larger (“disruptive” or “game changing” they say) opportunities. Now, in the depths of a banking crisis, banks also seem certain to retrench.
For better or worse, we think this landscape is the future for the vast majority of emerging and high growth companies – at least for the next 10 years or so. We see nothing on the horizon that will slow the size migration in traditional venture capital. Nor do we think that the retrenchment in banking will be shorted lived. Indeed, on the banking front, we tend to think that the strict lending standards of today (or perhaps a modestly calmer version that will hopefully settle in once the panic subsides) are much closer to where they should be. In our view, it was the pre 2008 bank lending standards that were the excessively risky exception.
While all of this is happening, the volume and quality of new business ideas is as high as ever and the cost necessary to test the commercial viability of many of them is as low as ever – and falling fast. On top of it all, the entrepreneurs (as a group) behind the ideas are more talented ever.
Who’s going to provide these companies with growth capital? That was precisely the question I asked a few months ago. After some thorough due diligence and even more sober thinking, I’ve decided that one of the answers should be Fundamental Financial. It is my intention to make sure that Fundamental Financial (and any other progressively minded commercial / alternative finance companies) picks up its portion of the slack left by banks and even a fair portion of previously misdirected venture capital. Angel Networks, which are just beginning what I think will be a highly influential run, are poised to pick the slack where venture capital is genuinely required.”