Venture capital managers are offering support and resources — but little cash — to target companies until their businesses become commercially viable.
These support programs have been referred to as "option entrepreneurs in residence" and "venture adviser" programs. While they are not new, there is renewed interest in the programs as a way to ensure venture capital and private equity managers have access to the best deals and boost fund returns, managers say.
With an abundance of capital threatening future returns, venture capital and private equity managers need every edge they can get to keep returns competitive.
Unlike earlier programs, today's entrepreneurs cannot rely on a steady income while they develop the next new great business idea. In the halcyon bubble days, entrepreneurs collected thousands of dollars a month to dream up the next great idea and then were free to shop the idea around to other venture capital firms. One venture capital firm devoted an entire floor to a stable of entrepreneurs who collected monthly fees. But that's all changed now. Entrepreneurs are still associated with the firms, but stipends are a thing of the past.