I've written in the past about some of the new models emerging for startup investing, including co-ops, incubators and super angels. They're all driven by the same mission: creating a more efficient way of jumpstarting new businesses. But a new program created by The Founders Fund is truly unusual in its approach. The Silicon Valley firm plans to hand over $25,000 to a dozen or so entrepreneurs who can then choose new companies to bankroll, reports The Wall Street Journal. The fund will then reserve the right to invest up to $250,000 more when those companies go out for their next round of capital.
Dubbed the TechFellow Awards, the unique approach speaks to how the venture capital model is evolving as open source technologies and outsourced Web services drive the cost of Internet business creation down.
It is certainly an interesting idea, relying on entrepreneurs to help choose promising business ideas. But after reading the Journal story, I am sill not entirely sure how it will work or what the benefits are for taking this relatively small amount of money.
Maybe it's the connections. The Founders Fund has lined up some of the biggest names in tech to help choose award winners, including LinkedIn co-founder Reid Hoffman, TechCrunch publisher Michael Arrington, former Yahoo CEO Terry Semel and Facebook CEO Mark Zuckerberg.
New models are emerging in the venture business, and I am sure we will see more over time as investors adapt to a world of few IPOs and smaller M&A deals.
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