Challenges Entrepreneurs Face Taking Disruptive Technologies to Maket

An Entrepreneur is the one who is willing to bear the risk of a new venture, if there is a significant chance for profit. Entrepreneur is a disruptor who markets the disruption. A disruptive technology is an innovation that changes an existing industry and also helps create a new market and value network, displacing an earlier technology or a way of doing business. On that journey an Entrepreneur faces numerous challenges:

1. Acceptance

Change is the only constant in life, yet many resist it. Every time an Entrepreneur embarks on the journey of taking a disruptive technology to market, s/he faces skeptics and negative energy from the industry, competition, and often times people in general. But courage, strength, and determination that are inheritant qualities of an Entrepreneur can help over come the adversity.

2. Legal & Regulation

Playing by the rules and industry compliance is extremely important while running any business, not just with the SEC in general or FDA when it comes to healthcare.  However, often time regulations turn out to be the blessing required for a disruption in an industry. E.g. JOBS Act and Crowdfunding for the Venture Capital industry. With NIN.VC, we now have the best of both worlds. We’re a hybrid between a traditional Venture Capital fund and a Crowdfunding portal.

3. Revenue Model

Ideas are dime a dozen, but how do you make money off of them should be an Entrepreneur’s number one priority, as those returns need to flow back into the business, which is what employees and investors ultimately want. Most businesses suffer because they do not have a strong revenue model.

4. Marketing

An Entrepreneur needs to create awareness when it comes to taking their disruptive technology or product to the masses. While word of mouth is more powerful than any medium out there, advertising and positive press plays an important role in sales. However, reading between the lines is the strategy everyone has adopted (or need to adopt) in this fake news environment.

5. Recruiting

You are what you eat. Similarly, a team is the backbone of any company. It is very important for a startup to find the right people who understand their mission, blend in with the company culture, and follow through on the founder’s vision. The right combination of people / team is the key to success for any business, because ultimately people build companies.

6. Competition & Risk Management

It is important for an entrepreneur to understand the market dynamics; the impact their product has on the industry and among other players or companies. The more disruptive the technology, the higher resistance an Entrepreneur will face from this group as they fight for their survival. The key is to channel the negative energy and use it as a fuel for motivation and indulge in a healthy competition to follow through on your vision.

7. Valuation

Startup valuation is more of an art than science and often times depends on the market momentum or what someone is willing to pay, keeping in mind the public comps and prior private company transactions. As long as the company has certain key ingredients like an amazing team, solid revenue model, good understanding of the competitive landscape, and an execution strategy to take its disruptive technology to market, it has the recipe for success.

8. Funding

The market is flooded with various startup funding options from Angels to VCs to Crowdfunding. So what approach should an Entrepreneur take? Because Angels and VCs have been the around for a while, they naturally have been the favored source when it comes to funding. However, since 2014 the Crowdfunding industry has grown from $16 billion to an estimated $34 billion in 2015 and is doubling or more every year, and according to the World Bank estimates, Crowdfunding will have a global market of $96 billion by 2025 - 1.8 times today’s global Venture Capital industry.

Crowdfunding is the practice of funding a project or venture by raising contributions from a large number of people, typically via the Internet. If you are an Entrepreneur looking for funding (seed / angle) to take your idea / product to market, Crowdfunding is a great option – reward or equity. It acts as a proof of concept for an Entrepreneur before they spend their valuable time or approach a VC. On the other extreme, if you are an experienced or serial Entrepreneur looking for capital, Crowdfunding again is a good alternative as long as they can avoid a messy capital table.

However, if you need someone to add value to your business, NIN.VC and Venture Capital is the way to go. If you take the top few billion dollar startups and average the age of those Entrepreneurs at the founding, its less than 30 years when they embarked on the journey of changing their industries. At that stage, an Entrepreneur needs lot more than just financing, for example, domain expertise, PR & marketing, recruiting, an exit strategy, and NIN.VC or VC’s in general are able to provide them all that with the help of our network of partners; which may not be the case with Crowdfunding platforms.

Venture Capitalists and Entrepreneurs share similar traits - both are required to take off against the wind, the end is unknown, and potential for disaster is evident, but Entrepreneurship requires brave and courageous bunch that are determined to change the way an existing industry functions. Are you a company or a CEO with a disruptive service or product? Visit us at nin.vc to submit a business plan.

Entrepreneurship with NIN.VC

The concept of entrepreneurship dates back to the 1700s, and has evolved ever since. Most people simply equate it with starting one’s own business. For some, it refers to venture capital-backed startups and their kin. For some, “corporate entrepreneurship” is a rallying cry; for others, an oxymoron, but economists believe it is much more than that. An entrepreneur is the one who is willing to bear the risk of a new venture, if there is a significant chance for profit. It emphasizes the entrepreneur’s role as a disruptor who markets the disruption. Entrepreneurship is also a necessary ingredient for stimulating economic growth and employment opportunities in all societies.

A disruptive technology is an innovation that changes an existing industry and also helps create a new market and value network, displacing an earlier technology or a way of doing business. E.g. NIN.VC, venture capital provides financing to early stage emerging companies with high growth potential in exchange for equity / an ownership stake. The risks VCs take investing in disruptive technologies or business models yield higher returns their limited partners (or investors) require. Since beginning of the 20th century, venture capital has been the domain of wealthy individuals and families. A typical LP base in a venture fund would be institutions, pension funds, endowments, family offices, etc.

However, the 2008 Financial Meltdown led to a liquidity crises for entrepreneurs, companies, LPs, & VCs. Fewer IPOs in the market means no exits for VCs, no returns for LPs, and as a result venture funds were on a decline. No new funds means less startup funding, low employment, and slow economic growth. Thus on April 5, 2012 The Jumpstart Our Business Startups Act (the JOBS Act) was introduced which enables crowdfunding for all Americans and that's how NIN Ventures (or NIN.VC) came into existence. NIN.VC is a crowdfunded technology venture capital firm that is offering membership interests under the JOBS Act & Regulation D of the US Securities Act of 1933. NIN.VC is a unique and first of its kind attempt to bring venture capital retail and give people the freedom to directly invest in a fund with an amount of their choice, which also leads to a better financial reward system. 

This offering is being made via general solicitation and general advertising, which is permitted by Rule 506(c) as contemplated by Title II of the JOBS Act. This rule came into effect Sep 23, 2013 and we were the first ones to go live with a website and videos about our fund. NIN Ventures also became the first venture fund to be seen on a billboard, which was followed by in taxi ads and other social media facilitated marketing. Learn more about us on Facebook, Twitter, LinkedIn, NIN Ventures TV, etc. 

Just like ours, venture capital, every sector at some point is up for disruption. For 2017, NIN.VC is focusing on series A & B rounds of 3D printing, the 4th industrial revolution, cloud computing, financial services, education software, and other disruptive technology companies. So what are some of the elements of entrepreneurship NIN.VC (or VCs) look for? First, why and how do people become entrepreneurs? The purpose can be personal, cultural, but most importantly involves a disruptive technology or innovative way of making a business better. 

With NIN.VC, we would like to truly democratize venture capital. Most people have a traditional portfolio (i.e. stocks, bonds, and money market), but NIN Ventures Technology (QP) Fund is an opportunity for "accredited" individuals / firms to invest in venture capital for a minimum amount of $100,000 using multiple investment options like self-directed IRAs, defined benefit plan, digital currencies (E.g. Bitcoin, Litecoin, Dogecoin), or a regular checking / savings account. 

An accredited investor is an individual with an income of more than $200,000 per year, or a joint income of $300,000, in each of the last two years and expect to reasonably maintain the same level of income OR have a net worth exceeding $1 million, either individually or jointly with his or her spouse, excluding the primary residence, qualifies as an accredited investor. For an Entity, any trust, with total assets in excess of $5 million qualifies.

Recently, the SEC approved Title III JOBS Act, Equity Crowdfunding for non-accredited investors, which allows any U.S. citizen, regardless of income, to make direct investments via a crowdfunding portal. However, investment in a fund like ours is still limited to accredited investors. Given funds are a less riskier asset class compared to crowdfunding in companies, perhaps it’s time to revisit their investor eligibility, alter the definition of an accredited investor, and make crowdfunding available for everyone.

Read more about what are some of the qualities NIN.VC (or VCs) look for in an entrepreneur here or company here. 

About Ms. Nin Desai: 

Ms. Desai hails from an entrepreneurial family and heads NIN.VC, a crowdfunded technology venture capital firm. Her experience spans all facets of mergers and acquisitions, and corporate finance including public offerings and private placements from private equity to investment banking and investment management. Her corporate finance transactions include RACK, LOOP, LQDT, DBTK, AMIS, SLRY, VOCS, OWW and others. Her M&A deal sheet includes the sale of Financial Profiles to EISI, Buyseasons to Liberty Media, sale of Sircon to Vertafore, and others. She is a Microsoft Certified Systems Engineer (MCSE) and has a technical diploma in E-commerce by IBM, holds Series 7 and 63 licenses from NASD. She holds an B.B.A and M.B.A in Finance / International Business from Loyola University of Chicago, and most recently attended leadership program in Private Equity and Venture Capital at Harvard Business School. 

Ms. Desai has been awarded 2015 CEO Of The Year – Illinois, for innovation and contribution to the Venture Capital & Private Equity industry by Acquisition International magazine and Private Equity Fund Manager to Watch for 2017 by Corporate America. NIN.VC has been the recipient of several awards including Wealth and Finance International Magazine's "Best Technology Venture Capital Fund - Illinois" for the Alternative Investment Awards, the "Best Crowdfunded Technology Venture Capital Fund - US" for the Fund Awards, and “Leaders in Private Equity – Illinois” by Corporate Vision magazine to name a few. 

Ms. Desai also chairs the Harvard Business School Private Equity and Venture Capital Group of Chicago and is a member of Women's Association of Venture and Equity (WAVE). She also sits on the Illinois Venture Capital Association (IVCA) Legislative/IVCA PAC Board and Events Committee. She enjoys golf and piloting light aircraft in her spare time. 

NIN.VC has been featured in VentureBeat, Chicago Tribune, Chicago Sun Times, Forbes, Inc, WGN's After Hours with Rick Kogan, NBC Weekend Web with Charlie Wojciechowski, Bloomberg's Taking Stock, Crowdfund Insider, and CIO Review to name a few. 

Alternative Crowdfunding with NIN.VC

Alternative Assets are non-traditional investments that would typically not be a part of a standard investment portfolio. Alternatives encompasses a wide range of assets including real estate, commodities, luxury goods such as art & wine, and also includes private equity and venture capital funds. Due to their unconventional nature and valuation of some of these assets, alternatives have been the domain of the wealthy individuals and institutions. The global alternative asset market is approximately $8 trillion and expected to be $14 trillion by 2020, according to PwC. 

However, the alternative industry is reshaping, and with this new sources of capital are emerging. E.g. Venture capital provides financing to early stage emerging companies with high growth potential in exchange for equity / an ownership stake. The risks VCs take investing in disruptive technologies or business models yield higher returns their limited partners (or investors) require. Since beginning of the 20th century, venture capital has been the domain of wealthy individuals and families. A typical LP base in a venture fund would be institutions, pension funds, endowments, family offices, etc.

However, the 2008 Financial Meltdown led to a liquidity crises for entrepreneurs, companies, LPs, & VCs. Fewer IPOs in the market means no exits for VCs, no returns for LPs, and as a result venture funds were on a decline. No new funds means less startup funding, low employment, and slow economic growth. Thus on April 2, 2012 The Jumpstart Our Business Startups Act (the JOBS Act) was introduced which enables crowdfunding for all Americans and that's how NIN Ventures (or NIN.VC) came into existence.

NIN.VC is a crowdfunded technology venture capital firm that invests in series A & B rounds of 3D printing, the 4th industrial revolution, cloud computing, financial services, education software, and other disruptive technology companies. NIN.VC is offering membership interests under the JOBS Act & Regulation D of the US Securities Act of 1933. NIN.VC is a unique and first of its kind attempt to bring venture capital retail and give people the freedom to directly invest in a fund with an amount of their choice, which also leads to a better financial reward system. 

This offering is being made via general solicitation and general advertising, which is permitted by Rule 506(c) as contemplated by Title II of the JOBS Act. This rule came into effect Sep 23, 2013 and we were the first ones to go live with a website and videos about our fund. NIN Ventures also became the first venture fund to be seen on a billboard, which was followed by in taxi ads and other social media facilitated marketing. Learn more about us on Facebook, Twitter, LinkedIn, NIN Ventures TV, etc. 

Crowdfunding is a practice of raising contributions from a large number of people, typically via the Internet. Since 2014 the crowdfunding industry has grown from $16 billion to an estimated $34 billion in 2015 and is doubling or more every year, and according to the World Bank estimates, crowdfunding will have a global market of $96 billion by 2025 - 1.8 times today's global venture capital industry. 

Crowdfunding is spread across several types of funding models including rewards, donation, equity, and debt / lending. The two most popular types of crowdfunding methods are Reward and Equity. For rewards based crowdfunding, entrepreneurs pre-sell a product or service to launch a business, and some times even in return for gifts or thank you notes. For equity crowdfunding, the backer receives share of a company, usually in exchange of the money pledged. For NIN Ventures (or NIN.VC), it would be limited partner interest in the NIN Ventures Technology (QP) Fund.

Alternatives are high-risk long-term illiquid investments, which are often hard to value, but they tend to generate higher returns, and also have low correlation with other asset class, which helps with portfolio diversification.

01.  Diversification

The market is flooded with number of investment vehicles, including stocks, bonds, mutual funds, IRAs, real estate; and alternatives like private equity and venture capital among others. Most people are short sighted and have a traditional portfolio (i.e. stocks, bonds, and money market) vs. taking a long-term approach and investing in alternatives like venture capital like institutions or sophisticated investors do, which leads to true diversification. 

02.  High Risk – High Reward

Yale is currently the best performing endowment fund in the United States. Since 2008 to 2015, Yale has increased its asset allocation in Private Equity / Venture Capital from 20.2% to 33.0%, out of which 16.3% is venture capital compared to 13.7% in 2014 and just 10% the previous year. Historically, if you look at USVC Index and S&P 500, USVC Index tends to outperform S&P 500 and they also have an inverse relationship, which allows true diversification and also helps mitigate the risk involved in having only a stock-bond portfolio.

03.  Tax & Other Benefits

There are wide range of options when it comes to investing in alternatives. NIN Ventures Technology (QP) Fund is currently available to "accredited" individuals / firms for a minimum amount of $100,000 using multiple investment options like self-directed IRAs, defined benefit plan, digital currencies (E.g. Bitcoin, Litecoin, Dogecoin), or a regular checking / savings account.

a. Self-Directed IRA: “Self-Directed” is a descriptive term that is used to describe how some IRA providers administer the assets they hold. With a self-directed IRA, an individual controls what their IRA invests in. Self-directed IRAs allow investors to hold alternative assets within their tax-deferred retirement plan, such as private placements in venture capital. Like any IRA investment, a self-directed IRA has built-in tax-deferred growth, and thus an individual will not pay capital gains tax on the growth of the investment. The return will flow back to the self-directed IRA, and will not be taxable to the account holder. A self-directed IRA allows for true diversification that is otherwise not achievable in a standard IRA portfolio.

b. A Defined Benefit Plan is a retirement plan that can invest in a wide range of securities and investment products, including venture funds.  Some of the advantage of investing from a defined benefit plans are: all contributions made to the plan and subsequently invested are a top-line tax deduction to the business, whether the business structure is a sole-proprietorship, an LLC, an LLP, a P.C., a C-corp., or an S-corp.  The investment growth is tax-deferred under the umbrella of the Defined Benefit Plan. The contributions might be significantly greater than that of a 401(k) Profit Sharing plan to help increase the retirement savings account for the business owner.

c. Digital Currencies are emerging as a new form of alternative payment and a global currency. We understand the significance of this change and thus allow digitial currency owners like Bitcoin, Litecoin & Dogecoin attain liquidity and tap into venture capital by investing in the NIN Ventures Technology (QP) Fund. There are many vendors that accept digital currencies and various places to spend it, but NIN.VC is an opportunity to invest and attain liquidity for digital currency owners that are concerned about currency instability.

 * An accredited investor is an individual with an income of more than $200,000 per year, or a joint income of $300,000, in each of the last two years and expect to reasonably maintain the same level of income OR have a net worth exceeding $1 million, either individually or jointly with his or her spouse, excluding the primary residence. For an Entity, any trust, with total assets in excess of $5 million qualifies.

Qualities NIN.VC (or VCs) Looks for in a Company

Venture Capitalists are known to invest in unicorns that prove to be home run for their LPs, but now that crowdfunding is turning everyone into a VC, how does one identify those winners? While there is no secret recipe for success, here are a few things NIN.VC looks for while investing:

1. Disruptive Technology

A disruptive technology is an innovation that changes the way an existing industry functions and also helps create a new market and value network, displacing an earlier technology or a way of doing business. E.g. 3D printing has been used for rapid prototyping and is being applied in a number of industries today, including manufacturing, automotive, consumer, aerospace, defense, and especially healthcare. As the accuracy and materials market have improved, the medical space shows great potential for this technology. There are about 123,851 people currently on the organ recipient list in United States; that list grows on an average of 12% annually. On the other hand, organ donor increases about 1-2%, and 21 people die every day because they cannot find a right organ. What if 3D printing tissues can help save some of those lives?

Every sector at some point is up for disruption. E.g. Traditional TV has been on a decline for the past few years, because the consumer behavior patterns are changing. People are spending more time on their personal devices like phone, tablets, & PCs. An average American spends about 3 hours everyday on their personal devices, and this is the first time, the time spend on personal devices have surpassed time spent watching TV. So what does this mean for the Ad Tech Industry? The current digital advertising market is $75 billion and traditional TV advertising is $112 billion, and as the consumer migrates to watching more digital TV or on demand content, this $112 billion will migrate to digital advertising, which is a huge opportunity and disruption for the ad tech industry. 

2. Revenue Model

Great ideas / technology needs to be backed by a solid revenue model in order to attract customers as well as attain profitability for the company to be an attractive investment opportunity for a VC.

3. Industry Analysis & Competitive Landscape

A startup needs an ecosystem to thrive upon, thus it is very important for a company to understand the market dynamics, its impact on their industry, product, and also have a good understanding of the competitive landscape in order to achieve long term success. A disruptive technology needs to scale and a through analysis helps gage those risk and rewards.

4. Entrepreneur / Team

CEO is the captain of the ship; and at NIN.VC we start with an entrepreneur because entrepreneurs build companies and not the other way around. Some of the qualities VCs look for in an entrepreneur are ability to dream big with ideas that scale, certain personality traits and work ethics like being focused, disciplined, and hard working. It’s important to have industry expertise and knowledge or surround yourself with people that compliment. However, flexibility and choices an entrepreneur / the team makes determines the future of the company.

5. Execution Strategy

An amazing entrepreneur with a disruptive technology, a solid revenue model, and good understanding of the competitive landscape goes to vain, if the company does not communicate effectively or has a good execution strategy.

Startup Crowdfunding Decoded

Startup Crowdfunding is the practice of funding a project at the angle / seed stage by raising contributions from a large number of people, typically via the Internet. Since 2014 the crowdfunding industry has grown from $16 billion to an estimated $34 billion in 2015 and is doubling or more every year, and according to the World Bank estimates, crowdfunding will have a global market of $96 billion by 2025 - 1.8 times today’s global venture capital industry.

Crowdfunding is spread across several types of funding models including rewards, donation, equity, and debt / lending. The two most popular types of crowdfunding methods are Reward and Equity. For rewards based crowdfunding, entrepreneurs pre-sell a product or service to launch a business, and some times even in return for gifts or thank you notes. For equity crowdfunding, the backer receives share of a company, usually in exchange of the money pledged.

For NIN Ventures (or NIN.VC), it would be limited partner interest in the NIN Ventures Technology (QP) Fund. NIN.VC is a unique and first of its kind crowdfunded technology venture capital fund to be raised under rule 506 (c) of the US Securities Act. NIN.VC invests in early / growth stage (Series A & B) 3D printing, the 4th industrial revolution, cloud computing, virtual reality, financial services, education software, and other disruptive technology companies. 

Why should people be interested in crowdfunding venture capital?

Yale is currently the best performing endowment fund in the United States. Since 2008 to 2015, Yale has increased its asset allocation in Private Equity / Venture Capital from 20.2% to 33.0%, out of which 16.3% is venture capital compared to 13.7% in 2014. In general, most people have a three dimensional portfolio (i.e. stocks, bonds, and money market), but if you look at Harvard and Yale’s portfolio, they a take a long-term approach and invest in alternatives like venture capital. Historically, if you look at USVC Index and S&P 500, USVC Index tends to outperform the S&P 500. And not only that, they have an inverse relationship. This type of investment strategy allows them to achieve true diversification and also helps mitigate the risk involved in having only a stock-bond portfolio.

Most people are indirectly invested in venture funds via a pension fund or any other investment vehicle, crowdfunding allows them to directly invest in a fund of their choice, and by eliminating the middle man i.e. the pension fund and their management fee, allows them to generate higher returns.

How is NIN.VC different and / or better than crowdfunding portals and traditional venture capital funds?

The 2008 Financial Meltdown led to a liquidity crises for companies, entrepreneurs, LPs, and VCs. Fewer IPOs means no exits for VCs, no returns for LPs, and as a result venture funds were on a decline. No new funding means less startup funding, low employment, and slow economic growth. To avoid this, the JOBS Act was introduced in 2012, which enables companies to crowdfund from accredited (and now even non-accredited investors).

However, there is a major flaw and that is what NIN.VC is solving. I come from an entrepreneurial family so I can speak on their behalf. Entrepreneurs are brave and courageous bunch that are determined to change the way an existing industry functions. On that journey they need lot more than just financing. They need guidance or domain expertise, help with PR/marketing, recruiting, viable exit strategy, more often follow up financing, etc., which crowdfunding portals are not able to support.

On the other hand crowdfunding exposed investors to a whole new asset class, which the normal population never had the knowledge or expertise to invest in. About 90% of startups fail; and with the shrinking number of startups that receive follow on Series A funding and dwindling number that manage to achieve an exit, and a low minimum investment like $1,000 which does not give a say or a board seat, puts investors at high degree of risk.

Here are some of the other differences between direct investing in a company using a Crowdfunding portal and the NIN Ventures Technology (QP) Fund.

For detailed explanation on Company vs. Fund investing visit our earlier blog post: Crowdfunding Matrix.

At NIN.VC we solved all of those issues. NIN.VC provides diversification, we take board seat on all our investments and lend the necessary support that an entrepreneur needs to build a business, like they would get at a traditional venture capital fund. And the most IMPORTANT part that investors cares about is the ability to direct invest and enjoy direct returns, which is not the case with a traditional venture capital fund.

NIN.VC has the best of both worlds. We’re a hybrid between a traditional venture capital fund and a crowdfunding portal. 

Who can invest in the NIN Ventures Technology (QP) Fund?

NIN Ventures Technology (QP) Fund is available to accredited investors for a minimum amount of $100,000 using multiple investment options like self-directed IRAs, defined benefit plan, digital currencies (E.g. Bitcoin, Litecoin, Dogecoin), or a regular checking / savings account.

An accredited investor is an individual with an income of more than $200,000 per year, or a joint income of $300,000, in each of the last two years and expect to reasonably maintain the same level of income OR have a net worth exceeding $1 million, either individually or jointly with his or her spouse, excluding the primary residence, qualifies as an accredited investor.

Recently, the SEC approved Title III JOBS Act, Equity Crowdfunding for non-accredited investors, which allows any U.S. citizen, regardless of income, to make direct investments via a crowdfunding portal. However, investment in a fund like ours is still limited to accredited investors. Given funds are a less riskier asset class compared to crowdfunding in companies, perhaps it’s time to revisit their investor eligibility and alter the definition of an accredited investor, in a way that it also allows funds to grow bigger in size.

What are some of the other concerns with crowdfunding?

One of the major concerns with crowdfunding is education both for investors and the press in general. When investing in public company stocks, investors have stock estimates and research reports from various different analysts, which is not the case with private company investing. More startup / technology coverage by media outlets will create investor awareness on this topic. However, journalists should be required to attain a license or certification in order to do so.

At NIN.VC we put a lot of emphasis on education and another feature that is unique to NIN.VC is transparency. Investors can attend our monthly calls, check our social media e.g. Facebook, Twitter, etc. for more recent activities at the firm.