When you consider popular opinion, venture capital (VC) is useful, even with the high risk it comes with. This is truer in fundamental innovation development such as NanoTech or space exploration.
However, the product centered nature of VC backed organizations, a major percentage for them is friction cost. Friction cost can be defined as things such as educating the founding team, hiring team members, lawyer friction, etc. Such friction can add up to at least 30% of operational costs and delays.
Such friction is deterministic in most cases and can be measured if a proper study is conducted. Moreover, The zero to one search that a startup does is not good as a deterministic investment approach, and its financial sustainability is accumulated weights the next fundraising rounds.
Consortium management approach
Hypothesis |? Financing <> Product <> Knowledge. |? Growth
The consortium management approach consists of making an organization that would structure any product development of foundational challenges in an industry, by making the tools, the practices and standards. The legalese is highly flexible, the hiring is high resolution, the risk is minimal, and the exit sums to zero.
In the end, it produces an investable market.
Hypothesis |? Knowledge <> Financing |> Products |> Growth
If we structure consortiums into the financial product “consolidated notes”, we can reduce the risk in venture capital, to validate tools and markets, then invest in things that we can measure and that we can grow.