VC firm, Founders Fund, has recognised the need to move with the economic times, by giving a selection of entrepreneurs and executives from outside of the company money to invest in a tech start-up they have discovered through their own networking.

It has not gone unnoticed that funds are still becoming available for tech start-ups, with a number of seed programs launching across the globe.  In March of this year, American firm Sequoia Capital, joined forces with venture incubator Y Combinator, that takes start-ups from ideas to business, to provide a new fund for tech start-ups.  Yet it is this new approach from Founders Fund, that sees the early decision out-sourced to others, that makes it so interesting.  The risk is still there for the firm, but the time and effort required in choosing  early investments is greatly reduced.

Silicon Valley firm, Founders Fund, has realised the potential to use other peoples’ networking to their advantage.  By using successful entrepreneurs and tech executives, they hope to capitalise on their business connections to more efficiently find and back start-ups.  After all, a large percentage of an entrepreneurs life is spent networking, and to be able to make use of this could save investment companies a lot of time and effort when the entrepreneur is doing it as a matter of course any way.

Called the Tech Fellow Awards, the annual program has used  an ‘open nomination process’ to find 12 leaders or 'fellows' that have achieved oustanding innovation in one of four fields: engineering leadership, product design and marketing, general management, and disruptive innovation.  Each successful fellow, self-nominated or recommended by others and chosen by a commitee of 21 industry leaders, for the impact they have had in the world of start-ups, will receive $25 000 to invest in a start-up of their choice.  In addition to the investment of each individuals prize money, Founders Fund will match the investment with a further $25 000 and reserve the right to increase the capital to $250 000 in the event of a good venture.
A committee of 21 industry leaders – including Esther Dyson, Chairman of EDventure; Caterina Fake, Co-Founder of Flickr and Michael Arrington, founder and editor of TechCrunch – have reviewed the nominations, and  it will be interesting to see where the funds have been granted when they are announced in June of this year.

With an available fund expected to total $3.6 million, the firm has recognised that investing in well thought through start-ups is still a good way to get a return for their money, whilst reducing the costs of making that initial investment by delegating the decision.  For some this might seem like a high risk option to Founders Fund, but to most it is surely considered an inspired step.