This weekend, the Artemisia Aceleradora, our partners, hosted a two-day session for the Village Capital program titled “thinking like an investor.” The goal of the education session: to cover basic terms of investment with entrepreneurs, and essentially train them to look at one another’s businesses the way an investor would. As a closing exercise, I had every entrepreneur describe their business in three words. ”We break barriers.” ”Health accessibility for all.” (I said four words was OK, if one was an article.) ”We train job-seekers.” Then they said “What does Village Capital do, in three words?” My response: “We democratize entrepreneurship.”
The process really has to be peer-driven to work, but there are some rules of the road. Village Capital education programs, at the start, were pretty unstructured. We gave guidelines to entrepreneurs, saying, “choose the most investment-ready.” The problem: in some cases, Village Capital cohorts spent 90% of their time together deciding on criteria, and 10% of their time reviewing one another’s businesses–which is what we really wanted. So over the ten cohorts we’ve launched worldwide, we’ve turned Village Capital from a “crowdsourcing” exercise into a pretty structured education program that teaches entrepreneurs how to build businesses that can gain mainstream credibility.
Because of this, there are a few regulations. We set the criteria by which the entrepreneurs evaluate one another, choosing six as the top risks that most often lead an enterprise to fail, and focus much of the education program on risk mitigation. We build in constant, transparent feedback into the program, and we really proactively teach entrepreneurs how to be investors: walking through what any investor will look for (for example, an exit strategy), talking through difficult conversations that entrepreneurs can expect as they build their business (e.g. valuation), and, in the end, teaching them how to conduct diligence not that differently than any investment analyst would.
On Sunday, the entrepreneurs did a “trial rank,” which has become a hallmark of all Village Capital programs. (In a globally-cool moment, the entrepreneurs in Sao Paulo and London were trial-ranking at the same time). Entrepreneurs fill out 360-degree feedback sheets ranking enterprises 1-10 on 6 investment criteria: entrepreneur/team, product, customer validation, financials, scale, and exit strategy. The highest score an enterprise can get is 60. In Sao Paulo, only 7 points separated the top average score (44.7) from the lowest (38.5), but the entrepreneurs appreciated transparent, direct feedback on what they need to work on. With four weeks to go until the final peer assessment, the entrepreneurs have clear marching orders from one another, as well as one trial rank.
Julianna Estrella founded Works, a company that sells online vocational training courses for small businesses, and handles account services for graduates (incorporation, payroll management, taxes, accounting) on a subscription basis. She got pretty blunt feedback in the peer ranking that while the substance of her company was good, the business model and communication was incredibly confusing. Today, two days after the ranking, she’s launched an updated website, simplified her marketing materials, and sent it out to the entrepreneurs for feedback. ”I was scared to get negative feedback, because I was afraid that a bad first impression would doom me,” Julianna says. ”But now I have a challenge to prove them wrong!”