Synopsis:
Semi-Active entrepreneurship offers an opportunity for higher financial returns and value in the marketplace. For the same $100,000 one could spend on a pre-Series A investment, one could significantly develop a product and gain the momentum and distribution needed to bring in a talented CEO-operator. Semi-active entrepreneurship is also beneficial for the economy as it creates new ventures and brings new individuals into entrepreneurship.
Semi-Active entrepreneurship offers an opportunity for higher financial returns and value in the marketplace. For the same $100,000 one could spend on a pre-Series A investment, one could significantly develop a product and gain the momentum and distribution needed to bring in a talented CEO-operator. Semi-active entrepreneurship is also beneficial for the economy as it creates new ventures and brings new individuals into entrepreneurship.
Semi-active entrepreneurship is a hybrid model between angel investing and active entrepreneurship.
How does it work?
In the initial stages of semi-active entrepreneurship one partners with a developer in order to tackle a new product. The ideal time to bring in a developer is after you have done the market research and vetted the business idea. At this point, depending on the developer, the startup funds can be used in order to cover a minimal salary for the developer while also providing him an equity share in the company.
The main consideration in semi-active entrepreneurship is to gain momentum in the venture. Ideally, this is done with the two of you as a team along with some contracted design work and PR work. As soon as you gain traction you bring in a CEO operator in order to take over control of the company while you stay on as President.
You can then decide to raise either angel money and make yourself an acquisition target or you can decide raise venture funds and have the CEO lead the growth stage.
If done correctly, semi-active entrepreneurship offers significantly higher returns on investment. Assume that you give a 50% stake (generous) to the developer and a 25% stake to the CEO (as he came in after momentum), the semi-active entrepreneur is able to retain 37.5% ownership without a significantly higher investment of time than that of an active investor (after the first several months).
Compare this to passive angel investment where one would have to invest roughly $2MM (as opposed to $100,000) to gain an equivalent share.
Of course, many times, traditional angel investors are able to invest with slightly less risk on the table. However, most of the times these traditional angel investors, like semi-active entrepreneurs, are just making bets on the management team.
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