VCs should adopt features of the Hollywood studio system

(Based on a Twitter exchange I had recently with Emmett Shear.)

VCs should have methods of reducing their risk other than limiting the amount of money they give, and the Hollywood studio system shows ways to do this.

In the movie industry you don’t have production companies saying to directors, “I like your idea for the next big Star Wars movie, here’s $100,000 to make a low-budget version on your own, let’s see if you can sell that; oh, and you have to find all your own people to help you to make it”.

Instead, there’s an entire ecosystem around “idea guys” (script writers) who sell their ideas (scripts) to be made into actual products (movies) by a separate specialty class of “doers” (directors), who are in turn able to be supported by specialists in the various things that need to get done (e.g. the cinematographer), and the production company already has ongoing relationships with these specialists to go work on the ideas they’re backing. There’s a lot more specialization and a lot more “process” in place than in the VC industry.

Granted, the amount that the directors/scriptwriters are getting in the movie industry is much less than what founders stand to make: there’s less risk and less reward. But I think a lot of people would take that trade: a reduction in their potential payout in exchange for a better support structure that reduces their risk.

“Sprint” is a good book that gives an example of one such method at Google Ventures: help the founders do one or more one-week sprints that allow them to test a mock-up in front of real users.

P.S. I’m on Twitter too if you’d like to follow more of my ideas.