Disruptive Investments: What VCs Won’t Tell You

Image: Wikipedia

Image: Wikipedia

Investors are on the hunt. Be veeewy, veewy quiet they’re hunting the latest investor passion: fractional armadillo shares. You read that right. For non-Texans reading this post, we’re not talking about the animal most commonly seen dead by the side of the road.

An investment vehicle called an armadillo is the hybrid where a B corp formed by a government entity contributes a small investment pool, or the “head fund” which serves as the funding required for the actual preparation of four identical pitches presented (in a double-blind mix) to nine geographically separate investors. The pitches are word-for-word verbatim except for the specific product|service that is the core of the business.

The concept of pitching VCs with identical plans comes from B-school professors at Wharton, London School of Economics and Case Western Reserve. It was to serve as a “filtering device on VC ego” yet the experiment unexpectedly produced successful results and has grown into an accepted new strategy for mitigating the risk of groupthink when investors saturate a market that is little more than the latest froth-du-jour.

It was the identical pitches which originally gave rise to the term “armadillo” because nine-banded armadillos have the trait, unique among mammals, that they bear four genetically identical young from one fertilized egg. Fund returns for more than 67% of all fractional armadillo shares available to investors during 2007-2012 showed results that matched, not a bell curve as expected, but a crown in the 3 geographically nearest investors and “notched fall-offs” (the technical term actually used in the formal LSE paper!) for those remaining six farther away. This distinction was subject to intense scrutiny because it confirms the concept that local culture is among the most vital ingredient in the business mix.

In the video of the Chicago conference, something of a media frenzy ensued when the professor from Case pointed out that the on-screen chart resembled nothing more clearly than the Texas official mammal. From that point on, the term acquired formal acceptance.

DISCLAIMER: This article is fiction. There is no such investment vehicle as fractional armidillo shares. Except possibly in New Joisey, where MF Capital, which had survived 227 years(!!) before Jon Corzine and only TWO years after he took the helm. God save the United States of America on this Independence Day!

Carpe Diem,

Matt

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