It’s been a while since the Renaissance, when the church supported the arts in an effort to gain souls in heaven. Patronage however, is not dead. It’s just taken a more secular form. The largest investors in the arts are now government agencies, private patrons, and venture capital firms. When you consider the social media patrons of today, crowdfunding shows there has been a significant closing of the gap when it comes to class and wealth in supporting the arts. Now, the average Joe can support an idea he likes with a small investment. An artist gathers a hundred Joes, willing to invest $10 and the artist now has $1,000! It adds up quickly. But what happens when small change is not enough, when you have a Sistine Chapel to complete?
Early on, a founder must weigh in on whether to self-fund (perhaps through friends, family, or crowd-funding), find an Angel Investor (who may or may not have enough money or experience), or seek out a venture capitalist firm. Even artists of the Renaissance had supportive social capital, and perhaps even hoped for and Angel Investor, but Venture Capitalists are a new breed of patron. Motivations of these firms move above the religious call of saints into heaven.
In Noam Wasserman’s Book, The Founder’s Dilemma, he talks about investor dilemmas. Outside funding, once it moves beyond the circle of founder and friends, must necessarily begin to formalize. A company may build a Board of Directors, be required to account for the money invested, and hone strategies for increasing the wealth of the company. It is the high-stakes industries, such as technology and life sciences, that also require swift decisions and broad, risky leaps of faith. Angel investors may not require these things with any stringency, perhaps because they lack the experience or capital to do so, but venture capital firms want their investments to yield profits at all costs. This often places the founder and the founding team in hot water. The team may loose places of power on the Board. They may be squeezed into a tight spot and told to sell or else loose profit.
There is an element of buyer beware when it comes to accepting venture capital. Often these firms play on the optimism of the founder and offer investments based soley on their agenda, not the founding team’s vision. I get the impression, having never worked with a venture capital firm myself, that these firms seek power and control in order to gain profit. Thinking back to the Renaissance Patrons who leveraged their money to weild power over the lower classes, perhaps patronage is not altogether different after all.
I think for artists, the need for monumental patrons is still important, and the government does a passable job funding large art endeavors in the United States. However, the level of Angel Investor seems to strike a nice balance between the high-stakes cash of venture capital and the personal risk involved with investments through friends and family. Many arts related businesses are not looking for millions of dollars in investments. Solo artists in particular, may be looking for micro-loans, just enough to buy a new chop saw for building canvas, or the cost of painting a community mural on an eyesore building. This is where angel investors can shine a light on the arts! Also, many arts based businesses have a complimentary role in edifying the culture of where they are located. Crowd-funding, Facebook ads, pop-up markets, and small-time fundraisers, are perfect ways to find angel investors who may have a more community-minded reason for investing their money. In my mind, these are the true patrons in today’s society. With the growing movement of handmade and local items, I believe angel investors will contribute greatly to supporting the growth of small arts based businesses in today’s economy.
3 thoughts on “Investor Dilemmas: Patronage”
Very great blog post Joy. I always enjoy your work. I like that you drew investor dilemmas and art of the renaissance together to discuss the topic at hand. I appreciate your point of view because I think it is important to understand that all founders will face similar dilemmas, but they will differ in very special ways, like how you talk about patronage and government funded art, as well as how many founders in the arts are not looking for huge investments. All excellent points that help us see the topic from a different perspective.
I recently watched a documentary on crowd-funding and how a smaller artist became a success because of his following. He took a huge risk and spent long hours trying to make this work, and finally in the end, it all paid off when he launched his campaign and watched the funds grow in his account. I enjoyed reading your blog! Thanks, Jill
Great post Joy! I love how you aligned the assignment with the arts, so that it not only addresses the class assignment but something you are passionate about. People say history repeats itself, and your post definitely reinforces the notion. I’m not fond of the idea of venture capitalist for the same reason. At that level of growth, it seems like venture capitalist want the power and the wealth. Angel investors are more ideal for me as well, as I think terms are a little more negotiable and present more flexibility for your company. Maybe I need to interview people who have dealt with a VC to see if that would change my perspective. They can’t all be out to get us right?