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The hippest, coolest part of venture capital comes to public media

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People work at computers in TechHub, an office space for technology start-up entrepreneurs in London, England.

This is one of the best ideas I've seen in a while: following on its establishment of an early-stage venture fund at the beginning of the year, the Knight Foundation has announced that it's going to fund a Public Media Accelerator, to the the tune of $2.5 million. It's clear what Knight is up to here: it's putting together a fully functioning venture capital metabolism for the non-profit space, with a focus on media. 

It used to be that you could think of VC in terms of early and later-stage funding. But the emergence of incubators, like Pasdena's own Idealab, and accelerators with a somewhat different funding model — they seek to identify, nurture, and develop startups at an extremely early stage, sometimes before an actual company even exists — has made it necessary for any entity that wants to mimic Silicon Valley to think more broadly. 

It also has to think about finding companies (or ideas, or ideas for ideas) sooner.

Plus, the accelerators are sort of like the cool kids in school, when it comes to the VC space. Y Combinator is an oft-cited example. It provides relatively microscopic amounts of cash to incipient companies and gives them a chance to audition for real money a later, more mature stage. A good example of a Y Combinator company is Disqus, who created the commenting technology that we use here at KPCC.org.

This undertaking is a good thing for public media because although $2.5 million is nothing to sneeze at, when you start to spread it around to get the right kind of diversity of ideas in a portfolio, it can run out pretty fast. Remember, in this arena of investing, a certain amount of failure is to be expected. At a level, it's even encouraged. If you don't swing big, work without a net, etc. etc. you aren't really trying hard enough.

So while one hopes that most of the Public Media Accelerator's funding choices will be good ones, the lessons of other accelerators, incubators, and Silicon Valley VC says that not all will.

And we haven't even gotten into garden-variety burn-rate issues yet. (Burn rate is the rate at which a startup spends its cash. In the early stages, it can be modest. But as the company scales, the burn rate can pick up, in a hurry as Union Square Venture's Fred Wilson explains in this burn-rate blog post.)

But I'm just talking about the financial risk. Underlying this project is something more important, which is addressing the innovation problem outside the for-profit sector. This is from the Nieman Journalism Lab:

A shortage of innovation is not unique to public media, [said Jake Shapiro of PRX, who pushed for development of the accelerator]. Nonprofits suffer constraints on financing ideas to scale, a lack of risk capital, and a lack of investment in deep R&D and technology, Shapiro said. The accelerator “gives license to risk in a more intentional way, and we definitely need more of that.”

The Public Media Accelerator is also another sign the Knight Foundation is taking cues from Silicon Valley’s startup culture. Knight will retain a financial stake in for-profit ventures that receive seed money, moving away from its traditional role as pure philanthropist. Earlier this year, Knight launched a venture-capital enterprise fund. And in October, senior adviser Eric Newton said the annual Knight News Challenge, a five-year experiment, will speed up to three times per year, starting in 2012.

“As we’ve started funding more smaller entities and startups, that model makes a lot more sense for us,” said Michael Maness, Knight’s vice president of journalism and media innovation. “That model allows us to go smaller, faster, more nimble.”

Note that the competition for funding and business advice and guidance will be open to both for- and non-profit candidates. It will be interesting to see if this skews the quest to "win" the opportunity to join the accelerator. People get involved with potentially moneymaking startups and publicly supported organizations reasons for very different, and at times incompatible, reasons. What Shapiro left out of his list of lacks was a lack of interest in competing with companies that want to make the folks who thought up their products and services many millions of dollars.

That said, this is one of those initiatives that could change public media forever, and for the better.

Follow Matthew DeBord and the DeBord Report on Twitter.

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