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Betaworks Uses Creative Methods to Find and Fund the Next Big Idea

Betaworks Uses Creative Methods to Find and Fund the Next Big Idea
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Don't call it a venture capital fund, an accelerator or even an incubator. None of those terms apply to Betaworks. It calls itself a "maker," scaling germs of ideas into companies that are the future of the social web. That may sound bombastic, but this New York City firm has the cred to back it up--heard of bitly, TweetDeck, Kickstarter and Tumblr?

Co-founder and CEO John Borthwick says Betaworks does two things: "We birth our own ideas and see them expand into companies focused on social themes and the real-time web, and we also invest in companies that focus on those themes."

The idea is that these companies will have the potential to pull in more funding in successive rounds (see bitly's recent $15 million VC funding) or be bought outright (such as TweetDeck's $40 million sale to Twitter).

This year, in a new initiative, Betaworks gave "a couple" million dollars to Fictive Kin, a Brooklyn, N.Y.-based design collective known for the web apps Gimme Bar and TeuxDeux, to spend time dreaming up and putting together four or five concepts a year. It's similar to a movie studio giving a producer a four-picture contract, then funding and distributing the films, explains Betaworks corporate development head Sam Mandel. "Fictive Kin generates ideas or products, and if they look like they have traction, we take them, turn them into individual companies and then spin them off," he says.

Betaworks' creative model is reflective of a growing nationwide interest in funding pie-in-the sky R&D with the hope that it'll generate good ideas that become great companies. Other firms rolling out versions of the concept include Los Angeles incubator Science; Chicago-based Sandbox Industries; and Obvious Corporation, established by Twitter founders Biz Stone and Evan Williams and former vice president of product at Twitter Jason Goldman (their latest investment: a plant-based meat substitute).

Borthwick says it's fair to say the jury is still out on the scalability of Betaworks' model. "People thought we were crazy when we started this," he recalls. "But even if we are crazy, a bunch of high-caliber people in technology seem interested in following our lead."

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This article was originally published in the October 2012 print edition of Entrepreneur with the headline: The Idea Factory.

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