An experiment in funding for not- only-for-profit startups is launched

An innovative and possibly risky experiment in social -enterprise incubation and funding just kicked off in San Francisco.

Called West Coast Village Capital, it’s a 12 week program with 24 social- enterprise entrepreneurs, based on the following philosophy: that startup founders can make funding decisions about one another as well as official investors.  The backer is First Light Ventures, which is part of Grey Ghost Ventures.

To that end, the program splits the participants up into six groups; they meet weekly to help each other out.  The entrepreneurs themselves decide who goes where. So, someone who’s strong in web 2.0 and weak in marketing might team up with a marketing-savvy colleague who lacks a background in tech . Every three weeks, the entire group meets to discuss whatever issues seem to be most pressing.

Then, here’s the new part, at the end, the entrepreneurs vote to decide who receives money from the fund. Four to eight people will get either $25,000 or $75,000. You’re not allowed to vote for yourself, of course. But you are supposed to vote for the most “investment ready” starutps, not the most “investment worthy”, according to April Newman, venture partner. (First Light might also invest in other companies that don’t make the cut).

This program, actually, is one of four launched by First Light. Others are in New Orleans, Boulder, and Dasra, India. Each also has a somewhat different model. Also, the others are run by existing organizations, such as Idea Village in New Orleans and the Unreasonable Institute in Boulder.   But, they’re all based on the same idea that entrepreneurs themselves make the funding decisions.

Also, to judge from the San Francisco experience, the startups chosen to participate cover a refreshingly diverse array of businesses. It’s not the usual web-only suspects.  For example, New Avenue builds eco-friendly, low-cost homes in empty spaces–backyards, say–to reduce sprawl.  RainSaucers has a rainwater collection system for family homes in the developing world. Senda sells fair-trade sporting goods. A portion of each sale is used to donate equipment to organizations using sports as a tool for social development.

Newman says the real test will be in a year or more, after the program is over, when administrators can see which and how many startups get funding from outside investors.  It’s an experiment, after all, not a work carved in stone.