Crowdsourced or 'community driven' venture capital
Following on the same theme as my earlier question about finding a place to share ideas and get feedback.
http://www.brightjourney.com/q/place-go-float-ideas-get-feedback Marry StackExchange communal voting sites such as this one and StackOverflow with crowdsourcing concepts. Throw in microloans like Kiva. Does such a thing exist?
I want a site where I can share an idea, people will vote on it, critique it, improve it etc etc. Once an idea is strong enough the 'inventor' can open his idea up for angel funding (think low amounts ala YComb) and the 'crowd' can then invest small amounts into the idea to drive a true market value for the idea.
Does such a thing exist? If it doesn't is it something meritorious enough to consider my time to build?
6 Answers
You're assuming the only benefit from raising Angel money is... the money.
But part of the validation experience is having to convince people to part with real money. And another part is taking advantage of the wisdom of your investors.
Of course I agree that getting money is better than no money, so it's a good question! Just wanted to make sure it was clear that you'd be giving up some benefits this way...
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I would imagine/envision that such a process of getting X to part with his money is one of those great ways of refactoring your pitch and focusing your efforts. That the more times you fail, the more you learn about what works and what doesnt about your product. Something like this would provoke that same process only in a slightly different form. I would still have people challenging my idea, still have them denying my efforts and turning me down. – Mkw 15 years ago
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As far as the wisdom that could be gained from your investors, I would say that any system which fostered this relationship between inventor and investor wouldnt be worth a dime unless it created a collaboration platform for that communication to occur. Traditionally one would expect a direct personal relationship with the investor, phone calls meetings etc but in the micro model which exists almost exclusively in a virtual sense, providing infrastructure to facilitate that relationship is of vital importance. – Mkw 15 years ago
This reminds me a bit of Cambrian House... or what Cambrian House used to be a few years ago. Basically, you would submit ideas, people would vote, projects would get sponsored (I think?), and so on. It was pretty cool and they had some interesting software to power it all.
TechCrunch covered their downfall and mentioned a spin-off called VenCorps. There's not much info about the "community powered capital", but it sounds similar to the investing part of your idea as well.
You can share, critique and improves ideas on FairSoftware (I'm one of the founders). You can be sure that we looked into a scheme such as the one you propose.
The problem with micro-investing is that it's heavily regulated. So we couldn't do that part of the system, although we'd love to figure out a way eventually.
There was a startup that launched at TC50 this year that sort of solves the funding problem, by manually filing the appropriate documents with the SEC and other regulators. It's not satisfying quite yet.
The only other approach that could pass legal muster is limiting the investing to accredited investors. The problem is that it sort of kills the "crowd" part of crowdsourcing when you only accept people with at least $1 million net worth :-)
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Lets say this imaginary site/system was called FOO, my thought was that people would be paying FOO who would then in turn own a stake in the new company/idea with a contract back the to micro-investor which said if/when we sell the FOO stake in idea you will receive ROI thus skirting the legal web around lots (possibly hundreds) of people owning small shares of the new company. You have to iron out solid agreements between FOO and Micro-Investor and FOO and New Company but that is better than lots and lots of FOO-MicroInvestor-New Company agreements. But I defer to your experience on this. – Mkw 15 years ago
Sounds like you are talking about a Kickstarter for software. The real question is; what do investors have to gain? Kiva you get goodwill. Kickstarter you often get some product or mention or benefit. With software, what will you give someone? Free membership? Free software? It just seems like a weak correlation vs. the amount of funding you likely need to get it going.
I really like the idea. I just struggle with how it would be properly executed.
Bit late but I wrote a blog post about this a few weeks ago.
I found about 10 different CrowdFunding sources, the provide both the cash injection and premade feedback / trail market you need to kick start an idea.
There is a real problem with pitching or selling ownership of private companies to the general public. You need to go investigate that first.
