Crowd-Sourced Capital | Hacker News Reader

Crowd-Sourced Capital

calleynye.com

17 pointssiliconcalley19 comments

While I can appreciate this approach from a one-off perspective, it seems like it would make more sense to package this process up, like some of the micro-lending services. The key difference is that there's no fixed interest (compound or simple) on the investment, but the sky is the limit. Call it anyVC.com.

You'd allow people to submit their startup idea, business name, contact info, anticipated operating expenses, fund-raising goal, and so on. Once anyVC.com had accepted the venture for presentation to it's users, anyVC posts these ventures with an "Invest Now" button. Or have an auction-type interface: X-many dollars at y% stake in company per dollar. You could just queue those up from smallest stake per dollar to highest. (Funds would probably have to be escrowed, so there'd have to be some serious legalese and possible snail-mail notary-public stuff going on to sign up to become a microVC. Maybe that's a show-stopper.)

Then, the entrepeneur looks at his queue and begins accepting funds from the smallest-stake per dollar to the highest.

This might limit certain exit strategies, like incorporation, unless anyVC.com aggregates the various micro-investments, paying out to the micro-investors when they want to cash out, minus a small handling fee.

The firms would then be subject to some oversight from anyVC.com, and joint reports would be filed to the micro-investors via the web site, or via a private channel if security is an issue. (Maybe the micro-investors have to be under NDA or non-compete?)

Has something like this been done? If not, have I overlooked something glaringly obvious that makes this impossible?

Edit: This may make even more sense in a tight credit market.

I think this is what http://www.vencorps.com/ is doing. In regards of your post to the OP: do it once, then refactor. :)

Apologies but: hahaha.

You are asking me for money and you'll owe me a favor and membership to a service which you admit isn't quite well defined yet? Under the current economic circumstances? And you cannot raise 25K on your own?! So when the 25K runs out, what?

OK, I'd rather provide some constructive feedback. Please tell me why you are a skilled entrepreneur. Here is an idea: you mention running a social media company for 3 years. How did it grow under your leadership and how did the initial investors do?

Alternatively you can just be funny: http://www.newyorker.com/humor/2008/09/29/080929sh_shouts_bo...

Sorry to be negative, nothing personal - best of luck to you.

@mkn That's a great idea, but the point is that I don't have the money to build it. How do you raise money for a site to raise money? And I am extremely dedicated to this idea right now.

@gz The idea is fully developed, I just don't want every aspect of my business to be public before I have a concrete product built.

And to "so when the $25k runs out, what?" Isn't that question the cornerstone to every investment ever made? It's to bring you to a next round, just because the source is different, it doesn't mean the same rules don't apply.

And it's not that I can't get angel money or VC, it's that I'd rather do it after I have a prototype.

I didn't have any investors to my first company, it was a marketing company. It was a service, not a product.

I would love to answer your question about why I think I am a skilled entrepreneur. I will do so shortly on calleynye.com.

Thanks for the feedback :)

We gotta get you using the reply link. Also, g'luck!

done and done.

hehe.

Thanks for your response. Sorry if I was sarcastic but honestly that's how it spontaneously came out and certainly it's nothing personal. My point regarding the $25K was that some people may be concerned about your ability to raise capital so perhaps this is something you should address (otherwise put: why crowd-sourcing in the first place?).

If your idea is fully developed then I misinterpreted the following statement on being stealthy: "I don’t want to build up one idea, just to iterate and have it be something totally different."

I am looking forward to the blog post about your entrepreneurial skills. One more thing: you could perhaps say much more about your idea without revealing what it is: eg, how big of a market is it that you are entering? How many competitors? How are you differentiating yourself? How long will it take? What will your sources of revenue be? You get the gist... give potential investors more info so that they can place an educated bet.

Good luck.

An idea can be fully developed but still have to change. There's an iterative process involved in all startups, and it has nothing to do with the development of the idea and has everything to do with limitations, competitive edge and strategy. Startups iterate all the time, and it does not mean the first idea didn't have merit.

If you sit down and really think about what I'm doing, in a purely business (not money) sort of way, you may begin to see why I'm doing it. There are 20 reasons that have nothing to do with money that I can think of off the top of my head.

And I don't know how anyone could describe their business that way without saying what it is. How can I say what differentiates Dashbuzz without saying exactly what it is I'm doing?

And no offense taken, I appreciate your input :)

As far as the development of ideas goes I agree with you. But what you state above is not what comes through in your blog post. But then again I am but one sample from your readership.

Regarding your last question here are some things you could say without revealing much while providing valuable insights:

1) we will differentiate ourselves by hiring k top scientists and attacking the problem algorithmically something that hasn't been done been before (or we'll hire k top marketers, you get it)

2) we will provide the service for free in a market where everyone charges for subscriptions (or the other way around, doesn't matter)

3) we will be able to charge less because we have identified this and that way to be more efficient.

4) we have xyz superstar coder/designer/etc in our team.

I could go on. But the point here is dual really: not only you are giving people more info about what you are doing (without revealing much) but you are also telling them you've done your homework (market research, etc).

Regarding the 20 reasons you are doing it this way, yes, I realize there are reasons (marketing is probably #1, great story to tell) but again I think you will benefit from explaining. What I am trying to convey is that there is a positive correlation between the effort you are perceived having put into this thing and the confidence/money you'll get.

Your idea is never exactly what you first thought it would be. pretty sure reddit was something entirely different when they started. same with auctomatic. justin.tv is now kiko.

There is a site that started in Australia that allows people to trade services for equity. Check it out: http://www.webequity.com.au. Note, just over a week ago they launched an international version.

Also, you could setup a pledge system, whereby money is called upon from pledgers only once a certain amount has been pledged. http://www.sellaband.com does this to help musicians do albums. Here, you could have say a few high profile angels or personalities to whom you've pitched make an initial pledge and then others might follow. The amount isn't that important, it's their profile/reputation. The site that could help is http://www.pledgebank.com.

Also see:

http://www.fundable.com http://micropledge.com http://www.chipin.com and maybe even http://TipJoy.com.

The good thing about doing purpose built fundraising site for startups is that a lot of the marketing work would be already done for startups that want to use it. In other words, the startups gathered in one spot would attract the investors.

You should try doing what we did when Publictivity first started. Find a potential customer or two, in this case it would also be a PR and/or marketing firm. Proposition them to pitch in $5000-$10000 each. Give them:

a) the software free for life b) a small stake in the company c) direct line access to new features + beta testing

Also:

a) Put a pitchdeck online that you're comfortable with b) Put some sort of small FAQ so douchebags like @gz can't really say anything.

Lastly, you should apply to YC for the upcoming session :-).

Those are all great ideas, Jason. Thanks!

And I am applying to YC :D

This post violates all sorts of securities laws regarding fundraising.

no, taking donations is different than having investors who will receive equity.

IANAL, but I agree with her. This should not violate security rules as she's not selling you securities ;). She can easily book the donations as payment for future services in case there are other accounting issues at stake.

Good luck!!! I would LOVE to have access to the product as described in your post. FeedBurner and the like confuse the hell out of a small time blogger such as myself ;).

This should not violate security rules as she's not selling you securities ;).

This clause might be a problem:

the top 100 donations will receive a lifetime premium membership.

If I donate X amount of money, I do not know if I will receive the lifetime membership. I could ultimately be outbid; or I might ultimately not be outbid. It is a game of chance; and unlike in the case of an auction, I pay whether I win or lose. That might make this an unlicenced gambling enterprise.

IANAL, but I would guess that if you are going to offer for sale specified products or services, you need to guarantee that paying customers will receive those specified products or services.

interesting point, i had not thought of that. will talk to my lawyer.

thanks!

someone has got to say it...

how many donations will you get calley (ex-model right?) because people think you're hott?

Reply on news.ycombinator.com