People are funding the struggling artists and bands, and movies are being made today with money generated from the donations of the audiences. But a lot many enthusiasts, who might be developing their prototypes at this point in time, are waiting to get funded to kick-start their venture. People can actually help by collectively funding the potential start-ups. This will give them the right to interfere in the important matters and get heard, and thus contributing managerial help as well. The entrepreneur will have to share all his experiences in the form of blogs, all the interviews and surveys he conducts, all the people he met last week, the changes in the plan, the developemnts, the technicalities, explaining his hard-times and all his actions. This will give the crowd the experiences of an entrepreneur, and a satisfaction of having been able to help someone. The start-up will also have to give-away the shares, as per the agreement. People can even help with as little as $10, or Rs.100 in an idea they think has potential. The company will collect the money and when a particular sum, as specified by the start-up, has been collected, it will be invested on behalf of the investors. The exit route being the investment of a VC or a buy-out, investors will get back a considerable amount in the time-frame of an year or so.
Please comment on the feasibility of the idea and your own considerations if you were to invest.
Sudhir
sid.man2@gmail.com
Suggestions:
-Too many people having an interference in one particular business would cause co-ordination trouble. Besides, if this guy has to spend so much time justifying his actions to people and giving explanations, when would he actually work on the startup?
Basically you're suggesting that we create a marketplace for ideas and let people invest in whatever capacity they can. How about issuing unsecured but convertible bonds, so let part of the risk be with the entrepreneur since he has to pay the interest, and part of it is on the investor since there is no collateral.
So what happens is, if I start a company today and need 100,000 rupees as capital, some people invest, I pay them an annual interest of 12 percent. After a stage, they can convert this into equity in my company. Of course, this would need a lot of credibility issues to be handled.
Ankur Gattani
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#I think that people like us who are students wont have any problem in investing upto , say , Rs. 1000 but they would need some kind of assurance.For an amount larger than this ,People would obviously demand for some kind of written proof and constant update of company's progress.
Soham Mazumdar
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Open blogging and discussions would interfere with the independence of the entrepreneur.getting funds is surely one of the most important aspects in starting a business but it should not be at the cost of your independence because after all its your own venture.
Simrita
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I agree with your point that the guy needs to have independence in decision making, but involvement of the investing crowd needs to be looked upon (though they won't have a mojor role to play), so i think this can be done by conducting polls on various issues concerning the company, taking the public perspective on it, mainly if i say, help in the market study. And it can be advantageous in one context that all the investors, like if we say there are 500 of them, they will be in an active role when it comes to studying the market. This can also bring-in the advantages of user-innovation, because the investors probably will have some relation or understanding of the business area.
And as per the first comment, credibility is very much required here and initially people will invest and help only if they trust the person, or can approach him, or share something common like school, college, workplace, colony. It will be a high risk situation and whatever return they get from the small contribution will be divided between the crowd and hence its not a good investment.
People, if-at-all do it, they will do it for reasons other than monetary gains. So now, what can be the other reasons? The question's important because this will not only apply here, but also to all other existing crowdfunding models, and others which are there to come.
Sudhir
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Crowdfunding will work if the person is doing something useful for the world with least self-help. wikipedia gets crowdfunding because its useful to the entire world.
Phani
