To confess, the thought originated more from a textual perspective than a conceptual one. But it made me think, and so I shared it on twitter a couple of days back – “do many startups fail because they start up? would it be better if they start down and work their way up?” While I’ll not get judgmental about startups, their reasons for existence and what they strive for, I’ll just stick my neck out for a second and say that the BOSS (Build, Operate, Sell Stake) model is probably the most popular. I wonder if that says anything about the intent.
Meanwhile, that tweet and Rang De, about which i had written recently (and have promised to try out in the near future) made me think whether a crowd sourced investment model is possible for start ups. Its a well known fact that Venture Capitalists and angel investors have their own criteria for judging startups and investing in them. So some startups get funded, some don’t. But what if I, as a user believe in the concept of a start up and am willing to invest in it? Now, as an individual, I will not have the million $ funding the start up needs for its expansion, but what about a large bunch of individuals like me? Individuals who could invest 5-6 figure sums and could possibly earn some good returns if the idea succeeds. Build in tagging, communities, and a Digg like rating structure and perhaps the VC type of investors could start using this to gauge the popularity potential of a start up. What if the powers of social media can be applied by those who use it most to  encourage the entities that want to build businesses out of it?
There are two things that would be important to address – one is the legal and regulatory aspect – whether such a structure can exist, and the other is the trust factor -we shouldn’t have a potential startup running away with the money. But with all the hype about web 2.0 and trust being an important part of it, if we can’t ensure that, perhaps we’re all going wrong somewhere.
until next time, what is the massive loophole you see in this?
Hi,
While the idea of a crowdsourced startup seems good, a possible problem could be of aligning the steps taken by company towards achieving its goals with the perception of investors involved towards those goals. I am reminded of the saying “Too many cooks spoil the broth”
If investors just put money and don’t take part in decision making its still fine but what if they want to take part in making decisions.
For ex: a site which starts of as a say “a platform to share something” and people pool money to help it grow but over a period of time the founders think that taking X route would get them more traffic but some of the investors feels Y would be better and then some route Z. Getting a consensus etc might prove to be a tough task especially if majority votes against the founders ideas.
What will happen then and will the founders be willing to give this amount of control ?
more complications could be on how much voting powers to be given to the investors and on what basis etc..
These are a few thoughts that occurred to me just now, will share more later.
thanks for the comment mayank.. agree with what you say, which is why a ‘Rang De’ model of a pre decided tenure and interest appealed to me… it follows that as an investor, I only vibe with your stated goals, how you achieve them is upto you… so, its almost like (for example) ‘kwippy needs Rs.2 crores, which will be sufficient for operations and expansion for a period of one year’… if i, as a user, feel that kwippy has a bright future, i could lend say 1% of that figure at a pre approved interest rate.. in that respect, i was thinking more at a ‘utopian’ ‘be part of the new economy’ than a make some big money approach, similar to rang de 🙂