Indie backer idea
The recent post from Courtland: "Indie doesn't mean bootstrapped anymore" made me thing of this crazy idea for founding:
Say you have an idea and you're ready to build but need money (just a couple of hundreds to get things moving)
- Indie backer
So you create an option to join your project as "indie backer" (say a $1,000 USD account) which gives you rights to dividends when the company becomes profitable, and access to "founders" communication channels (slack, forums, mailinglist whatever) where the progress of the company is being shared, features being discussed. etc.
While this account won't have decision-making powers, only rights to dividends in the future, the feedback provided is very important and this is where having like-minded indie hackers instead of the general public or specialized investors could make the difference. The general public just wants the product ready (and their money back), the specialized investors would require an already existing and profitable company already working to minimize risk ( which is understandable when someone is putting $250k-$1m) but at $1,000 account, you're just interested in helping and you're ok if that $1k doesn't turn into anything.
- What the money is used for?
The money ($10k, $15k) is used to pay for work or servers, or advertisement, whatever the founders deem necessary.
Transparency is key to what the money is used for, how many backers (and hence "debt" is the project creating) , progress, plans etc.
- What if doesn't make any money.
Well, the backer would lose $1k and the founder the chance to have it's company. Like any type of investment there are risks.
But if it works, basically the backer would have someone doing to heavy lifting, and potentially access to what could become later a very profitable business for as low as $1k
- Similarities
So in essence very similar to projects like indiegogo and many of the founding mentioned by Courtland, except that you might actually get money back, no just perks in the case of indiegogo, and you don't need to have a working $10K MMR company already to get access to $50k-$1M investing where you just need a bit.
Of course he risk is much higher as these companies might never see they day of light.
Anyway, this might be just a crazy idea. Thoughts?
With the opportunity for a return on investment, I believe the backer would fall into the angel investor bucket. With that any backer would likely need to be earning at least $200K/year or have a net worth greater than $1M. I could be wrong on that, but that's my understanding of the securities laws. It's possible that small investments of ~$1K might be less interesting to individuals who meet the angel investing requirements.
This of course shouldn't be a reason to not explore the idea, but something that should be taken into consideration. You may even find potential backers actually don't fall under the accredited investor requirements, in which case those above limitations wouldn't apply.
Yeah, this could be a slippery slope, and fraud prone. Thanks for pointing out the securities laws.
You're crossing into SEC territory in the U.S. You may need to become a funding portal to pull this off.
Yeah, @rzabel mentioned that too. I can see how that might be abused; someone claims to build something and just takes money non-stop and then run away with the money.
Even when it's on good faith, it could be easy to misinterpret.
So, the difference between this and just a regular "highly" priced account? (Think of: Join the beta program with $1,000), it's just the opportunity for return of investment right?
I wonder how is this different too, from say, have a friend and they become co-founder but the only thing they do is to put the money.
The concept is cool. It’s a different way to validate your idea. If people willing to invest money on your product that mean something
However, I found a completely different problem with your idea.
As you said - 1000$ isn’t such a hassle
I believe that most entrepreneurs can put 1000$ of their own money even more.
When you asking other people to put those small amount you actually saying - I don’t believe enough in my idea to risk my money so I’m asking from others to take that risk
If you truly believe in your product you can put your own money for start
I can see that. So, how is that different from rising, let's say $75k? That in the later you're saying: "I believe in my idea, I just don't have $75k sitting around"?
Somehow I think it would be easier to get 75 backers, than 1 angel investor, and yet, this is meant to be really small, like 10, 20 backers.
Probably all of these founding companies mentioned in Courtland's post went through all these scenarios and came up with those limits: $75 min, live $10k MMR product.
That called crowdfunding and there are many startups who does that
Piplibz for instance
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I agree. There's a high chance of that. There should a TOS made and must be approved by both parties to prevent such situations.
Ough, yeah. I already see that in open source projects, where users come demanding functionality for free. They don't even back the project or anything.