PH Crowdfunding Co
Discussion
(mods, please leave this in the Business section!)
A few years ago I was the successful CEO of a multi million £ energy company which had some of the very best employees and partners any CEO could wish for. Unfortunately it didn’t exist, as it was the virtual PH Fracking Co Ltd.
This made me realise the extent and potential offered by the very wide range of PHers and how everything you’d need to start and run a successfully business was probably right here.
As you’ve guessed, I’d like to explore the possibility of doing this in the real world; developing a concept for a range of easily manufactured products into an operational business - however, not by the usual route of looking for cash investment.
What I’d like to do is gauge interest in the following. I would like to offer equity in exchange for services and processes like some additional CAD modelling/rendering and the following: metal machining, nylon moulding, e-commerce, assembly, distribution, web dev & hosting, accounting and legal.
If anyone wants to point out the potential pitfalls and how to prepare for/work around them, I’d be very interested to about it, as well as any other experiences from anyone who’s engaged in a similar approach to starting up with others.
Come on then, let’s have your thoughts and experiences please...
A few years ago I was the successful CEO of a multi million £ energy company which had some of the very best employees and partners any CEO could wish for. Unfortunately it didn’t exist, as it was the virtual PH Fracking Co Ltd.
This made me realise the extent and potential offered by the very wide range of PHers and how everything you’d need to start and run a successfully business was probably right here.
As you’ve guessed, I’d like to explore the possibility of doing this in the real world; developing a concept for a range of easily manufactured products into an operational business - however, not by the usual route of looking for cash investment.
What I’d like to do is gauge interest in the following. I would like to offer equity in exchange for services and processes like some additional CAD modelling/rendering and the following: metal machining, nylon moulding, e-commerce, assembly, distribution, web dev & hosting, accounting and legal.
If anyone wants to point out the potential pitfalls and how to prepare for/work around them, I’d be very interested to about it, as well as any other experiences from anyone who’s engaged in a similar approach to starting up with others.
Come on then, let’s have your thoughts and experiences please...
Happy to take on the web dev and hosting side.
I'd suggest that it would be best to get 3D renders made up of potential products, market them and get pre-orders/sign-ups to guage market interest before going to the expense of prototypes and working products.
I imagine the biggest pitfall would be everyone agreeing what a fair share is for each role and then how the company would be run in terms of leadership.
I'd suggest that it would be best to get 3D renders made up of potential products, market them and get pre-orders/sign-ups to guage market interest before going to the expense of prototypes and working products.
I imagine the biggest pitfall would be everyone agreeing what a fair share is for each role and then how the company would be run in terms of leadership.
I'm not sure exactly what you're proposing, but assume that you mean that suppliers to the company receive shares in lieu of cash, which in my limited experience results in mismanaged expectations, headaches and aggravation.
BTW, I'm a Financial Analyst and have spent most of the last decade building financial models and business plans to facilitate the inception of a project or company, or sale of a company.
I'll happily do yours for a fee and then buy shares in the company!
BTW, I'm a Financial Analyst and have spent most of the last decade building financial models and business plans to facilitate the inception of a project or company, or sale of a company.
I'll happily do yours for a fee and then buy shares in the company!
I'll chime in on the legal issues, particularly with regard to intellectual property. If there is a strategy to obtain patent or design protection for the product, discussion will need to be in confidence between all the parties, i.e. off forum (or a hidden, invite only, non-scraped part of the site). This is because a patent application should be filed before a public disclosure, and it is highly preferable to do the same with an application for a registered design. Trade marks do not have this issue, but it is a good idea to file an application sooner rather than later, and of course get the domain names. Copyright is not an issue, it comes into existence automatically.
As to ownership, there should be an agreement sorted asap that all members sign, setting out that any IP they dream up will be owned by the company/partnership/entity.
In terms of offering my services, I would love to, but I am regulated which means that it has to be done through my employer as they are the entity with the indemnity insurance. My employer will not be up for this sort of thing. You may have some luck with patently on here, who runs his own firm and therefore can (within reason) do what he likes.
You will find the situation is similar with any solicitors on here.
As to ownership, there should be an agreement sorted asap that all members sign, setting out that any IP they dream up will be owned by the company/partnership/entity.
In terms of offering my services, I would love to, but I am regulated which means that it has to be done through my employer as they are the entity with the indemnity insurance. My employer will not be up for this sort of thing. You may have some luck with patently on here, who runs his own firm and therefore can (within reason) do what he likes.
You will find the situation is similar with any solicitors on here.
It sounds an interesting idea, but full of issues... my thoughts though would be:
- under-capitalised businesses often fail - how would this business be capitalised / financed?
- how do you balance the value of effort put in against equity stake? Is legal advice worth more than web design or hosting? How do you value brand, or prototyping, manufacture or marketing?
- how would decisions be made? vote based on equity stake?
- who would be directors and how would they be remunerated for taking the risk?
- what would be the business structure?
- how would you deal with others wanting to be involved / or those who wish to finish their involvement?
- who would be 'in charge' another good reason that businesses fail is when there is no strong direction / vision / leadership
- how would quality of input be judged / monitored - e.g. if a 10% stake was agreed for a website, but then that was written badly / had fault.
I am sure there are many many more considerations - a key thing to remember is that businesses fail more because of people issues than anything else - the legals for IP / patents / etc. are simple comparatively, and can belong to the business - but dealing with people is not easy...
I have been involved in a lot of start up businesses and this violates one of my main rules - when a business wants work to be rewarded with future earnings / shares it is usually because the business is not in a secure financial position... It is fine to accept shares instead of cash as a gamble on a future upside, allowing the business to invest the money in growth instead, but a business which can't afford the payment and can only gain services by giving away its lifeblood equity is in a parlous state.
- under-capitalised businesses often fail - how would this business be capitalised / financed?
- how do you balance the value of effort put in against equity stake? Is legal advice worth more than web design or hosting? How do you value brand, or prototyping, manufacture or marketing?
- how would decisions be made? vote based on equity stake?
- who would be directors and how would they be remunerated for taking the risk?
- what would be the business structure?
- how would you deal with others wanting to be involved / or those who wish to finish their involvement?
- who would be 'in charge' another good reason that businesses fail is when there is no strong direction / vision / leadership
- how would quality of input be judged / monitored - e.g. if a 10% stake was agreed for a website, but then that was written badly / had fault.
I am sure there are many many more considerations - a key thing to remember is that businesses fail more because of people issues than anything else - the legals for IP / patents / etc. are simple comparatively, and can belong to the business - but dealing with people is not easy...
I have been involved in a lot of start up businesses and this violates one of my main rules - when a business wants work to be rewarded with future earnings / shares it is usually because the business is not in a secure financial position... It is fine to accept shares instead of cash as a gamble on a future upside, allowing the business to invest the money in growth instead, but a business which can't afford the payment and can only gain services by giving away its lifeblood equity is in a parlous state.
akirk, lostmotel - thanks for the thoughts you've put forward. I should probably clarify, the proposed business isn't yet formed in any way, so hasn't had the chance to be put in a perilous state. However you both put some very relevant points forward which clearly need very careful consideration. Perhaps there are PHers who've operated under similar circumstances who may be able to advise.
However I did ask for thoughts re: pitfalls so thanks for raising them.
However I did ask for thoughts re: pitfalls so thanks for raising them.
Edited by ReaderScars on Tuesday 6th December 18:26
uber said:
If the idea is that good go and raise some private funding and give away 10% and save all the stress.
The fundamental reason for taking this approach - or at least considering it - is because VC/private equity firms etc, (in my experience) like to see a team behind the business and there isn't one.Therefore my thoughts are that this possible consequence is a 'side effect' of the slightly unconventional approach and would have to be accepted.
Edited by ReaderScars on Tuesday 6th December 22:01
ReaderScars said:
The fundamental reason for taking this approach - or at least considering it - is because VC/private equity firms etc like to see a team behind the business and there isn't one.
That is a good concept, however I am not sure that this will necessarily build the best team.They will be looking for:
- previous experince of startups / that stage of business
- entrepreneurial expertise
- financial savvyness
- expertise in the specific market
- expertise in the particular product / service
- drive and energy
- something about the team which increases % chance of success
- something about the team which a competitor wouldn't have
- a team with skin / risk in the game
Is that what you will end up with? Or will you end up with a bunch of people whose skill sets vary from building websites to CAD skills to... etc.? VCs don't want dead weight in a company, plus they will challenge why a rag-tag bunch of people own equity... A VC prefers companies which generally have followed a reasonably standard route... self-funded, brought in finance from families & friends, maybe an angel round etc. They want to see that equity has gone to those who have brought in the ability to grow the company, i.e. Investing cash to invest in and grow the business... Equity for a website is not as clean a logic... In fact your concept works better for a organically grown / non-invested company... get the right sets of skills and the correct agreement and it might work, could be challenging though to build a company for early investment...
ReaderScars said:
The fundamental reason for taking this approach - or at least considering it - is because VC/private equity firms etc, (in my experience) like to see a team behind the business and there isn't one.
Therefore my thoughts are that this possible consequence is a 'side effect' of the slightly unconventional approach and would have to be accepted.
1% equity for £2000 of professional time might give you the services you need without paying up front but locking them in long term will be a nightmare. It only takes a better designer to come along or a guy who can produce stuff cheaper and the ship will sink faster than the Titanic. Therefore my thoughts are that this possible consequence is a 'side effect' of the slightly unconventional approach and would have to be accepted.
Edited by ReaderScars on Tuesday 6th December 22:01
Rather than just reply negatively "uber", perhaps propose potential solutions or real world examples of your experience so the OPcan learn from them.
Perhaps some sort of Virtual Workplace can be created and run the business along the lines of "Valve" who generally use a peer-review system for reward(s), that way everyone gets a say on ownership % based on their respective input / expertise.
I would also think of this as a small scale operation rather than something to be initially worked on in a full time capacity? If the current risk exposure is merely a few hours of peoples time to try and define a concept, then why not.
Good luck!
Perhaps some sort of Virtual Workplace can be created and run the business along the lines of "Valve" who generally use a peer-review system for reward(s), that way everyone gets a say on ownership % based on their respective input / expertise.
I would also think of this as a small scale operation rather than something to be initially worked on in a full time capacity? If the current risk exposure is merely a few hours of peoples time to try and define a concept, then why not.
Good luck!
Trexthedinosaur said:
Rather than just reply negatively "uber", perhaps propose potential solutions or real world examples of your experience so the OPcan learn from them.
Perhaps some sort of Virtual Workplace can be created and run the business along the lines of "Valve" who generally use a peer-review system for reward(s), that way everyone gets a say on ownership % based on their respective input / expertise.
I would also think of this as a small scale operation rather than something to be initially worked on in a full time capacity? If the current risk exposure is merely a few hours of peoples time to try and define a concept, then why not.
Good luck!
I am not being negative I'm just being realistic whilst offering a potential solution as requested.Perhaps some sort of Virtual Workplace can be created and run the business along the lines of "Valve" who generally use a peer-review system for reward(s), that way everyone gets a say on ownership % based on their respective input / expertise.
I would also think of this as a small scale operation rather than something to be initially worked on in a full time capacity? If the current risk exposure is merely a few hours of peoples time to try and define a concept, then why not.
Good luck!
Right now its only an idea and the only thing people can lose is time. In 6 months and say serious traction is gained can you see everyone being as friendly for their smaller slice of the pie.
It would cost more money to set up an official bullet proof structure than it would to just hire the services in.
Trexthedinosaur said:
Rather than just reply negatively "uber", perhaps propose potential solutions or real world examples of your experience so the OPcan learn from them.
Perhaps some sort of Virtual Workplace can be created and run the business along the lines of "Valve" who generally use a peer-review system for reward(s), that way everyone gets a say on ownership % based on their respective input / expertise.
I would also think of this as a small scale operation rather than something to be initially worked on in a full time capacity? If the current risk exposure is merely a few hours of peoples time to try and define a concept, then why not.
Good luck!
Thanks!Perhaps some sort of Virtual Workplace can be created and run the business along the lines of "Valve" who generally use a peer-review system for reward(s), that way everyone gets a say on ownership % based on their respective input / expertise.
I would also think of this as a small scale operation rather than something to be initially worked on in a full time capacity? If the current risk exposure is merely a few hours of peoples time to try and define a concept, then why not.
Good luck!
akirk said:
That is a good concept, however I am not sure that this will necessarily build the best team.
They will be looking for:
- previous experince of startups / that stage of business
- entrepreneurial expertise
- financial savvyness
- expertise in the specific market
- expertise in the particular product / service
- drive and energy
- something about the team which increases % chance of success
- something about the team which a competitor wouldn't have
- a team with skin / risk in the game
Is that what you will end up with? Or will you end up with a bunch of people whose skill sets vary from building websites to CAD skills to... etc.? VCs don't want dead weight in a company, plus they will challenge why a rag-tag bunch of people own equity... A VC prefers companies which generally have followed a reasonably standard route... self-funded, brought in finance from families & friends, maybe an angel round etc. They want to see that equity has gone to those who have brought in the ability to grow the company, i.e. Investing cash to invest in and grow the business... Equity for a website is not as clean a logic... In fact your concept works better for a organically grown / non-invested company... get the right sets of skills and the correct agreement and it might work, could be challenging though to build a company for early investment...
Perhaps I haven't been clear - the reason for taking this approach is so VCs/Private Equity outfits wouldn't need to be approached, at least at the outset, if at all. Maybe (perhaps further down the line) and as usual, once all of the hard work is done, then a VC/angel/private equity outfit might possibly be approached to help the business realise it's full potential. If ALL VCs/angels approached at that stage don't like the formula then another method of finance would have to be considered.They will be looking for:
- previous experince of startups / that stage of business
- entrepreneurial expertise
- financial savvyness
- expertise in the specific market
- expertise in the particular product / service
- drive and energy
- something about the team which increases % chance of success
- something about the team which a competitor wouldn't have
- a team with skin / risk in the game
Is that what you will end up with? Or will you end up with a bunch of people whose skill sets vary from building websites to CAD skills to... etc.? VCs don't want dead weight in a company, plus they will challenge why a rag-tag bunch of people own equity... A VC prefers companies which generally have followed a reasonably standard route... self-funded, brought in finance from families & friends, maybe an angel round etc. They want to see that equity has gone to those who have brought in the ability to grow the company, i.e. Investing cash to invest in and grow the business... Equity for a website is not as clean a logic... In fact your concept works better for a organically grown / non-invested company... get the right sets of skills and the correct agreement and it might work, could be challenging though to build a company for early investment...
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