

Startup Idea--Need Feedback - tci22

Hello--<p>How feasible would it be to create a startup that allows users to seek crowdfunding for projects and requires them to pay back a percentage of their profit to each person who contributed to the fund?<p>Thanks
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aginn
It is a good idea and there are some web entrepreneurs I know in the Dallas
area that are building something similar. Everyone is right who have commented
that you might run into problems with the SEC, then again Kickstarter often is
used as a solicitation platform of investors. There is a website in Europe
that allows people to fund startup ideas. I could not find it, but I know it
exists.

Recently, the SEC considered changing the rules for small investment amounts
(less than 1K). Maybe in the coming years, your idea will be possible.

There are creative ways around the SEC rules but it does get messy when people
want to cash out. Just get a good lawyer!

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Draft_Punk
As mentioned below, the main issue here is that you're violating a host of SEC
regulations. In simple terms, by crowdfunding a company to strangers on the
Internet, you've made your own "public offering".

I bought the domain ClusterFunder a few years ago with the same basic idea,
and even toiled with a dozen variations, but to maintain the site's value you
inevitably run into SEC issues.

They are currently reviewing a proposal that would make crowdfunding possible
up to 100K, so I'd stay up to date with that and proceed accordingly.

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mariust
It's a very nice idea, but you need to take in consideration the following:
Managing 10 projects with 100 backers / project so you already have 1000
people to take care + the founders of the companies, you really need to come
up with some simple way to do that, otherwise it will be very time consuming.

On the other hand check in with a lawyer, I know that there are some legal
issue regarding this type of project, I had a client how was having this
problem(I'm not sure if it's true or not, but I suppose so) Good luck

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ig1
It'd be messy, presumably you'd structure it as a loan with a special
repayment scheme. Having such a weird financing structure would (1) put off
other investors from investing (2) create an incentive for companies to
mimimize the profits shown on their books (ala the movie industry).

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maxdemarzi
IANAL, but I think you'll run into SEC issues with a setup like this.

Take a look at Reg D, 504

<http://www.sec.gov/info/smallbus/qasbsec.htm>

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jacques_chester
I had a similar idea to OP and ran into similar regulatory issues.

Still, Paypal was a regulatory nightmare too.

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zguy
As an alternative, you can work on something like meetup.com, but oriented
towards crowdfunding.

As soon as all the problems gets cleared away, you'll have something ready and
you could execute your business plan.

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abbasmehdi
Instead of crowd-funding, try crowd-sourcing for goods and services, dodges
the SEC and you still get most things you need. Also, profits can be hidden in
private companies, so give share in revenue and/or stock.

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SoftwareMaven
If some of the things the SEC is considering come to pass, that could be very
successful. To do it today, you'd probably have to set it up like a mutual
fund (IANAL).

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jimlast
I like it. I think crowdfunding is a major trend and we'll see it increasingly
used in the US and Europe for startups, not just developing countries.

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hansy
Love the idea and I myself have thought about similar concepts. Let me know if
you want to chat.

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bdclimber14
It's a terrific idea, but incredibly difficult execution given the regulatory
environment.

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speakbin
Good idea I'd probably use it.

