The model I see is a business that allows small private investors to makes small ($1 to 25k) calls in emerging businesses that have already cleared the angel investor / public offering hurdle. However, the first thing we need to make this happen is a proper summary of the legal issues involved. Kudos to Duck. - Chris
Well, I rarely get a chance to poke around in new & emerging company stuff anymore (I'm a half-time general counsel for a small consulting firm - mostly soft IP sorts of things), so I'm at least as happy to be on board as you are to have me...This is a lot more interesting than researching Oregon Administrative Rules around limited-use public swimming pools, which is my other burning assignment at the moment (for my condo's HOA). - J-P Voillequé
At the very least, if MicroVC is looking for as little headache as possible - this can always be done outside of the US. There are plenty of companies in need of seed capital, as well as small investors looking to diversify their portfolio. SEC problem - solved. - Aviv
Excellent points, but I also believe we can easily make ourselves compliant if we do things the right way. - Brad Nickel
That's right. If done properly, there are a few ways MicroVC can operate legally and successfully. In a nutshell, one [rather complex] implementation could be a payment system offering privately-issued digital currencies, each backed by various types of assets (just like how goldmoney.com offers accounts backed by gold). For example, this would then allow for a currency backed by "MicroVC Trust XXI" (of which only asset is $25K worth of shares in, say, SocialMedian) - allowing for individuals worldwide to add funds to an account in their name - even send/receive money in much the same way that PayPal allows. Each currency issued comes with its own terms (ie. in case of liquidation event, company shutting down, etc.). There would be a few things to take care of as far as money transmitting regulations are concerned, but it's doable and done right could take off pretty nicely. That was one of the ways to tackle this problem - again, in a nutshell. There's a whole lot more to it. - Aviv
Wow Aviv, that is a fantastic concept. I need to think through that a bit more, but believe it makes a lot of sense. Where are you based? - Brad Nickel
Phoenix AZ, and yes - the concept is indeed interesting :) - Aviv
I'll write up some more about it later. I've given this whole thing a lot of thought a few years back and have experience with privately-issued currencies, logistics, etc. - Aviv
I am in Miami, FL. While I believe there is merit in developing this openly, conceptually, I'd still like to have a chat about how to do and structure this. - Brad Nickel
“Daniel J. Pritchett - I'm a blogger watching SM explode all around me, this seems like an interesting way to get involved financially. http://www.sharingatwork.com”
Thanks for coming. I am going to pull some ideas together and post them up soon, but you are right abotu the explosion and what better way for us to approach the investment concept. - Brad Nickel
Daniel, I like your blog and its focus. Will send you an email shortly. - Brad Nickel
Thanks Brad, I'm still new at the whole thing and trying to keep growing and learning. - Daniel J. Pritchett
“VC is big money. Social lending like on LendingClub, lenders usually invest less than a few hundred dollars per investment. A $500k VC would require thousands of investors at $100-$500 each. Seems unlikely. How to bridge the gap?”
Take a look at funds like Y!Combinator and Techstars. They are low first round players - $20k to help new companies get started. That is really where I see the potential for this as well. - Brad Nickel
Like mini Angels? Am I wrong to say that microVC is smaller than Angel funding? - Yuvi (has IRL friends!)
Yes and no. My thought was that there are options for bundling investments up to say about $25,000 even if very small all together or include people that could afford say $1000 - $5000 as part of a bundle. I've also had people say that micro funding levels make sense for companies that just need a little cash to get things rolling. Since we are doing this on the fly, I would love to hear what you think. I think there is room for both. - Brad Nickel
So, you collect money from diff. people, give it to 1 person who handles all the paperwork? - Yuvi (has IRL friends!)
Brad, it doesn't necessarily need to provide VC money that the company really needs. MicroVC could be simply a [well-connected] club of sorts that gets involved in companies that already have other streams of financing. Then it's marketed as an opportunity for smalltime investors to risk a little bit of money for fun and relatively big rewards. For example, MicroVC would invest $20K in, say, SocialMedian, and then sell membership units in the SM trust it created - for example 100 units at $200 each, plus ~ $10 admin fee per unit. If and when there's a liquidity event, the money gets dispersed and it doesn't even have to take a cut of the profit to make money for itself (of course that's an option). So for that SocialMedian transaction, MicroVC would collect $1K in fees. - Aviv
Of course MicroVC could roll in the fees into the investment and hope for a liquidity event. That amounts to free money basically. - Aviv
Aviv, that is the model I was speaking to earlier and somewhat similar to my current business, so I really like that way of doing things and think logistically it makes the most sense. - Brad Nickel
“Sorry for the repost : Hey guys I am definitely interested, I am from Miami Florida and recently started something up that is getting a little viral, and I know soon enough I will need more resources to keep it going.”
Emmanuel, I am in Miami as well. Would like to hear more about what you are doing. Strange to find as many Miami people as I have lately in web world. - Brad Nickel
Awesome! Yeah we should definitely talk, what do you do bytw ? - Emmanuel Pozo
misread the post, sorry .. they are actually seeking funding .. .heh - Emmanuel Pozo
No problem. We are seekign input from customers and funders alike. - Brad Nickel
Right there with you. Lets see if we can make something happen. - Brad Nickel
I'm a web developer, unfamiliar with MicroVC (and don't know much about VC either), but interested in learning about the concept. I'm a member on sites like LendingClub and Prosper. - Hao Chen
We are creating the concept of MicroVC right here together and lendingclub and prosper area both excellent conceptual models for the concept behind this. - Brad Nickel
Julie, did I see you say you are from Florida? I am in Miami. Excited to get it rolling. - Brad Nickel
MicroVC is conceptually doable. SEC regulations will make it a fun ride, but not necessarily easy. Let's do this. One problem I foresee would be potential companies who may find it questionable to receive an investment from a MicroVC trust/club/group, especially if concerns over SEC compliance arise. - Aviv
Like, investing a comparatively smaller amount (say 500$ a month) in someone's pet project and get a share of the Ad revenue? - Yuvi (has IRL friends!)
Ofcourse, radically different from traditional VCing, but this is supposed to be MicroVC, right? - Yuvi (has IRL friends!)
We've discussed both models combining and single investments like that and I think they both have potential. Please feel free to tell us more along this lines. - Brad Nickel
