Best tv shows: Making Easy Money

The next few years in the mobile industry are going to be interesting not only because Google and Apple are competing with each other at making the most advanced mobile operating system, or because Nokia, for the first time in their 145 year old corporate history, have a non-Finnish citizen running the ship, but because the fundamental way we interact with each other and the world around us is going to change thanks to near field communication.

Man used to carry cash until roughly 50 years ago when the first credit card with a magnetic stripe was released. It brought about a huge change in people’s spending habits, not only because they could actually borrow money and pay it back at a later point in time, but because the visual artifact of slips of paper and coins was removed from our understanding of how money really works and how much it’s actually worth. Now, with the recent announcement of Isis, a collaboration between Verizon, AT&T and T-Mobile aimed at making your mobile phone the only thing you need to take with you when leaving you home, the world is set to change yet again.

How does that make Visa, one of the ancestors of plastic cash, feel about their role in the future of the daily transactions that make our world economy go round and round? I’m not going to copy and paste the entire article, which I recommend you read, but here is the main argument:

“It might be easy to build an iPhone app that lets you enter in the phone number of a co-worker you want to pay back for lunch, a common promise in the new mobile-payments world. But then someone has to do the intricate behind-the-scenes data processing that makes sure the card isn’t stolen, the people involved aren’t scammers, the payer’s account has the necessary funds and the actual money transfer happens quickly and without a glitch.”

They’re on the defensive, citing their experience with handling mobile payments, but just like Visa killed cashed half a century ago, maybe the little NFC chip inside your next smartphone will the beginning of something new and exciting?

[Via: NFC World]

Raising funds for a small business can be a daunting task for any fledgeling entrepreneur. Whether it be from friends and family or from the general public, finding investors, setting terms of the funding, assigning equity and filing compliance documents is a challenge. Enter ProFounder, a stealth startup that launches today to ensure that all entrepreneurs and small businesses have access to an easy and simple fundraising platform.

ProFounder, which has been in private beta for the past year, offers entrepreneurs two ways to raise money on the site: through a private fundraising round, and/or a public fundraising round. The private fundraising rounds allow entrepreneurs to share a percentage of their revenues with investors (their friends, family, and community) over time. Essentially, this type of fundraising round is an offering of securities, and ProFounder helps facilitate compliance with state and federal laws related to this offering.

Public fundraising rounds allow entrepreneurs to share a percentage of revenues with both investors (anyone can participate – friends, family, community, and general public too) as well as a nonprofit organization. For both public and private fundraising rounds, ProFounder has a limit of $1 million raised.

Entrepreneurs can apply to Profounder, upload a pitch to offer to potential investors and then create a term sheet with Profounder’s templated forms and compliance sheets. As stated above, the term sheets are based on a revenue-share model. ProFounder then gives businesses a page where they can invite friends, family, and investors to a destination page that allows users to make contributions and investments directly on the site.

The bonus of using ProFounder is that the platform allows unaccredited investors (i.e. friends and family as opposed to a venture firm) to participate, so anyone can be an investor. And entrepreneurs can set their own investment terms and ProFounder facilitates all of the compliance, including tracking the number of investor seats in each state where each of their investors live, making sure entrepreneurs know which compliance documents they need to file, making sure entrepreneurs know which filing fees to pay, etc.

ProFounder, which was is the brainchild of Kiva co-founder Jessica Jackley and fellow Stanford Business School alum Dana Mauriello, also manages payouts and will pull funds from the entrepreneur’s bank account every quarter to pay investors their share of the business’ revenues.

ProFounder makes money by charging a 5 percent fee (of a public raise) and/or a flat $1,000 fee for any private raises.

If a company pays out investors before the terms of the deal end, then founders can choose to donate the rest of the revenues to a non profit organization. For example, if you offer two percent of your revenues to investors over the next five years and within two years, everyone has been fully paid, then the next three years of two percent of your revenues will go to the nonprofit.

To date, ProFounder has facilitated 5 successful private fundraising rounds, raising a total of $155,000 and engaging a total of 108 investors. For example, Bronson Chang, a recent USC alumni moved back to his native Hawaii to help out with the family business—a candy shop in Honolulu. Bronson wanted to open another shop in the area and raised $54,000 from 19 community members including friends, family, and USC classmates. Bronson is also currently raising an additional $60,000 through a public investing round.

Another private beta tester, BucketFeet, is a start-up from two recent college grads that makes hand-painted sneakers. The fledgling entrepreneurs managed to raise $60,000 from 37 investors including friends, family, and classmates across the country.

ProFounder’s model is similar in some ways to Kiva’s microlending, which recently opened up its platform to American entrepreneurs. Other companies playing in the space include Kickstarter, and Prosper.

But Jackley and Mauriello say that with the 27 million new and existing small businesses in the U.S., there are plenty of opportunities to offer fundraising and investment platforms to this demographic. Eventually, ProFounder will include social networking integration and possibly a convertible debt option for term sheets, say Jackley and Mauriello. In the end, Mauriello says, it’s about making sure that small business entrepreneurs have access to much-needed resources in terms of raising money.

eric seiger do

Wednesday, 1 December 2010

Making Easy Money

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