Startup Weekend, Take 2

July 19th, 2008

Tags: Blog, business

So, the idea of Micropayment Startup Funding turned out not to be viable…. correction- we have no idea whether it was viable, because we simply didn’t have the expertise necessary to refine the business plan. Why? Well, read on.

Most startups start off as LLC’s, largely because it protects the partners from liability while still being a valid corporate entity. The catch is that these organizations can’t have more than 99 shareholders, which puts a serious limitation on the micropayment idea. If you’re looking for $1,000,000, your investors have to be able to pony up at least $10,000 each, and there’s nothing micro in those payments.

Therefore, for the concept to be viable, the company has to take the role of the investor on behalf of the fund contributors (either directly or via a subsidiary), which means it must become a financial entity structured like a credit union or a mutual fund. This then means SEC regulation, transparency, due diligence and most of all a cubic boatload of fiscal liability.

These are not insurmountable- in fact we’re fairly confident the model remains viable and profitable, however none of us felt confident enough to continue development on a prototype without getting some better expertise. It is, in short, an idea for mature and experienced entrepreneurs- One Security Lawyer, One Finance Guy, and One Technical Genius.

So where does that leave us? Well, we realized we had to get out of the Equity field and into offering Grants, because that removes the liability. Yet nobody’s going to offer a grant to a startup without equity, unless they are personally invested- and there exist plenty of companies that address the philanthropic market.

So where does that leave us? Scholarships. Create your own Scholarship. Students can display a YouTube video explaining why they should get a scholarship, and visitors can pay into a scholarship fund. All I have to do now is deliver in 24 hours.