Startup Idea--Need Feedback

[tci22]

Hello--

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?

Thanks

[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!

[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.

[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

[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).

[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

[jacques_chester]

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

Still, Paypal was a regulatory nightmare too.

[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.

[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.

[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).

[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.

[hansy]

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

[bdclimber14]

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

[speakbin]

Good idea I'd probably use it.