EmbarkonsFounder'sBlog

Need funding for your app or book or music?

Crowd funding, contests, group financing, direct offerings, incubators, and a host of new models are part of a trend to transcend the one-to-a-few approach. Not surprisingly, peer financing is emerging a new model that allows your peers to participate as funders.

On March 19, at the Peer Financing Conference, we are going to bring together some major rock stars of Silicon Valley and look at how we can make new ground. These are just some of our rock star panelists:

Danae Ringelmann - Co-founded IndieGoGo to democratize fundraising. She brings entertainment industry and finance expertise, and serves as an Advisor to The Conversation.
Dan Schatt - Senior Director, Financial Innovations, PayPal is responsible for defining the business and product strategy for PayPal’s initiatives with financial partners.
Chris Gill - President and CEO,  Silicon Valley Association of Startup Entrepreneurs (SVASE). Chris has co-founded 8 companies with 6 achieving successful liquidity events. In February 2010, SVASE launched a Seed Fund Program in conjunction with Cambridge West Ventures.
Chris McCoy - Founder and CEO, YourSports. Chris had a vision that every game in sports–no matter its audience size–should be streamed online. Ever since, his company has been on a mission to find a repeatable, scalable, and profitable business models to make that vision possible. With crowdfunding, YourSports thinks they’ve finally found it.
Eric Klein - Managing Partner, Klein Venture Partners and a seasoned executive at many F500 companies, has founded or played an early role in a number of Bay Area startups, and through Klein Venture Partners is an active angel investor in consumer-focused startups.
Raymond Lau - Co-Founder and CEO of PlayHaven, a leading provider of online communities for iPhone games that creates a connection between game developers and their fans.
Ankit Agarwal - Founder and CEO of Micello, Inc. a leader in creating accurate indoor maps of places of interest, shopping malls, college campuses, airports, convention centers, and making them available on any internet-enabled device.
Kayvan Baroumand - COO, Plug and Play Tech Center, is responsible for the center’s multiple business divisions providing early stage technology companies accelerated access to angel, institutional and corporate venture funding, flexible real estate services, and a lot more!

If you are a developer, a content generator, an investor, an entrepreneur, come and join us at the Sun Microsystems Campus in Menlo Park for a half day conference that will challenge your thinking, inspire you and open up a range of possibilities that you didn’t know existed.

To join the conference, go to peerfinancing.eventbrite.com, and get $20 off the cost of the general admission ticket. Use promo code “FF20″.

Imagine an idea that you feel passionately about.  Turn away from your computer and imagine your idea coming to life.  Think first about how you would do it.  Who would you hire?  Where would your office be?  Think about the article about your idea in the newspaper or a magazine or this blog.  If your idea did maintain your passion, the rest of this post won’t matter much to you.  But if you could imagine your idea taking life, think then about how to fund your idea.  For most of us this is where a long pause comes.  And it is usually the pause that moves the idea to hiatus to stall out.

Ideas aren’t a dime a dozen.  Ideas are powerful.  They change the world–and can certainly change yours.  What are a dime a dozen are ideas that never get started.  Why?  Because you either have to take a huge risk yourself–living off savings or credit cards and paying the costs of the people that you have to hire or you wait to find the person who will back your idea.

Most people can afford to take the plunge but are always at risk of swimming out too far and then being unable to swim back to shore.  If you try to raise money from someone, get ready for a long wait.  Even if you know someone and they love your idea it will take 2 months.  Getting introduced to someone new will take time for the introduction–and the inevitable meeting of the (fill in the blank, son-in-law who knows your business, golfing buddy, out of work friend who could be a great marketing guy) who need to bless your idea before it will get funded.

And you do all of this for ideas that often take less than a month’s salary at a good paying job to get off the ground.

What is the alternative?  Peer financing.  We have created a new way to fund creative works, like iPhone apps, by allowing developers to sell wholesale units of the application.  The buyers get paid when the units sell at the iTunes store.  Developers get money right away.  Our idea is called appbackr.

Here’s how it works:  when an iPhone app gets created, a developer gets $.69 for a $.99 app.  From the time an app is first considered to the time until it sells, it is typically about 6 months until the developer gets paid.  By selling wholesale units, you are getting a buyer to make a wholesale purchase of, say, 1000 apps.  Each unit generates $.25 for the developer, so $1000 units =$250.  When that unit sells, the wholesaler gets $.50.  The developer gets an additional $.15 (for a total of $.40).  A developer can pre-sell up to 50,000 units at $.25–that’s $12,500, enough to code, build the UI and market a good app.

The developer is “giving up” $.29 a unit as a profit to the wholesale buyer.  That is about 1/3 of the net retail value from a sale on iTunes.  What the developer is getting is immediate funds; a relationship that lasts only until that unit gets sold (each unit has a queue number, so if a purchaser buys units 1-100, when units 100 sells, if no other units are sold, the developer goes back to keeping 100% of the amount due to her for each app); and distribution channels–each buyer has an incentive to help you sell more apps.

It is a new model and one that we will be beta testing at our launch which starts March 19.  In the meantime, the site is by invitation only.  We invite you to sign up at appbackr.com.  We’ll add more “verticals” as we go along and refine the process.

If you like the idea, we could use your support because our app is entered in a competition sponsored by PayPalX, the developer site at PayPal.  Each vote for us means a lot.  Voting ends on Friday March 5.  It takes a few minutes to do but we have created a page which explains the process at www.appbackr.com/challenge.html If you can support us with your vote, we’d be grateful.  If you do vote, drop us a note at ivoted@appbackr.com so that we can let you know the results of the competition.

This is the first of our new experiments in peer financing.  Keep an eye on our progress.  We are trying to change the world so that ideas can come to life with the support of each of us, not just a few of us.

Time is the biggest challenge to launching a new idea.  It costs less here in the U.S. to start an idea, but it still takes an onerous amount of time to match idea with funder.  The mission at Embarkons is to match ideas with people and to enable peer participation and financing for ideas.

In December we spun out a new idea called appbackr which is a way for buyers and sellers to get together and fund an idea.  The idea is breathtakingly simple:  a developer creates an app, or an idea for an app and sells whoesale units to buyers who profit when the retail unit eventually sells in the iTunes store.

The idea is explained in more detail on our site:  www.appbackr.com.

I want to ask your support because our idea has a chance to come to life.  We are in the middle of a challenge sponsored by PayPalX, the developer site from PayPal.  It is their APIs that enable the financial transaction at the heart of appbackr.  So the plug is here.  Take a look at www.appbackr.com/challenge.html and take the time to register at X.com and then vote for appbackr (d1021).  Voting ends March 5, Friday.

We need to innovate in terms of financing.  Great ideas no longer are decided top down.  But the financing for them is.  appbackr democratizes financing.  It distributes risk and profit efficiently.  The idea is new, but the problem it solves is old.

Our idea made it from thought to submission to the PayPal competition in 50 days.  We are one of 55 ideas that survived from an original 690.  Your voice and vote will make a big difference whether our new idea will get a look by the top VCs in the land.  This will take 5 minutes.  We are ahead of the pack right now, but that is because of grassroots support.  We want to make sure that some last minute scheme doesn’t meet our chance to see the light of day.

Easy instructions are at www.appbackr.com/challenge.html

Looking for the resources that can help your start-up to get up and going is a critical to the success of your venture.  The right lawyer; the right accountant and the right banker can help tie your idea into the right people.  It takes imagination to figure out how to get an idea off the ground.  If it were easy to do, you are probably doing the wrong thing because it may mean that there are no barriers to entry and that you are delivering a product that is in a mature state.  Silicon Valley Bank has been a good resource for me.  They, like lawyers, see a lot deals and can be helpful in market intelligence and pattern recognition.  By that I mean the ability to discern what is working; what is getting funded and how your idea maps into both.

It is so easy for people with ideas to just talk to themselves.  If you are doing something new other people often are not skilled at providing useful advice.  It can be discouraging to have someone confused and befuddled about your idea and the value that you think it can bring.  Also, it is easy and, by the way, sometimes right, to think that if “so and so had the imagination that you have they would be out building ideas” and therefore that if they aren’t, they are unqualified to give advice.

But you must talk to people even if it is just to have a better discussion with yourself.  Embarkons is featured in Silicon Valley Bank’s discussion of boot strapping.  Laurie Lumenti-Garty is the Managing Director at the Entrepreneur Services Group at SVB.  She has been very supportive of Embarkons and has helped me to keep the dialogue going about how best to achieve my objectives.  That may sound like a hackneyed line, but for a banker like Laurie she has to to invest real time in companies because many of them have nothing more than a good idea when they come to the Bank.

Anyway, assemble a world class team; lean on smart service providers; and build away.

The next time you’re in a Wal-Mart, consider how the retailing world would look today had Sam Walton’s father-in-law not bankrolled his first store. Imagine the recording business had Ahmet Ertegun’s dentist refused to make a $10,000 investment to launch Atlantic Records. And credit Leslie Wexner’s aunt for the seed money that funded the small women’s apparel shop that morphed into The Limited.

This article from Kiplinger tells the $2billion story of how ventures get started in the U.S.  Embarkons is working to make it easier and more democratic and more transparent.

A fundamental characteristic of many entrepreneurial ventures is the imbalance between the resources currently controlled and those needed to capitalize on the opportunities. Few ventures truly face pure financing problems, but rather more complex “resourcing” issues, i.e., how to gain access to the extensive collection of resources needed to succeed, such as management skills, distribution channels, networks, technology, and the like. In many instances, money will indeed provide access to those resources. But when there are funding constraints, where access to finance is not unlimited or is associated with huge costs, it becomes critical to use the fundraising exercise in a more creative manner, as a holistic approach to resourcing the firm.

The above I think perfectly characterizes the true challenge faced by Idea builders; venture-ists; entrepreneurs; and people who want to change the world.  Join the community at Embarkons and let’s work and finance our ideas together.

Authors:  Ralf W. Seifert, Benoît F. Leleux and Christopher L. Tucci

Nurturing Science Based Ventures is also available from Amazon.

We are very excited to announce that Embarkons is now a part of AddThis.  Ideas and projects start everywhere and for many entrepreneurs they are solving a problem.  That problem may reside anywhere–in an article that we read; on someone else’s blog; anywhere.  Now Embarkons is available on 450,000 sites.  Say you see something about the crisis in Darfur and you want to start a project to respond–just click the Embarkons light bulb and you start a project which is linked back to the article.

The article becomes the challenge to solve and your project becomes the solution.  There can be thousands of responses to one challenge.

And of course, the idea is the inspiration and the fuel is the money and people that you need to make it work.  All of that happens on Embarkons.

We are so excited to bring Embarkons out to become a distributed solution for starting ideas and ventures.  Thanks to Justin Thorp at AddThis for championing our efforts–and to Anil Kumar for building the application.

See the press release about AddThis and Embarkons to read the whole story.

SVASE is hosting a panel discussion on Social Financing.  I will be moderating the panel which includes some innovative entrepreneurs in the social financing space and Bill Reichert a VC from Garage Ventures.  The session will take place at Sun Microsystem’s Menlo Park campus.  This is a great chance to learn how social equity can be converted into financing for your idea, project or venture.  Embarkons is all over peer-to-peer financing for ventures.  Using your own network to secure financing is often a better way to seed your business than the long and slow process of trying to secure often mercurial venture financing.  Sprowtt is introducing a new marketplace for early stage companies and one of the founders will be on the pnael.  Entrepreneur Commons has a new not-for-profit model and seed fund.  They will add a lot to the discussion of new models for financing.  If you are interested in attending, it would be great to have you in our discussion.

You have probably heard someone say this if you have been around a corporate culture.  It is simple and true.  People lose interest.  They get cold feet.  Other opportunities look more attractive.  Political capital gets depleted.  Mandates change.  What people often miss is that it applies to new ventures, perhaps most especially.

What we often miss is that this adage applies to the things that we are working on as well.

Take a typical scenario:  you have a great idea and you build interest by involving a family member,  a friend, a colleague, etc.  You start on your journey.  Times passes without any victories and people start to respond to you more slowly and then you become the email that they send Friday, late afternoon.  That email gives the sender a sense of satisfaction that they have responded to you–and makes it likely that you won’t get back to them that day, a weekend will pass, and well, then it is another week.  Deal, dead.

You might say, “but there was no deal, these are just friends who like me and like my idea.”  But each person who gets involved is a deal.  They are the ambassadors who are opening up your network to social capital an idea well discussed by University of Chicago Professor Richard Burt in Structural Holes.  Social capital is your first deal.  If you don’t have the energy and power of that first circle, likely your idea will stall, like an airplane with not enough lift.

Here is a remedy in two parts:  keep people involved through updates–easily done on Embarkons which allows people to create a project and then send out quick little flashes of news.  The next part is ask people to participate.  When people are asked to do something they have an investment in you.  (Chris Matthews, MSNBC host talks about this in Hardball.  He suggests that when you visit someones house that you peruse their bookshelf and ask to borrow a book.  They have then made an investment in you.  (And when you return the book you show that you are someone to be trusted.)

Peer-to-peer financing and participation is about harnessing the interest and energy and talent that is out there.  With the long tail of ideas, someone is interested in your movie, book, business, NGO, concept, paper, etc.  Include your idea on Embarkons–tag it generously and let people find you.  You can even request that another Embarkons user puts you on their watchlist.  If you just wait for Mr. Money to come and write a check, you are playing the lottery.  Likely he will say no.  Build some social capital–with little white space between deals–and you will have momentum and your idea will be able to withstand a no or two.  In fact, your “team” can be energized by a defeat.

Getting people involved is the key to success.  Participation and financing from peers is the first circle for success of your project.

SVASE & GABA Present: Social Financing - Using the Web to Mine Money for Your Venture

Click Here to Register Now!

Raising money from VCs is increasingly difficult for early stage companies–even ones with a good product.  Social networks have been great for generating awareness but how do you turn social equity into funds for your business?  Social financing is working well for entrepreneurs in developing countries and those improving the well-being of society and the environment.  Could that same model work here?  New models are rapidly emerging that are changing the landscape for how businesses raise money.

Join this dynamic panel of experts as they discuss this timely topic!

• What is social financing?
• What is microfinancing?
• What new tools are available today?
• How companies facilitate sources of social funding
• How social networks can become social financing engines

The Panel:

• Trevor Cornwell, Founder & CEO, Embarkons
• Marc Dangeard, Founder, Entrepreneur Commons
• Joshua Sams, Co-Founder & CEO, Sprowtt Marketplace
• TBD

Moderator: Sumaya Kazi, Sr. Social Media Manager, Sun Microsystems

When: Thursday, November 19

6:00 – 7:00 pm: Networking and hors d’oeuvres

7:00 – 8:15 pm: Panel Discussion and Q&A

8:15 – 8:30 pm: Additional Networking

Location: Sun Microsystems, 12 Network Circle, Building 12, Menlo Park, CA 94025

Area Map

Pre-Registered Rates (All Rates Include Hors D’oeuvres):

Members - $20 Affiliates who advertise this event - $29; General Public - $49

Pre-registration closes at 9 PM the day before of the event

Walk-In Rates: Add $10.00 to listed price

To reserve an Exhibit Table:

Business Showcase Exhibit Table – member rate: $149; non-member rate: $250

(Includes exhibit table and two tickets to the event.) Contact Info@svase.org

Pre-registration closes at 9 PM the day before of the event

Seating is limited, so early registration is recommended to avoid disappointment on the day.

This event is co-sponsored by Sun Microsystems, http://www.sun.com/startupessentials/overview.jsp?CID=928364.

Speakers’ Bios

Trevor Cornwell, Founder & CEO, Embarkons

Trevor Cornwell is the founder and CEO of Embarkons (www.embarkons.com), a peer-to-peer financing and participation utility for ventures. Embarkons is a marketplace for what ventures need–from hiring to funding to expert advice.  People can join and contribute to a venture or start their own.  Embarkons was just included in AddThis making the site accessible on 450,000 sites.   Cornwell’s career has been spent developing and growing new enterprises in media and technology-based businesses deploying Internet technologies to provide content and streamline customer offerings. Most recently Cornwell developed video personalization software which produces customized video streams based on viewer behavior. One of Cornwell’s most successful entrepreneurial ventures was the start-up of the business jet reservation network Skyjet which was acquired by Bombardier.

Marc Dangeard, Founder, Entrepreneur Commons

Marc is the founder of Entrepreneur Commons, a hybrid structure composed of a not-for-profit organization providing mentoring to entrepreneurs and an investment fund providing seed capital for their ventures.

Prior to starting Entrepreneur Commons, Marc was president of the European American Angel Club, an angel group in the Bay area which he co-founded in 2005.

Marc is also a managing partner at Melcion Chassagne et Cie, an investment banking firm headquartered in Paris. He is their representative for the Bay area, where he advises entrepreneurs through the various phases of their venture’s lifecycle.

Marc holds an engineering degree from ENSAE Toulouse (1987), the top aeronautics engineer school in France, and an MBA from HEC Paris (1988), the top MBA program in France. He has been working in Silicon Valley since 1991.

Joshua Sams, Co-Founder & CEO, Sprowtt Marketplace

Prior to Sprowtt, Joshua was active in emerging markets. He actively managed investments in Turkey, speculating that there would be risk arbitrage opportunities as Turkey’s ascension to the E.U. neared. Prior to this, Joshua studied on and off at Harvard, taking time away to pursue real estate and other investments during 2001-2005. Joshua has a broad educational background, including behavioral economics and particle physics. Using the current economic crisis as a catalyst, he is now seizing the opportunity to affect social change by promoting democratic access to capital markets. Through the use of technology, he hopes to create an alternative investment banking dynamic for the benefit of early-stage companies and public investors.

Sumaya Kazi, Sr. Social Media Manager, Sun Microsystems

Sumaya Kazi is an internationally recognized innovator, leader, speaker and award-winning entrepreneur. She frequently speaks at professional conferences and educational institutions inspiring audiences on topics such as entrepreneurship, non-profit work, intrapreneurship, young professional issues, social media, diversity and technology.

By day, Sumaya works at Fortune 500 Sun Microsystems, a company that develops the technologies that power the global marketplace. Sumaya was recruited by Sun at age 22 and has since quickly moved up in her positions in the Executive Communications, Worldwide Operations and New & Social Media teams. As a Senior Social Media Manager in its Global Communications group Sumaya is charged with developing new and innovative programs to capture, expand and socialize new and evolving media, analyst and influencer communities.

Recognized by her colleagues as a Social Media ‘Maven’ and ‘Guru’, Sumaya has taken her knowledge and expertise in the media world and has integrated it within her work at Sun. Sumaya provides thought leadership and a young perspective on various issues for a major player in global business.

Sumaya founded The CulturalConnect, an online media publishing company dedicated to young professionals around the world. For her passion and success around her entrepreneurial endeavors, Sumaya has been recognized by BusinessWeek Magazine as one of America’s ‘Best Young Entrepreneurs’, CNN as a ‘Young Person Who Rocks’, ColorLines Magazine as an ‘Innovator to Watch in 2008′ and has been recognized as a Who’s Who of Global Emerging Leaders among many other notable accolades. Sumaya was recently honored to join Nobel Peace Prize Winner Muhammad Yunus in a ‘Meeting of the Minds’, the youngest invited.