Log on and Prosper

The chicken and the egg dilemma never looks as daunting as it does in the startup scenario. Where does the aspiring entrepreneur turn to for capital for a business that doesn't exist yet? How does he or she get past the look of sheer skepticism beaming from the face of the loan officer?

The traditional routes for startup capital are exactly that, traditional. They are very slow, cumbersome, and unreasonable for the most part. And in a society that claims to have a private sector comprised of over ninety percent small business entities, it seems entirely counterintuitive. Other societies are creating new structures for the formation of capital that have tremendous potential.

For example, in Bangladesh, Muhammad Yunus has taken micro-lending from a novel concept to a workable model. The micro-lending concept is deceptively simple: extend small but useful chunks of cash to startup entrepreneurs, with little to no credit history or collateral; the people that are too high risk for bank loans. Often these loans are extended to parties with deep communal ties, which makes defaulting even less palatable.

You would think that with all the genius in America someone would have applied the lessons of micro lending to the aggregating powers of the Internet. And indeed the someone already has. Prosper.com is the micro-lending genius merged with the simplicity of eBay, or eHarmony, depending on how you slice it. So it says on the product wrapper.

How it works: Those in the market for capital post profiles explaining their background, their business and their intended use of proceeds. Armed with charming photos and winsome rationale for the entrepreneurial jaunt, the prospective applicant does his/her best to capture eyeballs. And like finding that perfect date, they lay out the specs for their preferred note terms, including principal, term, and interest. Like the Bangladeshi model, applicants are encouraged to enter associations that have collective credit ratings. Micro lenders, meaning anyone with a bank account and a net connection can then "bid'' on your note, or some portion of it. Once the total note has been bid on the funds will be disbursed.

There are real world results that I can vouch for. A startup client of mine actually received a 3 year note for 25K with 15% interest, terms that were infinitely better than the bridge note terms offered by his high net worth angel network. As a result, he was able to parlay that money into the offering plan for his Series A. All it took was him putting his profile up with a reasonable amount of information and being open minded.

Disclaimer:
Prosper and other micro lending web sites are relatively new fangled premise that may or may not be what you or your business truly needs. Let’s face it, debt under any name is still debt. Proceed with caution and remember that it has to be paid back.

Some useful links:

Review of Prosper.com
http://www.investorgeeks.com/articles/2006/08/15/prospercom-a-6-month-review/

Fundable.com—Another Micro Lending Site
http://fundable.org/

Zopa.com-- Another Micro Lending Site
http://zopa.com/ZopaWeb/

A Harvard Education at DSL Prices

The players involved in emerging growth and venture capital often steer their ships by their gut and the light of the stars. The sure truth is that most don't have any monopoly on crystal balls and any discussion of "process" or methodology is thinly veiled marketing speak. That has not stopped the brains at Harvard from attempting to conceptualize real frameworks and methodologies for the emerging growth crap shoot. Harvard also tackles other stubbornly opaque industries that loathe examination or quantification of their practices.

If anything, the Harvard Business School's Working Knowledge archive offers principled analysis for off the cuff enterprises. Consider their empirical analysis of ad spend versus box office performance for Hollywood feature films (Advertising and Expectations: The Effectiveness of Pre-Release Advertising for Motion Pictures). Consider also their analysis of Leadership principles from an emotional perspective all with gel coated time released Podcast convenience (The Authentic Leader). The Working Knowledge site is a terrifically scholarly and valuable resource. And most importantly, it’s all the rockstar power of Harvard faculty at your keyboard, without the misery of student loan payments. Perfect.

Mob Pyschonnectivity

Mob Pyschonnectivity

It’s my new catchphrase (not a genius work I admit, but work with me). It refers to the now common occurrence of repetitive information deluge that begins on the corners of the net and becomes a trillion crows cawing to blot out the sky. Corporations should be scared. The mighty cease and desist has morphed from the tool of choice to excise a threat into a lit bomb fuse. And this time the powder burns are still on the lapels of the film industry attorneys who tried to cease and desist away the a code that unlocks HD-DVD copy protection.

The “pass it along” of the number has wound its way through chat rooms, forums, and my personal favorite:

“Keith Burgon, a 24-year-old musician from Westchester County, New York, grabbed his acoustic guitar at noon on Tuesday and improvised a melody while soulfully singing the number. He posted the song to YouTube, where it has since been played more than 45,000 times.” (Read the rest of the NY Times Article (reg’t req’d))

When the news hit Digg.com, it mushroomed. Ultimately, Digg.com the new “Am I Hot or Not” for net news and media (it is actually a great site) decided that the crows were more frightening than the suits. It bowed to the pressure of its users, who felt anything less than defiance was a trespass on their speech rights. Digg has become the King Leonidas of the Net.

I am decidedly torn on this issue. I am a proponent of open discourse on the internet, but I am loathe to support the notion that all intellectual property has gone the way of the dodo. Moreover, I question a culture that advocates a mass information riot sometimes just to “stick it to the corporations.” In any event, Mob Pyschonnectivity is something that attorneys should be wary of before they automatically resort to letters that have a long half life on the net.