A new way to raise funds: The social funding

Some people might have noticed that Mark Zuckerbergs’ fan page on facebook was hacked (related article) which is pretty funny actually but not the point of this post. The interesting thing is what the hacker’s message was:

“Let the hacking begin: If facebook needs money, instead of going to the banks, why doesn’t Facebook let its users invest in Facebook in a social way? Why not transform Facebook into a ‘social business’ the way Nobel Prize winner Muhammad Yunus described it? [LINK] What do you think?”

Interesting idea if you think about it.. With such a huge user base, you would think that Facebook could definitely raise a LOT of money that way.. Who wouldn’t pitch a few dollars in the hope of a nice return? I’m no expert but there are certainly lots of legal issues and risks in doing so:

  • How many shares do you put on that social market place?
  • At what price per share?
  • Do you let users sell their shares to some other user (therefore recreating a market place with potential speculation?)
  • How do you distribute dividends? What are the users’ right on that front?
  • Let’s not forget taxes… 😦 How do users pay taxes? would this market place become a competitor to the Nasdaq (for example)?
  • Who controls for insiders fraud?
  • Who controls for hostile take over of all the shares available on this market? would there be a limit to the number of shares an individual can get?
  • Would this be limited to individuals only? (could be interesting)

I’m going to stop here because I’m just reacting on the spot and didn’t think that thing very deeply, but it seems to me that there is a pretty large legal issue around the idea. That said, I think it could be worth investigating how a company could raise money from it’s users, very much like you would get funding from friends and family in the early days of its start..

I like the reference to Muhammad Yunnus by the way.. if you haven’t read his book (banker to the poor), it’s really impressive.. This guy totally deserved the Nobel price. He changed the world by tackling a gigantic issue with poverty in the developing world. He has fostered Entrepreneurship and aimed at woman as the backbone of their community. Fantastic and inspiring example.

 

 

 

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One thought on “A new way to raise funds: The social funding

  1. the main reason is that you cannot have more than a certain number of shareholders before having to be listed (I think it’s 500 but not 100% sure). that’s one of the reason why when they entered that deal with GS, there was a minimum to be invested.
    And regarding Yunus, the microcredit market is experiencing huge problems right now. the amount of deliquencies raised dramatically, so the banks are sending people to seize assets. This led to a massive increase in the suicide rate in some provinces in India. Repossessing has now been banned in some provinces. Basically the model is collapsing…

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