Firstly I thought Couch Tycoon was a joke*, then upon further inspection it seemed to be for real** after all. It struck me as the kind of silly idea that comes up between friends where it pops out, then you pause, then the cogs move a little faster in your respective brains and you share that look of "hey actually, that isn't such a crazy idea" (oh to have a dollar for every startup idea that was born from a sentence that began with the words "wouldn't it be cool/great/useful if...")
To apply a crowd funded model to high risk startup enterprises in much the same way that Zopa and Prosper have modelled P2B and P2P lending does have a lot of merit (as an idea at least).
With Couch Tycoon, things get a bit more hairy when you get to the fulfilment/ownership parts of the equation. The service is not accredited by the FSA/SEC/CESR to act as an investment advisor, so they have instead created a proxy casino-like system whereby you give them money, they issue you with game like credits (read chips) that you can invest with (read gamble) and then if you want out you can then swap your credits for real money again (read good luck) if it hasnt been assigned to a venture.
They aim to look after an investor's money up until the total amount needed is raised, at which point they will then give the money to the venture, take a 10% success fee (so if you need 100k for your venture, 110k will need to be raised with 10k remaining in CouchTycoon's pocket) and the ownership/equity of the venture will be help by Couch Tycoon's parent company who will apparently act as a trustee for your investment. In their own words:
"PIPELINE ventures GmbH or an affiliate purchases the real shares of the financed venture with the money collected through Asset Slip sales. This company holds all the real shares on a trust basis, the investors on CouchTycoon bought as fictional shares (Asset Slips).
So no user on CouchTycoon will be a real shareholder of a venture he buys Asset Slips from. As CouchTycoon investor you only buy fictional shares due to legal reasons. But you can deal them like real shares. Mr. Idle´s company will be the real owner of the real shares, but he acts as a trustee for you. So your fictional shares give you the same rights like you had with the real shares."
So in a sense they would make money twice. Firstly from the success fee, and secondly from the interest that is accrued on the money held in escrow whilst a venture is waiting for the full funding round to be completed (however long that may take).
To be honest it looks like a tough sell, especially when it isn't backed by any notable names from within the established financial/banking/VC arena; but it would seem that the financial industry as a whole is indeed in need of a rather fundamental shakeup which may well come from some unknowns from outside of the system.
It wasn't that long ago that Zopa was playing the role of outsider; they are now expanding quite quickly (Zopa now has 200,000+ customers) and have had an impressively low default rate. Prosper have also charted a course to success using the very same P2B/P2P model with in excess of 580,000 customers and $117,000,000 in currently active loans in operation. If crowd funding can disrupt the arguably slow moving and bureaucratic banking industry, why can't it work for VC too?.
(update: note that the Zopa default rate has recently risen, but only a little).
You could also argue that an individuals credibility for creating financial stability is only being as good as the last billion they did/didn't lose, and right now a lot of very credible names are proving to be pretty damn good at losing large amounts of money.
As an entrpreneuer the idea of crowd funding has a definite appeal over the well trodden and labour intensive 9 month show-pony process that has become the investment norm, so rather than dismissing it entirely, I'm gonna file Couch Tycoon under Wait and See.
--
* I am still not entirely sure that CouchTycoon isn't just the world's most overly thorough Web Meme.
** The perception of being seen as "not serious" comes entirely from the manner in which the service owners have created a fictional 'character as owner' to illustrate their concept (and get around the legal right to play broker). This approach is playful and creative, but somewhat convoluted and perhaps even the biggest early risk they might face when getting people to buy into (in both the figurative and literal sense) what is essentially a good idea (crowd funded VC funding).
Comments