Day 1 - $320, The Press, Plan B Options, Mike Arrington’s input
By Steve Poland • March 26, 2007
Last night I officially launched the Ringside Startup project. I actually had soft-launched last Thursday, notifying a handful of people — including the initial advisors. Wanted to work out any kinks before going public. The mistake I made was getting the thing digg’d that night — because come today, the digg is 3 days old — it only had a few diggs over the weekend, and I’m still not sure whether it could ever get to page 1 of digg.com now.
Last night I sent an email out to Pete Cashmore (Mashable), Mike Arrington (TechCrunch), Matt Marshall (VentureBeat), and Allen Stern (Center Networks). Pete posted relatively quickly (around 1am EST), but then posted another 8 posts before I woke up — so the post was buried if you read Mashable. (Note: Don’t compete on a Monday; wait and notify the press late Monday night or Tuesday morning). The others haven’t posted yet that I’ve seen — however other bloggers have done some posting (thank you!).
Received a lot of positive feedback/support from my Techquila Shots readers. Also received quite a few inquiries to the advisory positions — honestly, keep them coming in, but I’m focused on getting the contributions now and then in the future will possibly add more advisors. Right now, there’s nothing to advise on.
I’ve only raised $320 in reader contributions — thus, I’ve started thinking about Plan B options if I can’t raise the funds. I’m thinking I either need to find some larger sponsors — or possibly return the funds and instead find an angel (or two) now, have them invest and give up equity to them… and still openly blog the experience. That’d be fun, because we’d all get to learn the angel investment route right up-front. (Angels, feel free to contact me — note, I’m not asking for anyone’s money right now, just to be clear).
As for larger sponsors — $20,000 is a lot of pageviews — and I’m not sure I could reach the levels that would make it worth it to them. (Of course, if we assume this were to go on for 6 months — and they’re making a one-time payment now — maybe that would be enough pageviews. Note: I’m open to opening up 6 slots on the sidebar like TechCrunch and others do).
I just spoke to Mike Arrington for 15 minutes — I contribute to TechCrunch and even for me it’s impossible to get him on the phone — he’s a busy, busy man. His comments on the idea were to find a way to give up equity to contributors — or specify that the first $X in profits will be divided up to contributors. Something like that could make it more viral — contributors wouldn’t only be getting an education, but would have the possibility of earning a little cash of their contribution. He doesn’t understand why someone would put up the money — “even if someone doesn’t put up the money, they still get access to the blog.” Which is true — but only if I can raise enough contributions. If the contributions aren’t raised, then the project doesn’t go on (everyone gets their contribution back and there’s no insight to be gained from the advisors that are on-board and willing to comment openly).
The big problem why I’m not giving out equity or profits are the possible legal issues — I don’t want the SEC breathing down my neck. From my understanding, I might need a prospectus if I’m raising funds from 35+ individuals — and the individuals have to be accredited investors (or claim to be). Don’t take any of this paragraph as representing the truth — honestly, I don’t know. I’ve put an email out to Jay Parkhill — a VC lawyer that’s on-board as an advisor, to see what he has to say. If anyone has any insight on this, please advise.
FYI - If you’re curious about my traffic stats during this entire cycle, they are available here — although they are only updated once a day (early morning).
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7 Responses to “Day 1 - $320, The Press, Plan B Options, Mike Arrington’s input”
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Posts like this are exactly why people should put up some cash. This is invaluable education. I’m helping to spread the word and encouraging others as well. See here for a few more details: ...
Keep up the awesome work, definitely looking forward to seeing the progress!
[…] site officially launched last night, and unfortunately things didn’t go so well. Steve pointed out that he got the site onto Digg too early and also choose to announce his startup […]
Steve,
I think your concerns about equity are well-founded. However, I think there is a simple solution that could help navigate the legal landscape while also getting the fundraising fired up. I used this when I opened on e-tailer and while the long term prospects didn’t work out, my “investors” ended up pleased to have participated. (That said, I’m sure every situation is a little different in the legal sense, so make sure and double-check my work here.)
In essence, I offered not equity but a deferred cash payment for each dollar invested. It was essentially a forgivable loan to be paid out at one specific point in time. In this case, something like “1.5 dollars back for each dollar invested, paid either within 18 months of when I declare launch or when the company bank balance has averaged more then $50k for 90 days, whichever comes LATER. No equity attached” You’d need a little more protective language, but that might suffice.
You are essentially trading 30k in a year and a half for 20k right now. While that sounds like a bad bet - and in a vacuum, it is a bad bet - such a structure might work fabulously for this project. 18 months from now, your project will be in one of four places:
1. Non-existent. Put a provision in the contributing terms that says if the business doesn’t exist and has been disolved, there obviously won’t be any money to pay out.
2. Making revenue, but not enough to justify a payout. Thus the provision of “whichever comes later” protects you until the bank balance gets over the 50k average threshold.
3. Bringing in more funding, some of which can be used to pay off the initial contributors or maybe even extend their interest.
4. Making enough cash that you can pay the 30k and that’s that.
Obviously consulting with a lawyer is a good idea, but I think you should be able to add some enticements without having to form a Corp. or get accredited folks or worry about the SEC.
Hey Steve, A few thoughts…
-You’ve got to be patient and stick with it - few things are an instant success. Stay positive, keep doing the work, keep bringing people on one at a time, keep building the buzz, and then 3 weeks from now, just when you’re about to quit, that front page digg (or the equivalent) will happen and you’ll raise the rest of the money in an afternoon.
-Put yourself in your potential contributor’s shoes and ask yourself what the value is to them. My motivation for signing up was twofold: 1. I’m actually interested in learning along with you as you build the company and look forward to participating. 2: $10 for two links back to my blog and corporate site (especially if this takes off) is a good investment. Now, not everyone has the same motivations as me and will be of different value to you so you need to find additional drivers of value for your potential audience to really get this moving.
-As Seth Godin would say, you need to “get to the edges.” One place to start would be with the cost of participating. 5$ as a minimum is sort of middle of the road. Maybe go super low (1$ and let everyone put up a logo / blurb) or go high ($750 each and they get equity - that gets you your money but keeps you below the 35 person fund raising threshold). This is just one example - there are lots of other potential directions here.
-You may gain some affinity by better defining the project up front to give people a clear vision of what exactly it is they are participating in. As it stands right now, you have an interesting fund raising project, not a business which, as I said before, is interesting to me but maybe not the broader audience. Getting crystal clear about what you are doing now will also help you down the road as you prepare to ask for VC (or even angel) money. Just don’t make it about Twitter - please, I can’t handle anything more about Twitter…
Good luck, -Adam
One idea would be to guarantee that if the company “makes it” either by being acquired or becoming profitable, that some of the money/profit (a certain percentage based on the current investment) will go towards helping fund other startups in more of a educational form (something like TechStars, etc.). This provides an educational bend for people to donate the money to. If it succeeds their investment is going to help out others
Thinking Colin might have some interesting thoughts there. Would definitely be worthwhile to check into them further from the legal/securities perspective.
Don’t forget that you have TechquilaShots.com and all the screen estate and page views that it provides. Unless you have a fundamental problem with putting advertising up over there, if you are going to put ads on this site that some larger investor/sponsor is paying for, why not place them over there as well.
Heck, why not create your own “micro ad ring” and allow contributors to participate with you in the process? I’d see it going something like this: you already have it set up to receive PayPal contributions. It’ wouldn’t be terribly hard to set up an install of OpenAds and manage ad placement on others blogs. You sponsor/investors would be getting page views, and if you wrapped the ad units in some sort of memorable Ring Side Startup mock up with a link back to this site (in addition to the outgoing link to the actual ad) everyone might win.
The person placing the RSSU.com ad would be “participating” with you, the advertiser/sponsor gets more page views than just what you might be able to generate with this site alone, and RSSU.com gets some more visibility and incoming links as well.
What do you think?
You also might ponder selling yourself a little bit more.
VCs don’t invest in ideas… They invest in people. You need to tell why people should invest in you. Talk about the startups that you’ve worked with and how you’ve helped them succeed. Talk about the team you have that’s going to build this.
I’d also echo the sentiment that settling on a rough idea might be a motivator… While most VCs and successful entrepreneurs know darn well that ideas are just shy of worthless, I think the rest of the world really believe that the idea is 90% of the battle.
G’luck!