Alternate Funding Conference report

Todd Walters, Loanio David Feldman, Feldman Weinstein & Smith Lawrence Langs, iBusiness Partners Dana Stetson, The Receivables Exchange How do you access capital in these very trying times? VCs and Angels still have money but unless you are a successful serial entrepreneur or are prepared for ridiculously low valuations and high equity giveaways you may want to hold on to your business plan. Likewise, banks are tighter than Fort Knox, so unless you don't need their money and your credit is too good to be true, you might not want to bother. That seems leaves a few choices other than rich Uncle Joe, assuming he kept his money out of the market. So, in this half-day conference we looked at some of the near and long-term solutions to this problem. If you are a company with receivables - purchase orders from creditworthy companies - then factoring is the shortest way to raise money. However, the rates are legally usurious - up to 38% APR. But with the internet, a company like The Receivables Exchange has opened your receivables up for auctioning and could theoretically lower that rate by half or more. For those who need smaller loans - under $25,000 - then you could have used crowdfunding with sites like Loanio, Prosper etc. At least you could have until November of last year. That's when the SEC, probably reeling from its criticisms over poor market regulation and overlooking the Madoff's $50bn scam, stumbled upon the one true threat to the banking system - the online aggregators of people to people loans backed by little more than good credit scores. This $100 million industry worth say, one grommet on the "Tarp" was determined to be in the business of selling securities, so they shut them down pending new filings. The solution appears to be some legalistic maneuver of repackaging the loans as bonds and so on. Nevertheless this type of funding will in likelihood return and probably become increasingly available to small business. One side benefit is that Loanio found that it could go public by self-registering, which is way to dramatically lower their underwriting cost. This leads us to the closing presentation by reverse merger guru David Feldman and iBusinessPartner Larry Langs who specializing in taking companies public through so-called sell deals - i.e. using a defunct public company shells to go public instantly (the stock exchange used this technique itself when it went public!). This is a great idea if you can attract investor money - especially when the market recovers. The only downside is the high cost of quarterly filings. Then again with the internet, those costs could come down.

WIKINOMICS REPORT

March 19 - iBreakfast

Katarina Skoberne, OpenAd.net
Nic Perkin, The Receivables Exchange
Jessica Morris, OurStage.com

The March iBreakfast was notable for showing how to put the world to work for you by tapping into idea marketplaces. This is not about Wiki software per se but about extracting value from the universe simply by putting it to work for you. We call it Collaboratition – motivating people to work together or against each other for a common purpose.

This is truly a revolutionary concept even though it has been talked about for a long time. What is clear now is that all the tools and public sentiment is in place for those who can think outside of conventional parameters to harness. This point is so important because it also explains why your next competitor is not likely to be your current one – since they are probably as captive as you are to conventional wisdom.

We looked at 3 companies using some form of Collab – in music, advertising and monetizing receivables.

OpenAd.net is a really good example of all of the above because it is a great way for marketers and advertisers to reach out to the world creative community for ideas. They pay OpenAd a fee of several thousand dollars and then put out a brief to their community of 10.000+ creatives worldwide and offer a prize – typically between $500 and $2000 – for a fleshed-out campaign idea. The concepts pour in. The most famous being one set up by Bono to retire 3rd World Debt. But many Fortune 500 companies like Gillette participate too.

And where does this groundbreaking company, now with offices in the US hail from? Slovenia.
Next, we looked at The Receivables Exchange, which monetizes the short term loan you give to customers when you allow them terms of 30 – 90 days. From their perspective this is a free loan which, worldwide is worth around $2.3 trillion. Now that’s a nice number!
This is often called factoring and normally, companies call their bank or a factoring company and get the best deal they can which is typically around 15-25% in annualized interest. By creating an open exchange, suddenly you have made your business opportunity available to the world and your interest comes down dramatically. Investors tend to get a very good return for their risk too.

Finally, there is OurStage.com, a music judging and promotion site which covers just about every genre from rap to world music as well video. It is open to all comers and has a monthly contest for around $500 in prizes in each category. The dynamics are very interesting. Aside from raising $13 million, the site has grown quickly and attracts 1.2 million monthly uniques.
Visitors are asked to judge two songs whenever they log on and here’s the secret – it is a “thin slicing” approach - you only have to listen to the first 15 seconds to judge. Naturally, that favors songs with the hooks up front, but even so, by aggregating the scores on these microjudgements, they come up with a good index of what is hot. Any musician, amateur or pro can submit and there is no fee. The site makes money through ads, selling songs and sending out the cream of the crop to record co.’s and concert organizers.

The eye-opening part is how they grew – by the musicians themselves, of course. That’s because today, every busker worth their salt has an email list and their own little marketing machine called: “emails to fans.” It can be postcards toom but you can’t beat the price of emails

So the lessons learned are: figure out who can be motivated to help you (especially ones who can multiply your message), how to reach them and how to execute with a great site. This is a key point because so much of this intangible that the IP rights are a critical issue.

The metaphor we chose to set this show in motion are UFOs and the Web, partly because, like the value concepts of Wikinomics, they have a way of popping out of nowhere and people seem hellbent on uploading these videos by boatload onto YouTube. The motivator appears to be the ubiquity of camcorders and a desire to let the world know you’re not crazy. Or is it too much Photoshop? Either way, the world works for you – you just need to figure out how to tap into it.

Other Blogs about this iBreakfast:
Why the Big 4 Labels are Dead by Ray Beckerman