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Some Notes to Congress on the Economy

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Re: Some Notes to Congress on the Economy

#11

Post by Retric »

johnrob wrote: post #10
joshu wrote: post #9

Earlier quoted context omitted.

the vast majority of wealth available for investment is represented primarily by institutions and entities, and secondarily by people who meet the requirements. of the latter group, i suspect the vast majority do not invest anyway. it takes a lot of stomach to systematically invest in enough opportunities that a positive return is likely. it certainly makes me queasy from time to time. anyway, i'm reasonably sure tha…

What would happen if a startup was seed funded by 30 people at 1K each? It could be very interesting. The company would only have 30K of investment, but on the flip side there would already be 30 people who want to see it succeed. 30 evangelists ready to pump whatever the company can produce. Nobody really knows how well a model like this would work, because it's not yet legal.

This has been tried in the past the result was an is mostly pyramid schemes and other forms of investment fraud.

See: multilevel marketing for a more common equivelent.

Re: Some Notes to Congress on the Economy

#12

Post by Retric »

johnrob wrote: post #10
joshu wrote: post #9

Earlier quoted context omitted.

the vast majority of wealth available for investment is represented primarily by institutions and entities, and secondarily by people who meet the requirements. of the latter group, i suspect the vast majority do not invest anyway. it takes a lot of stomach to systematically invest in enough opportunities that a positive return is likely. it certainly makes me queasy from time to time. anyway, i'm reasonably sure tha…

What would happen if a startup was seed funded by 30 people at 1K each? It could be very interesting. The company would only have 30K of investment, but on the flip side there would already be 30 people who want to see it succeed. 30 evangelists ready to pump whatever the company can produce. Nobody really knows how well a model like this would work, because it's not yet legal.

This has been tried in the past the result was an is mostly pyramid schemes. See: multilevel marketing for a more common equivalent..

Re: Some Notes to Congress on the Economy

#13

Post by anamax »

westbywest wrote: post #7
rmorrison wrote: post #3

Earlier quoted context omitted.

Could anyone today really start a bank, an oil company, a car company, etc? Actually, a few businessmen in my home town got together and started a bank. Tesla Motors is an example of a car company started, according to Wikipedia, by a couple of guys with personal funds (while they created the business plan). Regularly, although rarely, companies start out small, attack some market, and then grow into the multinationa…

I'm uncertain about the ability of independent start-ups to gain much traction in the petroleum industry. Much of that has to do with owning/having access to fleets of ships that are capable of bring you and your equipment to/from the right location on time. That said, the BP oil spill in the Gulf of Mexico has indeed shown some light on potential niche fields that could be accessible to start-ups, e.g. Kevin Costner…

> Much of that has to do with owning/having access to fleets of ships that are capable of bring you and your equipment to/from the right location on time.

That's not the only way to build an oil company.

There are lots of folks who rent an on-shore drilling rig.

If you hit reasonable amounts of oil, transportation appears. Sometimes it's in the form of a guy who builds a pipeline from said small field to a place with better transportation.

Those are two of the many ways that folks have built oil companies without fleets of ships and the like. (It's not just "dirty work" - there are many tech opportunities in oil-relevant data analysis.)

For example, the only US billionare who died this year started his oil company with $10k and a pickup.

Re: Some Notes to Congress on the Economy

#14

Post by johnrob »

Retric wrote: post #11
johnrob wrote: post #10

Earlier quoted context omitted.

What would happen if a startup was seed funded by 30 people at 1K each? It could be very interesting. The company would only have 30K of investment, but on the flip side there would already be 30 people who want to see it succeed. 30 evangelists ready to pump whatever the company can produce. Nobody really knows how well a model like this would work, because it's not yet legal.

This has been tried in the past the result was an is mostly pyramid schemes and other forms of investment fraud. See: multilevel marketing for a more common equivelent.

I had a similar thought when describing the idea. However, I don't think we're comparing apples with apples. The accredited investing law has been in place since 1933, so if the pyramid schemes you're referring to really are conceptually the same as what I described, they would have been illegal.

Re: Some Notes to Congress on the Economy

#15

Post by tlb »

logicalmind wrote: post #2

It's nice to see the nod to Y-Combinator and the realization that many businesses can be started with much less money today. But there is also another point to realize. Have you noticed how large the barriers to entry are in some industries? Could anyone today really start a bank, an oil company, a car company, etc.? Some markets (especially in technology) are opening with very low barriers to entry. But some markets…

You don't need to start a "car company" to be in the car industry. As a new company, you should make components or technology for cars, oil drilling, banking, etc.

Re: Some Notes to Congress on the Economy

#16

Post by Retric »

johnrob wrote: post #14
Retric wrote: post #11

Earlier quoted context omitted.

This has been tried in the past the result was an is mostly pyramid schemes and other forms of investment fraud. See: multilevel marketing for a more common equivelent.

I had a similar thought when describing the idea. However, I don't think we're comparing apples with apples. The accredited investing law has been in place since 1933, so if the pyramid schemes you're referring to really are conceptually the same as what I described, they would have been illegal.

Accredited investment law's have significantly reduced the impact of most pyramid schemes because they make it far harder to get the ball rolling still you can find a few more recent examples at: http://en.wikipedia.org/wiki/Pyramid_scheme but mostly they are outside the US.

For a better look at the pyramid schemes closest relative:

http://en.wikipedia.org/wiki/List_of_Ponzi_schemes you can see several home grown examples mostly involving more wealthy people. What separates them IMO is Pyramid schemes give you plenty of foot soldiers to sell the idea, Ponzi schemes are limited to the initial con artists which focus on people with money by default.

PS: There is a friends and family exception to these things, so if you only need 30k you can probably collect to from people you already know. However, random strangers have a hard time distinguishing a reliable businesses from a con artist so it's a hard call to make.

Re: Some Notes to Congress on the Economy

#17

Post by natemartin »

pinko wrote: post #4
rmorrison wrote: post #3

Earlier quoted context omitted.

Could anyone today really start a bank, an oil company, a car company, etc? Actually, a few businessmen in my home town got together and started a bank. Tesla Motors is an example of a car company started, according to Wikipedia, by a couple of guys with personal funds (while they created the business plan). Regularly, although rarely, companies start out small, attack some market, and then grow into the multinationa…

FWIW, Tesla Motors is out of cash and may fold or be sold: http://venturebeat.com/2010/05/27/elon-musk-personal-finance...

There's a difference between the CEO being out of money, and the company being out of money.

Re: Some Notes to Congress on the Economy

#18

Post by eserorg »

logicalmind wrote: post #2

It's nice to see the nod to Y-Combinator and the realization that many businesses can be started with much less money today. But there is also another point to realize. Have you noticed how large the barriers to entry are in some industries? Could anyone today really start a bank, an oil company, a car company, etc.? Some markets (especially in technology) are opening with very low barriers to entry. But some markets…

I started my own oil company. I'm 27. See: http://www.eser.org

Stats:

* There are thousands of independent oil and gas producers in the United States.

* Independent producers develop 90 percent of domestic oil and gas wells, produce 68 percent of domestic oil and produce 82 percent of domestic natural gas.

* Most independents have fewer than 20 employees.

See the "Independent Petroleum Association of America": http://www.ipaa.org

Re: Some Notes to Congress on the Economy

#19

Post by pinko »

natemartin wrote: post #17
pinko wrote: post #4

Earlier quoted context omitted.

FWIW, Tesla Motors is out of cash and may fold or be sold: http://venturebeat.com/2010/05/27/elon-musk-personal-finance...

There's a difference between the CEO being out of money, and the company being out of money.

Yes, but they're both in trouble. From the above article:

"Musk’s willingness to funnel his own cash into Tesla has for years sustained the faith of fellow investors and reassured would-be car buyers in 2008 when the company’s finances were in perilous shape." ... "Tesla, likewise, is dealing with its cash flow problems by borrowing money from a friendly source — the United States government, which has eagerly backed cleantech startups through a Department of Energy loan program. Tesla burned through $37 million in cash in the last three months of 2009, according to amended S-1 documents, filed with the Securities & Exchange Commission in preparation for its IPO. Tesla slowed this burn rate in the first quarter of 2010 to $8.4 million, but only by drawing down part of a $465 million loan from the DOE, while reporting a net loss of $29.5 million. Tesla’s sales were flat year-over-year in the first quarter, but declined precipitously in the U.S., according to a former Tesla executive."

My point is just that Tesla is not in fact a good example of how "anyone today" can start a successful capital-intensive business like a car company (which is how it was being used above).

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