They have no rule as to how investors can get return on their investment, but it seems to work very well despite that.

Actually we had the same idea at the same moment !

Just have a look on this website : http://www.challengepost.com/

More Idea oriented but the concept is there !

cheers,
Hervé

Great article!! It’s nice to see people like you bringing new ideas to change the way businesses have always been financed (change paradigms).

Here are some clarifications about what you’ve said..

1- from an entrepreneur perspective, since it’s a loan, you still have to start reimbursing it right away, even though you haven’t created any value yet

J.N. – First, it’s really important to understand that we won’t only grant loans to startup businesses. We will especially invest in SMEs that already have created value and/or are in the process of, namely growing and established SMEs. Otherwise, it would be too risky for investors.

Moreover, if the investors collectivity decides so (because they manage the investment fund), a borrower who ask a grace period on his loan would be able to get it, which will help him to generate value for example 1 year without paying any interest.. Their is a lot of possibilities with our platform. A collectivity is wiser than one or few specialists, and thus investors will be able to pick the best projects for them, but also to help local SMEs (startup, growing, mature or declining one).

2- from an investor point of view, even if the company makes huge benefits, you only get the loan interests that were negotiated at the beginning

J.N. – Actually it could be more lucrative for investors that the our fund invests in business equity, but it would also be more risky.. Loans are probably a better way to assure good and stable returns to investors.. In starting up this project you also have to think about what people want and I don’t think they want to be pay in 4 or 5 years, they need rapide returns on their investments.

3- from a philosophical standpoint, it doesn’t encourage value creation enough, because investors don’t have a particular interest in the company being successful, just in it having enough money to reimburse their loan.

J.N. – As I said priorly, it’s possible to create value even while reimbursing a loan. Not as efficiently as if it was an equity investment, but nevertheless its possible.. For SMEs (borrowers), Colektivo is a good alternative to banks, but not that much an alternative to business angels and venture capital firms.. These kinds of investors aren’t only bringing cash to companies, they are also bringing knowledge and experience.

Thanks

We will keep you informed

1- from an entrepreneur perspective, since it’s a loan, you still have to start reimbursing it right away, even though you haven’t created any value yet
2- from an investor point of view, even if the company makes huge benefits, you only get the loan interests that were negotiated at the beginning
3- from a philosophical standpoint, it doesn’t encourage value creation enough, because investors don’t have a particular interest in the company being successful, just in it having enough money to reimburse their loan.

It feels too much like what a bank would do, even though it has obvious advantages over it. Maybe their approach is more adapted to generic SME’s, I don’t think it’s suitable for software startups, which is a little more specific in that it involves a little more risk.

What do you think?

Like you said, it sounds a lot like Open Source, and it’s not a coincidence since I’ve been an OS advocate for quite some time now. But contrary to Open Source, which leaves unanswered THE BIG QUESTION as to whether it’s fair not to share commercial benefits with contributors, this system would make it possible to answer it.