Crowdfunding social good hypotheses.
This vision, ironically runs counter to one of the very principles we teach, and expect of our entrepreneurs. FOCUS on an early adopter segment. If you use the word ANYONE OR EVERYONE in your customer hypothesis, it means you do not know who you are trying to help.
We have struggled with this recently, trying to figure out a way to truly democratize the funding process - by not investing in ideas or even teams, but by investing in the leanstartup process (Credit to 500 startups, for being among the first to actually put their money where their mouths are in this space).
We started our fund by offering $5,000 to any startup who did 100 customer interviews in 50 days. Not surprisingly - many people took us up on the offer. Not as many as you might think, but enough that it forced us to refine the model. Most of the people who completed the challenge were "social entrepreneurs living abroad". By definition, we never wanted to treat these incredibly awesome folks differently. We didn't want to give them a lower valuation to "penalize them" for trying to save the world. We also didn't want to treat them the same as entrepreneurs who really did face "market risk" as their primary obstacle. Asking someone to do 100 customer interviews to prove that education or clean water is a problem, is insulting. It is also wasteful by definition.
We have pivoted the model in the following way. Here is an excerpt from our last email to the community.
- Part of our mission is/was to make early stage funding more accessible to EVERYONE. That said, there is a clear difference in business model intent on the side of the entrepreneur that influences our funding ability. We are one step closer to solving this problem. AFTER you get $100 for your hypothesis, you have to make a declaration. You can tell us that you are aiming for a scale-able startup where profits or an exit are part of your strategy. Or you can tell us that you are mainly trying to solve a humanitarian problem (still, in a financially sustainable way). If you select the former, we will fund you for equity. If you select the latter, my current hypothesis is that we must fund you in a new and creative way.
- The funding must be crowdsourced like kickstarter
- The funding must be an interest free LOAN (unlike kickstarter, but like KIVA - more credit coming soon to KIVA ZIP for their inspiration)
- The funding must be a NO RECOURSE LOAN with a LONGER PAYBACK PERIOD than KIVA to adjust for truly early stage stuff.
- There must be a matching element.