Mark Cuban is an American billionaire entrepreneur, ranking 407th on Forbes’ “World’s Richest People” list. He owns the Dallas Mavericks and is chairman of HDNet (a HDTV Cable network). He’s been involved in some of the biggest names in eCommerce – Broadcast.com, Weblogs, Grokster, IceRocket…
..his latest idea is Open Source Funding.
“Rather than trying to be a Venture Capitalist, I was looking for an idea that hopefully could inspire people to create businesses that could quickly become self funding. Businesses that just needed a jump start to get the ball rolling and create jobs. Im a big believer that entrepreneurs will lead us out of this mess. I just needed a way to help.
I will invest money in businesses presented here on this blog. No minimum, no maximum, but a very specific set of rules. Here they are:
1. It can be an existing business or a start up.
2. It can not be a business that generates any revenue from advertising. Why ? Because I want this to be a business where you sell something and get paid for it. Thats the only way to get and stay profitable in such a short period of time.
3. It MUST BE CASH FLOW BREAK EVEN within 60 days
4. It must be profitable within 90 days.
5. Funding will be on a monthly basis. If you dont make your numbers, the funding stops
6. You must demonstrate as part of your plan that you sell your product or service for more than what it costs you to produce, fully encumbered
7. Everyone must work. The organization is completely flat. There are no employees reporting to managers. There is the founder/owners and everyone else
8. You must post your business plan here, or you can post it on slideshare.com , scribd.com or google docs, all completely public for anyone to see and/or download
9. I make no promises that if your business is profitable, that I will invest more money. Once you get the initial funding you are on your own
10. I will make no promises that I will be available to offer help. If I want to , I will. If not, I wont.
11. If you do get money, it goes into a bank that I specify, and I have the ability to watch the funds flow and the opportunity to require that I cosign any outflows.
12. In your business plan , make sure to specify how much equity I will receive or how I will get a return on my money.
13. No multi-level marketing programs”
His blog post has attracted over a thousand comments so far but, nomatter what you think of the scheme, there are some parts of his rules which seem obvious.
It can’t depend on advertising for revenue
This is obvious. Companies are not making money on advertising – the smaller companies are drying up in the baking heat of the recession and larger companies are only just weathering the situation. Newspapers, wholly dependent on advertising for their revenue (and being vastly outpaced by online models of news distribution) are struggling if not already dead.
It must be cash flow break even in 60 days. It must be profitable within 90 days. If you dont make your numbers, the funding stops
This effectively mean you have to be selling your product within 30 days and you’ve gotta make some money from that initial sale. Companies are going to want to get NET30 after all. You have to be profit focussed and you have to exceed your business plan sales numbers.
In your business plan , make sure to specify how much equity I will receive or how I will get a return on my money.
This is the question that will give most entrepreneurs the heebie-jeebies. When you’ve worked your ass off on some project, the idea of giving part of it away it very tough to stomach. But if you don’t then there’s the question of how quickly you can pay him back (and at what return).
There’s nothing new here. This is something that Business Angels and Venture Capitalists have been doing for years. The difference is in the cachet that Mark Cuban may bring and the fact that this offer is being posted on his blog and not just an invitation on a VC web site. This idea isn’t really Open Source – it’s just taking the elevator pitch and putting it into some blog comments.
You can talk to VCs. They’re human. And some of them will be at the Digital Media Forum’s Innovation Accelerator which is an all-day event on the 24th of February in Dublin.