Solar Roadways has officially become another crowdfunding sensation. They’ve raised over $1 million USD on Indiegogo from over 25,000 people around the world, all to fund research, development, and production of solar panels that can be used to pave roads. This is amazing. This is wonderful. And it could all be soured if we hear in two years that they’ve sold out their backers and been bought by General Electric.
We’ve seen this movie before. Revolutionary startup turns to crowdfunding, thousands of people contribute, then two years later the startup gets sold to a huge corporation for billions of dollars and the backers get nothing. No say in the decision, not even a cut of the profits. This is what happened when Kickstarter-darling Oculus VR sold to Facebook.
Oculus’s backers were, understandably, furious.
The $2 million which the backers had collectively raised had all just served to make a few key Oculus people and investors very, very rich. If Oculus had been selling shares of stock, and their 9,522 backers had each bought in at an average of $210, then they’d each have $210,000 after the Facebook sale. These aren’t exact numbers, given that Oculus took extra venture capital after their crowdfunding campaign, but the principle is the same: the Oculus board and VCs made out like bandits, and the backers got shafted.
But it’s not really about the profits.
If this kind of a scenario were to happen with Solar Roadways, the backers would have even more of a right to be furious. Many of Oculus’s backers contributed money to receive a developer version of their VR headset, so these instances at least had the pretense of preordering a product. Solar Roadways, on the other hand, isn’t selling functioning solar panels to backers. At most they’re offering commemorative gifts like pieces of artwork or coffee mugs; the sort of thing you’d expect from a local public radio station’s fundraiser. And as of this writing, 30% of Solar Roadways’s backers haven’t elected even to get a bumper sticker, and are just giving a pure donation. None of the Solar Roadways backers are in this because they want to make money. They’d probably be shocked to find out that its founders are.
For a company that’s doing a not-for-profit-style fundraiser, you’d expect them to actually be a not-for-profit.
Judging by this investor-courting page that’s since been removed from the navigation bar on Solar Roadways’s website, it’s clear that they, at one point, planned to seek venture capital. Now that they’ve raised a million bucks through crowdfunding, they really ought to consider another option.
There’s still a legal minefield around giving equity in a company to crowdfunders, so it’s understandable why Solar Roadways isn’t offering a return on their backers’ investment in the event that they get acquired for billions of dollars in the future. The backers aren’t even interested in that return on investment anyway. But there’s another solution that’s in the exact same spirit of Solar Roadways’s stated goals of being revolutionary and sustainable. They could reorganize as a cooperative.
The Solar Roadways backers should have a right to dictate the company’s future. They can enable this by giving every one of their 25,000+ backers a right to vote on company decisions. One person, one vote, are how cooperatives work; it’s not related to how many “shares” anyone has. There’s already tried-and-true legal structure enabling a cooperative’s “customers” to become its members, and Solar Roadways can make use of it.
Really, this is all the Oculus backers ever wanted. The fact that they didn’t get a slice of the 2 billion dollar pie stung, sure, but the real injury was the fact that their company — the one they felt and believed they had a stake in building, which is basically the entire appeal of crowdfunding — had been taken away from them.
By promising its backers not a share in the profits, but a say in its direction, Solar Roadways can ensure that it always lines up with the public interest in its mission to pave the world’s roads with renewable energy, and that its owners or other investors are never able to compromise that mission in any way in the pursuit of their own profit. It would be fitting if the company that hopes to literally pave the way for ecologically-sustainable energy also had a more ecologically-sustainable business model. After all, the social and financial world are ecosystems too.
In becoming a cooperative, would Solar Roadways scare away self-interested VCs and investors? Probably. That could be a challenge for a project as massive as paving solar panels into millions of miles of roadway. But they’ve already achieved amazing things on a shoestring budget, and now, especially, by depending on the power of a big swarm of enthusiastic people. Who’s to say they can’t go even further by doubling down on that?
There should be a crowdsourcing option that works like that, but that’s not the idea behind kickstarter or indiegogo. As you mention you get what you paid for, but in the end it may not end like you wanted. Apparently people liked the idea so much they didn’t care for the right to dictate the company’s future.
True. That’s not what kickstarter is about, or at least that’s not how it’s set up. What you’re looking for is a mini-IPO. Those are about to be allowed in the US. They weren’t allowed since 1933, because of a long history of “blue sky” scams. There are lots of restrictions in the new scheme because of that; SEC registration is still required, but less info is required. This turns on on early 2015, and it will be interesting to see how it plays out.
A more general problem is the decline in membership organizations where the members really run the organization. You are not a “member” of Facebook; you are at best a customer. Even most non-profits don’t have real elections. Voted for the head of the American Automobile Association lately? Or State Farm Mutual Insurance? Both once had elections.
Hmmm. Crowdfunding and ‘croudsourcing the administration’ are two different beasts. I do like your idea of making the company directions subject to the ‘stakeholders’ directly. But one of them does not require the other.
Sometimes people don’t contribute in such crowdfunded projects to get something in return. Sometimes they just wish the thing to move forward. Just think about how much natural resources this thing could save? How much excess energy it would produce? How much the excess energy would allow in terms of recycling? I’d back it up just for that. The real question to ask here, if Facebook bought Oculus what would prevent Exxon Mobil from buying this company and killing it? See where I’m getting at? “No, dear customers, we at Mobil are trying to diversify our portfolio and move towards a sustainable and environmentally friendly future.” Right.
Even Oculus itself, what good did Facebook buying it make? I’m all for companies diversifying their portfolios but much like Google tried some fields and failed miserably I don’t see Oculus succeeding unless Mr Zuckeberg decides to let the company fly by itself very liberally.
A.) No one will be building millions of miles of new roads.
B.) If I invest $100K I should indeed get 100x the influence of someone who invested $100, this is not a public service but a business.
On to the actual content, revolving largely around the ephemeral concept of social justice, tough. Just because someone else benefits greatly doesn’t mean you should too. That has always been, and will always be, up to the person who originally benefitted to decide. If you want a share you sign a contract for it beforehand or ask politely afterword. You don’t throw a blogtantrum.
A) Pavement has to be replaced at some point regardless of building new roads
B) You are confusing crowdsourcing with something else. When you contribute to kickstarter there’s no obligations from the entrepreneur and you other than honoring what they are promising. This solar thing for instance only offers some memorabilia and not the product itself. I’ve funded a project that’s being developed for over an year now and yet the one behind it is keeping constant updates even though he missed the original schedule by a whole eternity. Others might fail to achieve what they want due to technical limitations for instance. Doesn’t mean they owe you your money back. You GAVE that money.
B.) If I invest $100K I should indeed get 100x the influence of someone who invested $100,
Why? “Its a business” is no answer btw. A cooperative is a business, too. The oldest model there is except the man-owned artisan shack.
The (partly) crowdfunded Creative Commons Collecting Society (C3S https://www.c3s.cc/) has itself organized as a european cooperative. http://en.wikipedia.org/wiki/Cultural_Commons_Collecting_Society
[…] is the source for the above quote (an article by Zacquary Adam Green) and another […]
Not sure if a coop status is enough, but open sourcing all the data about the design and production of crowdfunded project would make it easier for other projects/forks to spring up if the company take a direction that the crowdfunding community doesn’t approve.
I bet in a not so far future, most project will have to open source their data in order to get funding.
Privacy Concerns Much? Extends to homes. detect cars leaving and returning.
Yes, well mobile phones and mandatory built in tracking in cars already does that too.
[…] is the source for the above quote (an article by Zacquary Adam Green) and another […]
Well, only problem is that this campaign is either a scam or a monumental waste of money.
This, very long (28minutes) video on YT explains all the problems of the idea:
https://www.youtube.com/watch?v=H901KdXgHs4
With more follow-up vids: https://www.youtube.com/watch?v=K3ftXinT4jI https://www.youtube.com/watch?v=KI8c2f8r0UU https://www.youtube.com/watch?v=ocV-RnVQdcs
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Given how important this developing research is, I would like to see them give away the technology much as Jonas Salk did with the polio vaccine.