Companies committed to a Radical model are embodied by happier and more effective people. They communicate and solve problems faster. People have more meaningful lives. The Radical company is far superior to Fiat businesses. But, you may be asking yourself, how are we going to finance businesses to step away from the familiar Fiat joint-stock corporation?
One possible answer is Radical Investments.
Radical Investments
A Radical Investment is a commitment to pay back the principal funds plus a capital gain. It is still an investment, not a loan, in that the investor could lose his capital. For example, if all goes well, a $100,000 investment may get “repaid” as $200,000 over three years.
A Platform
Normally, individual founders go to individual investors to make a pitch and, hopefully, negotiate a deal. It would be more interesting to create a platform where they all meet. There might even be a bidding component to it.
In this platform, a founder will put up their company’s description, its hypotheses and strategy, and any progress they have already made; they would also post the amount they would like to raise and the repayment scheme. Investors can browse these descriptions and pick the companies they may like to support. A conversation will likely ensue and then the investor can offer to fund all or some of it under the stated terms. On the flip side, a Radical investor can put up a description of the type of companies they are looking to invest in, how much they are willing to invest, and the terms they are looking for. A platform like this would allow matching founders and investors to find each other.
This type of platform is not new (e.g., AngelList), but they have not done very well in the past. And in the Fiat model, that is to be expected. In a Radical environment, with its commitment to transparency it may be different because a certain amount of trust is there from the start. Investors could talk to anybody in the founding team, not just self-chosen individuals. They could ask any questions they want without signing a proverbial NDA. They could see what the team considers important by looking at their past RAD distributions and what they recognize as contributions.
But, Is It Sustainable?
How would this kind of platform sustain itself?
|
By the Match |
The traditional, Fiat way is to charge per match or charge a subscription fee. But this mechanism is not in line with the desired outcome. Yes, we want the platform to be sustainable, but that’s not the most important value we want to create. |
|---|---|
|
Percent of Profit |
This is the we-make-money-when-you-make-money approach. The platform makes money when the Founders start paying the investors. Here the platform is more directly aligned with investors and founders, but it still does not align well with the Radical model where people and communities come first. |
|
By Making a Contribution |
Alternatively, the platform gets RADs by becoming Banner. For sure, it would be a Banner in the new company’s RAD Distribution system. It might also be a Banner in the investor’s RAD Distribution system. When the new company starts to distribute its earned dividends, the platform sees it as revenue. Ditto for the capital gains for investors. It’s important to note that the number of RADs can vary. It is not a negotiated amount or percentage chiseled in a legal contract. If the platform is creating value, it gets RADs, and then revenue. If the new company and its investors are delighted and empowered by the platform’s contributions, then it makes money. |
Contribution or Exploitation
I remember having an interaction with Zappos customer support and by the end of it, I was totally delighted with the interaction. I would have definitely given them RADs at that point. On the other hand, Facebook, which is more interested in exploiting me than helping me, would not see any RADs from me. Over time, even Fiat businesses would lean to Zappos-like behavior rather than Facebook-like behavior.
Financing based on recognized contributions will create multi-dimensional wealth for the founders, the investors, and the platform.
