Dot-com billionaire
Mark Cuban has come up with a concept to allow entrepreneurs to submit
open source business plans to his site for his consideration, and for the taking of anyone else who sees a compelling idea. Cuban lays out a
list of his requirements that must be met before he will consider any potential investment:
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 mult-level marketing programs (added 2/10/09 1pm)
I like that Cuban writes his own blog, but I don’t always agree with what he says. As an entrepreneur I know that Cuban’s requirements of breaking even within sixty days and being profitable within ninety days will be the greatest challenges for anyone who reveals their business plan to Cuban and the public. Cuban states that the organization should be completely flat with no hierarchy, which seems irrelevant to me if all of Cuban’s other demands are met. But, he has the money, so he can make the rules. The most problematic issue is that Cuban says he will only fund on a month-to-month basis with no guarantee of additional funding after that first month, even if the new venture is profitable. Perhaps for some folks a month’s worth of money is better than no money. If the venture is profitable, it gets easier to raise money from more traditional and perhaps less capricious sources.
It seems that everything has been going open source these days;
Software,
virtual encyclopedias,
furniture and now venture capital, but the concept is not new. The Internet itself represents an excellent example of the open source philosophy; the software based frameworks and communication protocols of the Internet were built openly and collaboratively in the 1960s.
Whereas traditional methods of raising capital for business ventures and new ideas sometimes involve secrecy, Cuban’s approach is to let everyone see the idea. Cuban says that someone else may steal the idea and make it work, but this is ultimately good for everyone because a successful new business will make money, hire employees and bolster the economy.
You must post your business plan here on my blog where I expect other people can and will comment on it. I also expect that other people will steal the idea and use it elsewhere. That is the idea. Call this an open source funding environment.
If its a good idea and worth funding, we want it replicated elsewhere. The idea is not just to help you, but to figure out how to help the economy through hard work and ingenuity. If you come up with the idea and get funding, you have a head start. If you execute better than others, you could possibly make money at it.
Collectivism meets capitalism, in my opinion, and Cuban’s concept does not appear to be consistent with the the ideals of intellectual property ownership. The foundation of any free market system is the ability of one to own an idea and have that ownership protected by law. Without this protection, the market becomes a free-for-all and allows anyone to copy anything. In this environment, the innovators quit innovating because their ideas have no value. Imagine if the great inventors simply threw their ideas into the public domain for anyone to peruse; this might benefit the savvy, hard working folks who execute the ideas, but the inventor is left with nothing. If the inventor gets nothing, then he is not motivated to invent and good ideas never find their way into the public domain — the concept defeats itself. Free ideas are usually worth their cost and mundane ideas enjoy public exposure without much concern they will be stolen.
I would agree with Cuban that the great idea is just a start and that it is the hard work that separates the thinkers from the doers, but even the thinkers deserve some compensation for their ideas — if they are able to legally secure ownership of the ideas.
Despite my statements above, Cuban’s plan might work, but not as he may expect it to work. Truly revolutionary ideas are so bizarre that the market itself will generally view them as absurd. These kinds of ideas can be shared and publicized with no fear of them being stolen.
Howard Aiken’s quote says it best:
Don’t worry about people stealing an idea. If it’s original, you will have to ram it down their throats.
The problem, in my opinion, is that these types of radical ideas do not break-even in sixty says and turn a profit the next month. Patient money, persistent hard work and belief in the seemingly impossible are the elements of the most revered innovations. If Cuban’s month-to-month seed capital can ignite even one such venture, then his idea will have been proven a success. I wish him luck.