We talk with Ankur Sharda, creator of Tuggle about his new idea for Equity Crowdsharing
MH(Marcus Holmes): Equity whattywhat?
AS(Ankur Sharda): Well, Equity crowdsharing involves giving away small units of equity to people who share your company on social media.When you’ve got a new company you need people to see it and hopefully use it. Getting that initial traction is so hard. Even if people want your product, it’s so hard to get it out there. Equity Crowdsharing is a way to break the deadlock and move foward. Essentially a sharee company gives a person IOU’s over the financial rights to some stock in exchange for social media posting. It won’t work for every company, but for those that it does it could totally rewrite the rules.
MH: OK, so what problem does this solve?
AS: Mainly the 2-sided marketplace problem; call it the “chicken and egg problem”, catch-22, whatever you will, but the main thing for so many businesses like an upcoming Uber or AirbBnB is that they need two types of customers to signup in large numbers.
Let’s say you’re starting a babysitting marketplace. You do your initial validation and find there’s a real need out there. But to make it work as a business you need a certain critical mass of babysitters and parents. Traditionally that was a bit of an issue. How do you reach that many parents and babysitters. You could get some media attention, but what happens is, and I’ve seen this many times, people visit your site and see that there isn’t much going on, so they leave without signing up.
I’ve visited sites myself and thought, that would be a great service, but I’ll wait till they grow a little. But with Equity Crowdsharing instead of me disappearing never to be heard from again, they can offer me a small piece of their potential future success in exchange for a social media post. If what they’re offering makes sense my friends might join on as well and so on. Now let’s say your babysitting marketplace has 2000 babysitters from day one, bringing the parents on board is going to be a lot easier.
MH: So tell us about Tuggle and how you came up with this idea
AS: Tuggle is Australia’s local shopping search engine. You can go to tuggle.com.au and search for products which will be ordered by their distance from you. Local retailers are losing out to online, I want to make it just as easy to buy from a local shop by going to Tuggle.com.au and level the playing field between online and offline and large and small retailers. Independent shops love the idea, and the evidence suggests it’ll work, but retailers want to see traffic if they’re going to pay any significant amount of money for Tuggle, so I need to do something to break the deadlock.
I was thinking a lot about Equity Crowdfunding, and what we’d need to do to get that off the ground. Then I asked myself what I actually need the money for. Mainly it’s marketing. Then I asked, “what’s the best kind of marketing?” – word of mouth from friends. I remember learning about how Instagram took off and also group buying, they both pushed alerts to Facebook to spread the word. And the answer was obvious. What if you let people share in your company’s success, by giving them shares, in exchange for a little social media attention?
MH: Except that’s impossible, because shares have laws about how you can allocate them. This whole plan sounds dodgy as hell, have you checked it with a lawyer?
AS: It would be illegal to just give away shares. Doing that also has lots of other problems. So instead of giving away shares, we’re giving away something which is much like an IOU. Basically you get the money associated with some shares. That is any dividends or value from a sale of shares. What you don’t get is the ability to vote on company decisions or even choose when the underlying share is sold, that remains with the company. There are more details at tuggle-shares4shares.com.au
MH: So this is legal, yes?
AS: We’ve checked with lawyer friends, and there’s no reason why they aren’t legal. Of course with any new financial scheme like this it depends on how the authorities choose to interpret the regulations, but so far we can’t see any reason that this is illegal.
MH: So, putting all the legal issues aside, what does this plan do for the community?
AS: Well, in “the Valley” people have been protesting about the divide between the well-off tech employees and the rest of society. Imagine if Google or Facebook had used this strategy early on many of those people would have done quite nicely. I see it as a way to ensure everyone can benefit from the value that’s being created within the tech sector and in the long term build a sense of togetherness rather than creating a kind of digital upper class, which if the US is anything to go by is a real possiblity.
MH: I kinda meant the startup community…
AS: Of course there’s the immediate marketing benefit. But one of the major issues with startups is that you need investors who understand these businesses. Many places around the world don’t have that many experienced tech investors. But now investors will be able to see the level of sharing that a company is getting and that can provide a kind of first level validation and can make investors more confident in investing. And this is something that can happen anywhere in the world. So you can be in some remote area with a laptop and create a product that millions of people want to use, but no one in Silicon Valley could have ever imagined it. But if the sharing is big enough, you have something tangible with which to try and attract the support you need to grow it.
MH: So you’ve already got this set up on Tuggle? What do people have to do to get their “shares” in Tuggle?
AS: Just go to tuggle-shares4shares.com.au and signup. You need to do a Facebook post through the site and leave your name and email. Then before we launch Tuggle.com.au you’ll do another post and the EFR contracts for 100 shares are yours. Pretty simple.
MH: And you’re open to helping other startups use this model?
AS: We need to attract a few more good companies to do this with us. If there are a few companies using this model, then it makes it more of a movement that might spread quite quickly. So if you’re building a startup and think it might make sense, get in touch and we can have a chat.
Obviously //Startup News has no idea if this is legal or not, so we absolutely cannot recommend it to our readers. But clearly if it does work out then this is a potentially useful tool for startups. If you would like more information please contact Ankur direct on firstname.lastname@example.org