Friday, March 05, 2010
Imagine an idea that you feel passionately about. Turn away from your computer and imagine your idea coming to life. Think first about how you would do it. Who would you hire? Where would your office be? Think about the article about your idea in the newspaper or a magazine or this blog. If your idea did maintain your passion, the rest of this post won't matter much to you. But if you could imagine your idea taking life, think then about how to fund your idea. For most of us this is where a long pause comes. And it is usually the pause that moves the idea to hiatus to stall out.
Ideas aren't a dime a dozen. Ideas are powerful. They change the world--and can certainly change yours. What are a dime a dozen are ideas that never get started. Why? Because you either have to take a huge risk yourself--living off savings or credit cards and paying the costs of the people that you have to hire or you wait to find the person who will back your idea.
Most people can afford to take the plunge but are always at risk of swimming out too far and then being unable to swim back to shore. If you try to raise money from someone, get ready for a long wait. Even if you know someone and they love your idea it will take 2 months. Getting introduced to someone new will take time for the introduction--and the inevitable meeting of the (fill in the blank, son-in-law who knows your business, golfing buddy, out of work friend who could be a great marketing guy) who need to bless your idea before it will get funded.
And you do all of this for ideas that often take less than a month's salary at a good paying job to get off the ground.
What is the alternative? Peer financing. We have created a new way to fund creative works, like iPhone apps, by allowing developers to sell wholesale units of the application. The buyers get paid when the units sell at the iTunes store. Developers get money right away. Our idea is called appbackr.
Here's how it works: when an iPhone app gets created, a developer gets $.69 for a $.99 app. From the time an app is first considered to the time until it sells, it is typically about 6 months until the developer gets paid. By selling wholesale units, you are getting a buyer to make a wholesale purchase of, say, 1000 apps. Each unit generates $.25 for the developer, so $1000 units =$250. When that unit sells, the wholesaler gets $.50. The developer gets an additional $.15 (for a total of $.40). A developer can pre-sell up to 50,000 units at $.25--that's $12,500, enough to code, build the UI and market a good app.
The developer is "giving up" $.29 a unit as a profit to the wholesale buyer. That is about 1/3 of the net retail value from a sale on iTunes. What the developer is getting is immediate funds; a relationship that lasts only until that unit gets sold (each unit has a queue number, so if a purchaser buys units 1-100, when units 100 sells, if no other units are sold, the developer goes back to keeping 100% of the amount due to her for each app); and distribution channels--each buyer has an incentive to help you sell more apps.
It is a new model and one that we will be beta testing at our launch which starts March 19. In the meantime, the site is by invitation only. We invite you to sign up at appbackr.com. We'll add more "verticals" as we go along and refine the process.
If you like the idea, we could use your support because our app is entered in a competition sponsored by PayPalX, the developer site at PayPal. Each vote for us means a lot. Voting ends on Friday March 5. It takes a few minutes to do but we have created a page which explains the process at www.appbackr.com/challenge.html If you can support us with your vote, we'd be grateful. If you do vote, drop us a note at email@example.com so that we can let you know the results of the competition.
This is the first of our new experiments in peer financing. Keep an eye on our progress. We are trying to change the world so that ideas can come to life with the support of each of us, not just a few of us.
iPhone developer extraordinaire Dave Mark thinks there's something to it as well, maybe this thing will actually take off, I recommend voting so they have a fighting chance.
Vote Now! AppBackr Peer to Peer Developer Funding Program By Jason Dowdell at 04:18 PM