Trading Influence for Equity, Wahooly Boosts Startups, Raises Ethical Questions

[ 2 February 2012: Wahooly has started now. See note at Google Plus Wahooly Post ]

Perhaps one day people will run out of ideas for new Internet startups but I don't think that we are there yet. Alongside all the me-too photo sharing and social network sites there are some brilliant new concepts that remind me how creative people can be. Wahooly.com is one of these.

Wahooly is a new web service scheduled to roll out in January 2012 that effectively trades influence for equity in startups. Their business model is simple yet compelling: a startup approaches Wahooly and offers a small percentage of their equity in return for the support of influencers to get their business started.  This is an intriguing idea though there are some ethical complications, as we shall see later.

Let's just suppose you have a new video sharing service -- not a great idea, but this is just an example -- and you need a critical mass of early users.  You offer 5% of the equity to Wahooly which then signs up a certain number of Wahoolians who will support your company in return for a share of this 5%. In other words, you use your time and influence to help the startup actually get started up and in return you get a small share of the equity. Maybe one day there is an IPO or an acquisition and you can cash in your stake.

Like many interesting business ideas, Wahooly brings together two groups that have complementary needs. On the one hand there are many startups needing help to get traction at the beginning -- maybe their first million users or their first million uploads. On the other hand there are plenty of people who wished they had an initial stake in Google, Facebook or Twitter and would like a chance to have even a tiny stake in new startups.

You can join up on the website but the first startups won't be available until January. The only company available today is Wahooly itself, and this little detail is, in a way, very reassuring. Warhooly effectively eats its own dog food and is one of the startups that you can get a share of. The first 25,000 users to sign up will get on average around 0.0002% of the equity though the exact figure depends on how much influence you contribute, a factor that will be calculated with some help from Klout.

While the idea is brilliant it does have one major downside risk: to many people there are ethical issues associated with promoting a company that rewards you with some material benefit -- even if it is long term and uncertain. It might also breach some rules if this conflict of interest is not disclosed. Personally I do not see this as being a real problem because people who are seriously influential are not likely to risk their reputation for the sake of a few dollars, but it is likely to be a PR issue for the company. Maybe the founders have a workaround for this problem, or maybe someone will be inspired by this example to make something new that isn't tainted by ethical doubts. Whatever happens it will be interesting to see how the story unfolds when the service officially starts.

Disclosure: to write this post I joined Wahooly's inaugural class so presumably I have a very small stake in the company. There is a possibility that I might materially benefit from the company one day, though to be honest I am not counting on it for my retirement.


+



Related posts on Startups

Social Media Crisis Management: Odimax's Emergency Stop

16pics Automatic Photo Picker: Humans Do Better But Have Better Things To Do

Why Gidsys Marketplace for Experiences Will Change Things

Zerply: Three Thumbs Up, Two Thumbs Sideways

Comments

Post a Comment

Popular posts from this blog

Dear Best Regards: How to Start and End Your Emails

Image
Last year I wrote that to make your email more effective you should put meaningful content into the subject line, keep your messages short and consider other channels (see Three Timesaving Tips for Email ). I also wrote some guidelines about common culture problems when email crosses borders (see Three Non-Obvious Ways Culture Affects Email ). But there is one other question about international email that comes up regularly in workshops: how should you start and finish? Do I use "Dear", "Hi",or "Hello" to start with? What do I do if I don't know if the person I am writing to is a man or a woman? "What is the difference between "Best regards  and "Warm regards"? This is a question that puzzles many people and a while ago it stressed me, too. But the answers to these questions are perhaps easier than you imagine. DEAR MR/MRS WHATEVER . First of all, at the start of a mail you probably have some sort of salutation. How do you kn
Read more

Reverting to Emails: Confusion and the Indian English Language

Image
In workshops about global email many people focus on their issues communicating with colleagues in India. Partly this is related to some deeper cultural differences that lead to misunderstandings. But many problems are also caused by the different ways in which Indian people use English. There are some "English" words that you will probably only hear in India, like " stepney ", their word for a spare wheel. A hundred years ago this term was coined in the UK and was exported to India where it survived. Back home only a few antique vehicle enthusiasts have any idea what it means. There are also many English expressions that are peculiar to India, like "What is your good name?". But in both cases an English speaker from elsewhere would just see an unfamiliar expression and either ask what it means or google it. Most problems are caused by another kind of difference: where a standard US or UK English word is used but with a different meaning. Recently s
Read more

TED’s Magical Red Carpet

Image
Watch any TED(x) video or, better still, attend a live event, and you will probably notice that speakers stand in the middle of a circular red carpet. This choice is not just a question of aesthetics. That red carpet actually plays a key role in the success of the TED format. Having the speaker stand in the middle of a red carpet has several important consequences, leading the speaker to follow best practices that they might not be aware of. No script or notes . Since there is no table, lectern or other furniture within reach, the speaker cannot easily read from a script. This forces them to deliver their talk from memory, which is much more compelling because few people can read from a script and make it sound natural. And no matter how good you are at reading, the audience can see that your eyes are scanning the text and this breaks the magical connection with their minds. Encouraging people to speak from memory pushes them to make a much better talk than they might ot
Read more