The Rules: Open Source Startup Funding

Mark Cuban’s blog is an odd one; I really can’t remember why I started reading it (presumably linked by a VC blogger would be my guess), and yet even though I read very few blogs I’ve stuck with his. It’s not like the standard SiValley other investor/commentator blogs. It’s a lot more based in the real world, and a lot closer to my experiences of running the business side of a business as opposed to the “building to flip” side of running a startup without ever being profitable just to sell it to someone else.

Anyway, advert over. He’s posted an interesting challenge: want money for a startup? Right. You have to publish the entire business plan, and let everyone else copy it. If – as many people are fond of saying – it’s implementation that matters, not the idea, then this shouldn’t be a problem for you. But it may bring wider-world benefits to everyone else, intangible virtuous-circle stuff.

I will invest money in businesses presented here on this blog. No minimum, no maximum, but a very specific set of rules. Here they are:

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)

PS: I love Mark’s attitude that comes across in his blog. E.g. in one of the first comments to this blog post:

Would you be open to reviewing pitches on your blog and then details privately?

From MC> No. This is an open source opportunity. Not a pitch Mark opportunity

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