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Guest Post: Financing, By and For Developers

On March 19th, in conjunction with PayPalX, Sun Microsystems, Embarkons.com and session sponsor Cooley Godward Kronish, developers, lawyers and financers will be gathering at the Peer Financing for Developers conference in Menlo Park, California. The goal of the conference is to examine new and innovative approaches to peer financing of projects.

The half day conference will take place at Sun Microsystems' campus,and interested attendees can get tickets at peerfinancing.eventbrite.com. OStatic readers can also get $20 off the cost of a $95 general admission ticket by using the code "OS20." We asked Trevor Cornwell, founder of Embarkons.com, which focuses on peer financing for developers, to write a guest column on the topic. Here it is:

Financing, By and For Developers

By Trevor Cornwell, founder of Embarkons.com, peer financing for developers

Developers are revolutionizing manufacturing.  New ideas are conceived of, coded and brought to market in days, when they used to take much longer.  But financing for porojects is still time-consuming to put together because it is based on trust networks to which most people, especially people new to the territory, don’t have access. The good news is that there are simple solutions arising in the area of peer financing, which can be best understood by first understanding existing problems.

Products, ideas, books, and stories get better as more people hear them, add to them, shape them and make them their own. But when it comes to financing, the focus has traditionally been on finding that one person who will write the check that will make The Next Big Thing possible

In short, democratization makes things better--and the concept hasn't spread sufficiently widely in the field of financing.  Developers are going to need to lead that revolution—and they can.

It is said that if you can get the elevator pitch right, you will get funded.  Truth and practice are not that simple.  It can take months to get an introduction to the right person.  Then the funder has to be in a position to invest.  He or she has to possess both the means and the will to write a check.  VCs comment that they see hundreds and maybe thousands of deals before they choose to finance one.  Is it the best idea?  It is usually the best one for them, based on a variety of factors.

But what about you?  What if your idea or app or book doesn't get funded? Should you heed the wisdom of those you have seen, or move on to something else?  Should you go into debt? Tap a rich uncle?

Peer financing is about offering funding alternatives because people who know your business, who live your life, and live in your markets are participating as funders.  Also, sometimes dividing the amount of funding that is needed by a project among several participants opens up new possibilities. 

For many, what immediately comes to mind when peer financing is mentioned is peer-to-peer lending.  Prosper.com is a leader in the field, but what Prosper does is but one approach.  Crowd funding, contests, group financing, direct offerings, incubators and a host of new models are part of a trend to transcend the one-to-a-few approach.

PayPal has recently released a new set of APIs which have the power to open a host of new models because they allow funds to be distributed to multiple parties seamlessly.  Imagine being able to make one payment that distributes to multiple parties at once or multiple parties working together to fund one entity.  Creating a threshold for funding can be done easily and efficiently with these new APIs.  Simple payment tools are going to drive innovation in financing, which will force us past some of the ruts we are in today.

Markets demand change.  On Wall Street, everything is made into a financial product.  In Silicon Valley, almost everything conforms to one existing model.  Innovation in Silicon Valley is moving away from the venture and shifting to the determined developer who codes all night and gets his idea out there.  If the idea works, it may get traction fast.  If not, it is on to the next idea.  One thing is for certain: These new ventures need some financing, and they need it quickly. 

• Sun Microsystems
• funding
• Embarkons
• Peer Financing
• PayPalX

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