Every once in awhile I come across a story that, while interesting, makes absolutely no sense to me. Outvesting, which I discovered through Springwise, is just such a story. What the site has managed to do is raise $5,000 in seed capital, through 100 donations of $50 each, for a yet-unchosen Irish start-up to use. Those that have provided the capital will get to vote on who gets the money. Twitter has been a big part of how they’ve managed to accumulate the funds.
If I stop right there, it sounds like an interesting story of using prosumers to provide (an admittedly small) amount of venture funding, which is clearly targetted at people with a little Irish pride. But where I find it weird is in relation to the term outvesting. As the site clearly defines it, investing is “The act of committing money to a business while expecting income or profit in return.” Outvesting is “The act of committing money to a business while expecting to get nothing in return, other than the satisfaction of giving a leg up to Irish entrepreneurs.”
So the natural question, of course, is what exactly is the benefit of outvesting over investing? Obviously from the perspective of whoever ends up with the money, it’s pretty clear – they get money for free. But is that really a better model? Will it lead to better innovation? After all, the basic premise of investing is that the incentive to earn a positive return leads people to allocate capital to projects they deem most likely to succeed. With that incentive not in place, won’t more capital get wasted if an approach like this scaled at all?
Like I said, I find it interesting – but right now I just don’t quite get it. I’d much rather see a more traditional model here – using Twitter, micro-capital-contributions, etc. to allow people to invest in small, promising start ups. But am I just missing something here?
Categories: business · social media
Yesterday the Globe and Mail had a story about how the wealth of Canadian households had rebounded last quarter, after declines for most of the last year. While this is seen as positive news in regards to our economic health, I believe there’s an important element the report leaves out – wealth of Canadian households by age-group. My hunch is that older Canadians got a fair bit wealthier during this time period, but younger Canadians – on aggregate – treaded water while lurching into ever-greater debt. And it is this group of Canadians that I’m concerned about.
The reason I started thinking about this was simple. The article presents two key facts:
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Categories: economics · investing
Tagged: canada, debt, economics, garth turner, investing, wealth
Every year I join about a dozen high school buddies and head out on an NFL roadie. Every year it’s a different team – with New England, Green Bay, Cincinnati, and Indianapolis being among the most recent destinations. Many of the tickets are VERY hard to get – particularly when you’re angling for a dozen or so in the same area of the stadium. But since we’re willing to pay a relatively high premium to to the re-sellers (or if you prefer, scalpers), we tend to get to the games we want. In the last few years, sites like StubHub have made this far easier than before.
But I’ve always wondered why professional sports teams have allowed such a large portion of their potential profits to be captured by these intermediaries – particularly teams that could sell out their stadium several times over at their current prices. The simplest argument has been that it lowers their risk – sell at a particular price, lock in the revenue, and let the re-sellers worry about whether the tickets will go for a premium or not. But my belief has been, and remains, that teams are “paying” far too much for this – and that some sort of “auction market” could make them a lot more money in the long-term.
In turn, I’ve recently come across a platform – OptionIT – that is a step in that direction. Instead of buying a ticket for a game, fans (or speculators) can purchase an option to buy that ticket at a later date – it functions just like options do in the stock market. If you assume that team itself will eventually get at LEAST face value for each of these tickets, by taking a cut of the option price they directly accrue additional revenue. And if the market becomes really active / speculative, it’s notable that the team could get a cut every single time the option is traded.
This will be an interesting development to watch. While some commentators are noting that this is “just another way for teams to rip you off“, it doesn’t bother me one bit. I really have no problem with teams charging what the market will bear, and given that every year I pay a premium well above face value for a ticket to one game or another, I’d rather have the money go to the teams themselves – particularly since a vibrant options market would likely give my road trip crew a lot more options for when and where we go…
Categories: business · economics
Tagged: auctions, NFL, options, road trip, sports, stock market, tickets
Back in March I wrote about a 
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