By Sudarshana Banerjee
What if you had owned a little bit of Google when it went public? Since we are dreaming, why not imagine owning a little bit of Google without actually having to pay for your share? Your dream just came kinda sorta true.
Welcome to Wahooly.com. Sign up as a member, and you’ll have access to some 200 startups over the course of the year. If you like what the startups do, you start using it. Now by signing up as user, you become an instant shareholder in that startup. If you choose to sign up with all the 200 startups that Wahooly will bring your way, you’ll have equity in all 200 of them.
Gimme A Real Life Example
Use case. That’s the phrase we were probably groping for. Okay, here goes. A startup has just launched a photo sharing service. They believe the service is awesome. But. Not a lot of people know about the service. How to spread the word around? Traditional advertising channels, including those available on the Web are expensive; and if most startups do not have one thing, that is money. So how does a startup generate that critical mass of users? They contact Wahooly.
Wahooly takes a long hard look at the company and its service/product offerings. If the Wahooly honchos think the company has potential, they broker a equity deal with the company and the registered Wahooly users. Then Wahooly opens up the ‘investment’ opportunity to Wahooly users. Its a win-win deal. You get to own equity in a company just by playing around with a new service. The new service gets users by giving up a portion of its equity.
While money is very, very expensive to most startups, equity comes cheap (Just ask a certain Google chef who made around $20 million when the company went public. If you don’t want to look that far back, how about asking Zynga instead? The company asked some of its employees to return shares they had been given. Zynga is preparing for its IPO, and thinks they may have given away far too many shares, and the fair and square thing would be to ask for their money back from their employees, or else. True story).
Are we there yet?
To begin with, Wahooli itself is looking for an initial 25,000 members. According to Wahooly’s co-founder, Dana Severson, the current goal is to launch the site in January with 25,000 users. Some 15,000 of these users will come from Klout (as a perk for those with a 45+ Klout score). This is part of a no-cash agreement between Klout and Wahooly. Klout gets to give users a hot new perk. Wahooly gets to give its users, well, get hot new users.
If you sign up with Wahooli you will also be automatically owning equity in Wahooly according to the rules of engagement. Now, Wahooli has a ‘system’ built around proprietary algorithms the company has designed. It will track your usage pattern and monitor the impact you are making. Yes. Just like Klout. All this will happen in near real time. Like Klout, you will also have a dashboard from where you can track your own score, among other things. The more active you are as a user and supporter, the more your score, and your equity will increase.
Will I be handsome? Will I be rich?
Yes sure, I am getting free equity. But exactly how much equity are we talking about? Since Wahooly mentioned the magic numbers, we are going with that to the back of our envelopes. According to an instance mentioned by Wahooly, say a start up offered 5 per cent equity for 5,000 users. I will be getting 1/5000th share of a 5 per cent stake. Say a company is worth $2 million, and you want out. The total equity said company has pledged is 5 per cent, which amounts to $100,000. Now lets split this money 5000 ways. My share comes out to be $20. I have just about enough to have a quick breakfast at Charlie Ayer’s restaurant if I am not feeling too peckish. If any one of the 200 Wahooly companies reach the heights of Google, Groupon and the likes, I will get more money.
The math we just did assumes a company will be worth $2 million. The numbers can be actually higher. We also went by Wahooly’s assumption of a 5 per cent stake for 5000 users. You may have a different equity because you are more active. There may be less (or more) users.
“All you need to do to earn equity is become a user. The idea is simple, but how we arrive at the equity calculation is not,” says Wahooly.
I will not continue to be handsome if I sit at a cubicle and live on pretzel M&Ms, pizza and soda. Turns out, I might not be filthy rich with Wahooly either. Sigh. But hey, the company is not claiming to be a get-rich quick scheme. I should be looking for persecuted Nigerian royalty who needs my help to transfer his multi-billion dollar fortune to America if I wanted to make a fast buck.
How to lose a guy in ten days or less
I could be a greedy user, and end up endorsing all the 200 companies, not because I care for them particulary, but because these endorsements could turn out to be more equity for me. (For end-user companies, this may mean that they may not be able to distinguish between real and fake enthusiasm among their users.) I could also end up alienating a portion of my friends, because I am pushing a company I have a minority stake in. Now lets try that times 200.
It could go the other way too. I will be able to win friends and influence people because I am opening up these new exciting services and companies to them. Depends on who I am, and who my friends are, and what the company I am promoting is, among a whole bunch of other things.
There are FTC regulations on advertising and promoting companies you have a financial interest in; but since the equity you will be getting is worth nothing at the beginning, Wahooly says those rules will not apply to you.
Dana Severson, Tony Holmes, and Connor Hood launched Wahooly in September this year. Severson is a ad-guy, and has worked with Sight Creative and Greer and Associates in business development. He is currently advertising director for Rockler Companies, and part of the iDesignYourLogo team. He says he has found therapy by writing for Fastcompany.com among others.
“At some point we may pursue VC money, but right now it’s too early to predict. I have a feeling we can do without, but only time will tell. If we don’t need to take it, I think we’ll be better off in the end,” Severson sums up. You can read more about Wahooly in Severson’s own words here.
Holmes sold his sign design business in 2005, and has been doing creative design gigs for the last few years. Hoods works with Elite CSS and is currently a student in Babson College, Austin.