Mutual funding - can it work?
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Head of Press and Publicity at Serpentine Gallery
14 February 2001 08:37am
What are people's views on whether an online business can sensibly fund itself through shareholders who are site users?
The failure of the TheMutual.net, which originally launched as a knowledge-based company that acquired users by offering them shares, and has since repositioned its business model after failing to become financially profitable, suggests that this model may not work.
However, it may not have been specifically the nature of funding in this case and more the reliance on these shareholder / users to form an integral part of the site's content proposition. Ben Heaton, the managing director, said; "Our users generated our content from which we sold ad and sponsorship space. We found this didn’t work for us, as the inventory was far too eclectic and wasn’t of great interest."
Anyone know of other companies who have successfully funded themselves 'mutually'?
Fndr at Majestic12.co.uk
03 September 2003 15:14pm
I know this post is well dated but I felt that it warranted response nevertheless.
>The failure of the TheMutual.net, which originally
>launched as a knowledge-based company that acquired users
My believe is that initially TheMutual.net launched as flat-fee ISP in 1999 or early 2000. I remember vividly that I tried to sign up to someone with that name and concept but it failed. Since BT did not have flat-fee internet on offer at the time economics simply did not work for these providers - most of whom had to fold, much to distress of their users. IMHO this is the reason for failure.
>What are people's views on whether an online business can
>sensibly fund itself through shareholders who are site
>users?
Talking of "mutual" concept - I think its best to stick to things that work best - customers are customers and investors are investors. This does not mean that someone shopping in local supermarket should not own shares of respective company but during shopping pay more attention to what that customer wants rather than marginal gains from shareholding. There can be various options here but since its an old post I shall refrain from getting into analysis of all possibilities, some of which, naturally, could be beneficial to the firm and its investors.