When considering implementing an enterprise crowdfunding system, the scholars Voigt and Jovanovic provide a substantial framework that delivers a comprehensive list of aspects to consider. When considering implementing crowdfunding towards aspects around New Work, a more general view of influencing factors should be considered and planned for in advance. These factors were proposed in chapter four as Mindset, Aim, Rewards and Communication. Thus, a form of business crowdfunding equity or loan is not inherently for any project proposal. It also needs to be considered because not all initiatives really require financial assistance at an early level. At the latter point, funding rounds may be added or staggered over several periods. Along with the audience, an idea management committee should be able to determine whether a proposal should be nominated for financial assistance. The following parts will aim to respond to questions posed during discussions with colleagues.
How much could an employee invest with enterprise crowdfunding?
Limiting the amount of personal investment that an employee should have is important at this point. A high-risk investment portfolio can be in, but not limited to, the range of 10 to 20 per cent. Given the dangers of crowdfunding investments and the absence of common laws around the EU, the European Regulations granted a recommendation to the EU Commission to establish equity and crowdfunding policies to govern and become legitimate on 19 December 2019. A limit of EUR 5 million on financing, the amount of contribution dependent on individual income and the approving bodies to supervise crowdfunding, would be part of this plan. (The European Commission, 2019) It is uncertain what legislation would extend to crowdfunding for an equity and lending business.
How often can employees fund and what protection do they need?
The word pre-emption right is an industry norm that provides a legal basis for organisations requiring additional financing. The blog from Davis provides very clear information on pre-emption rights. Pre-emption rights are also known as protections that guarantee that current owners have the right (but not the duty) to participate in a company’s potential funding rounds in order to retain their degree of company shareholding. In such a scenario, as more investment rounds are required by the firm, venture capitalists and business angels have the right to provide financing. Such a right has been adopted to protect the capital of investors. Davis explains that such insurance is usually only applicable to professional investors with a majority shareholding. If a creditor fails to act on the right to provide additional funding, shares are diluted. Davis provides an explanation on dilution, that it is a concept which also has a negative connotation since stock shares would decline if no additional financing is given. Davis explains that additional fundraising usually means that the organisation is performing well, so the value of the firm is enhanced by financing rounds. If a firm receives more capital at the same or higher valuation, an individual with a lower share of the company would get a higher share value. In other words, as the shares are diluted, the owner would retain a smaller slice of the pie, but the pie is getting bigger. (Davies, 2013) Another significant point is that pre-emption provisions are often seen as one of minority investors’ most vital safeguards. Pre-emption rights hinder majority owners at low value from selling new shares to themselves (Bigot, 2017). These pre-emption protections are an essential legislative mechanism to be used in the crowdfunding of companies, as well as information on the future dilution of investors’ shares. Investors may consider diluting their shares and instead of using the money to diversify into various investment possibilities.
How to evaluate project milestones and objectives in crowdfunding?
The assessment of Amabile’s research in entrepreneurial creativity and motivational synergy has identified three imperative points that should be considered when implementing an enterprise crowdfunding system, those being skill development, enabling achievement of a task and confirming competence, and perceived autonomy. Strict monitoring mechanisms and lack of autonomy give way to the deterioration of entrepreneurial innovation. Instead of achieving the business goal, extrinsic motivators such as the accomplishment of additional funds will cause the entrepreneur to continue pursuing funding. (Amabile, 1997) In comparison, funding rounds will increase innovation and intrinsic motivation if paired with consistent milestones, operations and deliverables. An entrepreneur is kept accountable for meeting the goals set in the absence of a strict control system. A strategy of “three strikes and you are out” may be enforced if targets are not reached. Such a strategy should be applied for an audit if a date has been missed. It will be necessary for the crowd to elect a new entrepreneur in an enterprise crowdfunding scheme to seek the interest of the crowd and its creativity. It is important to reassess internal variables and external conditions, such as competition and consumer needs, which can contribute to new milestones and business strategies. Such a modern and practical strategy reassessment and initiative would reduce the burden on businesses and, therefore, work in favour of growing motivation and defending the interests of the crowd.
How can financial interests of investors and organisations be protected?
An organisation that incorporates a crowdfunding business model will not only want to protect its rights with the launch of products, but workers will want to protect their investments too. There are two subjects to be considered, which are majority voting rights and workers’ investment guarantee. By offering a double-up equity scheme for an employee’s contribution, the majority share, as well as voting rights of the company, will be secured. Each committed sum is paired with an equal amount by the company in a double equity scheme. The business should, thus, be confident in staying in a leading position and a controlling shareholder in any project. Furthermore, an allocation through double equity for the personal investment of workers may have a beneficial impact on motivation to pursue an investment. For this argument, further study into this will need to provide justification. In general, however, it is understood that any form of promise and reward that was explored earlier in this paper can have an impact on system-1 and system-2 thinking and decision-making.
How could work by employees be quantified and valued?
If employees of an enterprise crowdfunding program would spend their private funds on innovations, these funds could be made available in the form of a currency as part of their wages, as part of the work provided, or in the form of a cryptocurrency. The benefit of a cryptocurrency would be that it would open up a trading forum for workers to participate in and exchange among themselves in different technologies. A cryptocurrency could not only provide a valuation of mutual funds but also provide a valuation of time and effort for creativity. Therefore, staff offering funding for the launch of innovation may receive cryptocurrencies in exchange. The total value of innovation could then also be calculated by the amount of cryptocurrency generated and the work done in the form of financial support. There are examples of regulatory and compliant turnkey options that provide entrepreneurs with an option to provide a non-convertible preferred share class that pays a dividend and does not cause dilution at the stock stage. Holders will, then, earn a revenue share instead of equity, as illustrated by Thomas in his article on cryptocurrencies and the advanced phase surrounding ICO 2.0 (Thomas, 2018). If the cryptocurrency is related to the value or stock market price of the company, then the cryptocurrency will be shielded from volatility. It would also be possible to launch an own cryptocurrency for each innovation; however, more experiences need to be gained to understand whether multiple cryptocurrencies in an enterprise crowdfunding model would provide more clarity for each innovation’s progress and success and be feasible in terms of costs and resources.
What impact have intellectual property rights on projects?
In an employment contract, every intellectual property right is clearly regulated. Any intellectual property is, therefore, in the hands of the company unless otherwise agreed. An invention is bound to a person or a group of people, but the employer and the corporation have the freedom to use an invention and intellectual property, as this is usually governed in an employment contract. A crowdfunding scheme for businesses supports workers with a forum to try to launch an idea and offers a protected space to launch the idea. These advantages could play in favour of more traditional entrepreneurs and inventions that would otherwise have remained absent. Furthermore, a system of crowdfunding offers accountability and will allow the innovator to reap the benefits of successful innovation in the form of extrinsic rewards that are not certain in a traditional hierarchical organisation.
What rights would employees have when leaving an organisation?
As investors with the right to receive a certain amount of money back from their investment, the standard among investments is the right to liquidity. Most of these rights would not be sufficient for company crowdfunding, except for the “put option”. The put option allows investors to compel the company at a previously negotiated price to buy back the shares (‘Put Option’, 2019). These rights could allow employees to compel the organisation or innovators to buy back shares from employees based on their previous value in the sense of enterprise crowdfunding. The worker also has the opportunity to offer his stock for the actual market value, which is referred to as the right to convert, if the current value is lower than the market price. The workers have the right to transfer their investment to standard common stock, other company-related assets or even holiday days if the value of the innovation rises. While the right to convert is usually considered fair for investors in crowdfunding, the liquidity right is still being addressed. It is necessary to consider the distinction between equity and lending, as both liquidity rights and conversion rights are equity funding instruments and should not be eligible for lending (crowdfundattny, n.d.). In the case of an employee wishing to leave the company, funds that are allocated for a previously defined period and which provide employees with a daily interest will be lost or may be transferred to another employee.
How could employees spend time to work on their projects?
Companies such as Google have introduced workdays where employees can work on their own projects and are not bound to their daily tasks (Walker, 2011). There are numerous ideas on how employees can allocate time to work on their innovations. Clear is that a company that has introduced a crowdfunding system will have enabled a methodology to allow employees to develop their innovation. As outlined in the earlier chapters, if extrinsic rewards are available in form of dividends, interests or equity shares then an intrinsic motivation can be increased. It would be interesting to conduct research and understand the correlation of rewards with time spent. Ultimately any work performed towards an innovation project needs to be valued towards the project. Thus, if an employee provides any form of support this should be tracked as a value add and increase the overall value of the innovation. If an hour was added to a project, then this hour cannot be allocated to any other project and also cannot be considered as regular work time. Any work provided towards the project will be compensated via dividends from equity or interest from lending. This will provide a certain guarantee, that hours spent will not be accounted for and remunerated twice.