The Social Kapital Investment Process
Social Kapital can simply be described as a diverse group of people that use the Ethereum blockchain to pool their funds, time, intellect and networks together for the purpose of creating profitable companies.
This is the story of how Social Kapital takes an idea and develops the idea into a winning business proposition. Before proceeding, it would be useful to describe three significant roles played by community members in the investment process.
The Idea Advocate is the person or persons that take an idea to vote at Social Kapital. The idea advocate creates the momentum that leads to the development and eventual funding of the proposed idea.
The Devil’s Advocate is the person or persons (maximum 3) that are officially designated by the investment manager to provide reasoned arguments against an idea been considered for investment.
The Investment Manager is a high ranking community member that has elected to co-ordinate(for an idea) all the steps that make up the investment process.
The idea advocate starts the investment process by submitting a pitch to the Social Kapital community. The pitch will outline the project’s objective and provide as much information as possible about the project. The information is arranged in the format specified by the idea development framework (see diagram above). The project objective is a one paragraph statement that can be framed in two ways. As an aspiration or a problem. Lets use outlandish examples to illustrate objective framing.
Aspirational Objective: project xyz intends to build a starship to take space tourist to planets within earth’s solar system.
Problem Solving Objective: project abc intends to develop a hydrogen battery that will cut global green house emissions by 90%.
After the idea advocate submits a pitch, the community gets involved in the idea development phase. During this phase, community members will provide technical, commercial and legal solutions to fill gaps or solve problems with the idea. Industry domain experts and those with end user insights will provide valuable contributions to the discuss. On the other hand, community members that think the idea will not work for financial, commercial, technical or legal reasons will also make their voices heard.
Those interested in forming or been part of founding teams will also indicate interest. At Social Kapital (see the players), the idea advocate will not necessarily be part of the founding team. Anybody can build a founding team around an idea under development. The idea development phase is the free wheeling and deal making phase of the investment process.
Based on the contributions of those for and against, the idea advocate could elect to modify the project’s objective. So, instead of the objective been to develop a hydrogen battery that will cut emissions by 90%, the new objective will be to build a battery that cuts emissions by 20%. The idea development framework provides a thinking loop that enables those interested in developing an idea to identify and solve problems with the idea as well as effect significant change to the idea by modifying the objective.
The idea advocate and devil’s advocate will at some stage use the idea development framework to make their case for or against the idea based on the contributions of the community. Depending on how popular the idea is (voted up or down) within the community, the investment manager will decide whether to shortlist the idea and call for business plans (thus step 2 on the diagram below).
On receiving business plans after the call for said plans, the investment manager publishes the plan(s) for review by the community. After the business plan review period is over, the investment manager creates a poll on the blockchain to determine which business plans are popular with shareholders (step 4).
Based on the result of the poll, the investment manager creates a funding proposal on the blockchain for shareholders to decide whether to fund a business plan. If the funding proposal is successful, the treasury contract sends the approved funds to the finance committee’s multi signature wallet.
Applying community rules, the investment manager will use the Ethereum addresses of those that contributed during the idea development process (for or against does not matter) to create the Support & Advisory (SO) group contract for the funded company. The SO group is like a company’s board of directors. Each start-up can design it’s SO group according to need. SO groups can number anything from a minimum of fifteen members to millions of members.
Once the SO group and it’s leadership is in place, the investment manager will advice the finance committee to transfer the approved funds to the SO group’s multi signature wallet. The SO group conducts due diligence on members of the founding team that sign the funded company’s multi signature wallet before transferring funds to the company wallet according to the cash flow statement in the business plan.
Sirus Knight is the Co-Founder of Social Kapital
