Venture Free StartUp Financing and How Respect Network can Earn Income
Session Topic: Venture Free Start-Up Financing
Convener: Kevin Cox
Notes-taker(s): Kevin Cox
Tags for the session - technology discussed/ideas considered:
Startup Funding, prepayments, non compounding finance, credits for payments
To handle small payments efficiently a vendor can ask for customers to prepay and to buy Vendor Credits. This is like a prepaid phone card - but with some differences. The credits never expire and if they are not spent then the customers receive Reward Credits. Reward Credits do NOT earn more Reward Credits. A vendor will offer Rewards commensurate with the risk of the business not being able to supply the services. Typically this will be around 20% per annum. Credits and Rewards Credits will increase with inflation. Increases in credits will be made each day the Credits are unused.
Credits and Rewards Credits are transferrable and can be sold in a market place established by the vendor.
If a customer has too Credits they cannot use then up to 50% of new Credits sold by the Vendor can be sold by the Credit holder.
Rewards are not taxable if used for services because they are legally the same as a discount. In most jurisdictions if Reward Credits are sold the income from the Rewards will be treated as a Capital Gain.
Credits are secured against future production and in the event of the Company being wound up the Credits have the same status as loans.
Credits can be used to purchase services from suppliers - such as the Respect Network. Credits can be used by other vendors to sell goods on the Internet provided there is an agreement by the vendor.
Credits can be used by investors. They offer the equivalent of a 20% fixed interest on investment where the capital is increased with inflation.
Because Credits are used as the payments mechanism means that the operation and treatment is simplified.
It was suggested that the Respect Network could sell identity audit and security audit services and be paid in Credits from future income. In the case of pre-revenue companies the Credits will not be realised until sales are made but while waiting they are earning a good income.
The Respect Network could also earn income by monitoring and watching the Vendor Credits and could act in a similar way to ratings agencies such as S&P. These services could be paid by the Vendors in Credits.