shared ownership structure for web venture

[crescen3]

I'm investigating a potential business structure for a new web venture and was wondering if someone could shed some light on whether the following would be possible and/or a good idea, at least on a conceptual basis. Basically, website members would be gifted shares based on certain 'tasks' they completed on the website. For example, founders could have 50,000 shares, seed investors could have 50,000 giving a total of 100,000 shares initially. Members would be gifted shares (perhaps every year), based on how many 'points' they have on the website. So its possible the members could own more than half the company within a few years.

- Would this work?
- I've read that the 'TravelZoo' website did something similar - are there any other more recent examples of this structure? Its similar to a co-operative, but members would never work or pay for shares.
- How would we go about administrating this? I was thinking perhaps we'd start a trust or other entity, and then after 1 year, if members had accumulated 50,000 points, we'd gift 50,000 shares to this entity. We would keep a record of how many shares each member was allocated. Could we get by with an informal structure like this?

Thanks for any help!

 

[FlyingRon]

And what do you do with these "shares"? If they're actually a real security (i.e., ownership in the company) any public offering either for straight cash or some in-kind gimmick, would be regulated.

I'm not sure I understand what the business model is here.

 

[crescen3]

Thanks for the quick reply. The shares the members would have would be real shares, albeit allocated through a holding entity of some sort. With 1000 members it would be a hassle to have them all on the share register. For example if after the 1st year, members generated a total of 20,000 'points', we would create an entity (maybe a trust) which would be allocated 20,000 actual shares in the company. We would keep track of how many shares each member was allocated within that. This trust would then act on behalf of members, potentially with its own directors. Since members aren't paying for these shares in any way (they get benefits from the website regardless of these shares), I'm hoping we're exempt from normal legal headaches.

Ideally, shares would be assigned annually, so at the end of each year, members would be assigned X shares each.

Without going into the actual functions of the website, the business model is simply using these shares as a marketing incentive, making members feel part of the concept and thus more likely to spread the word etc. For each 'point' (share) that we gift members, we'd make sure the website would be getting much more 'value' in return so its not purely a marketing gimmick like with travelzoo.

 

[FlyingRon]

TravelZoo actually gave out options. However still since this was extended to the public, you're going to have regulatory hurdles. You need a lawyer specializing in securities. This is NOT something we can explain on the internet.

 

[Zigner]

How would it be a "hassle" to have 1,000 folks on a share register? You ARE going to use a computer to keep track of things, right? Amazon & eBay have millions upon millions of transactions that they track.