I was thinking recently about ways of raising starting capital for various projects in ways that avoid the complex debt mechanics that loans incur. I am not a financial expert, but have come up with a method I believe may allow for this, and would like some input from our more financially minded members who may be able to point out specifics as to how this could be better achieved or fatal flaws I am too ignorant to recognize.
I am assuming that most factions will have a form of membership fee to bring in capital to accomplish broad faction goals as well as pay for all the other benefits of faction membership, what I am proposing is that instead one one kind of membership fee, factions have two kinds of membership fee. In membership Type A, members pay a flat rate per month* and get back a fixed % of total faction profits over that same time. In membership Type B, members pay a % of their personal income to the faction, and receive a flat rate payment per month.
* Month here is an arbitrary unit of time, perhaps 100k or 1m seconds would be better
Initially these would be recurring expenses, as the amount members pay the faction will be on average, somewhat more than they receive. Each type of membership has pros and cons - if the faction does exceptionally well, Type A members receive more back, if poorly, they get less; if Type B members do poorly, than their membership fee is lower, if they do great, they pay more.
However, this system would utilize faction standing to turn membership from an expense into an income. For those members who have a neutral standing, the fee is ultimately a not insignificant expense, paid either upfront or at the end of each month. As a member’s standing grows within the faction however, their flat rate or percentage income they pay to the faction will decrease until it’s barely anything. Even with good standing though, this stable source of income is not significant enough to be considered starting capital for a major project, but is more a way to paying for small recurring expenses like ammunition, supplies, tolls, etc.
Starting capital comes in because that as one’s standing within a faction rises, not only do you get a better rate, membership periods can also be made consecutively in ever greater time periods, and the flat rate payment/receipt can be made all at once as well as monthly.
For example: You have somewhat decent standing with the Venetian Trading Company, you have run a few security missions for them before, but were never a member. You can join their faction either as a Type A member where you pay 5000 credits a month, and receive back 0.05% of total faction profits (expected to be about 4500 credits) or as a Type B member, where they pay you 5000 credits a month, but you must pay 5% of your monthly income, regardless of how much you make. You also have good enough standing to join for up to 5 months at a time. You are looking to buy a new ship, but the one you want costs 40K credits, and you can’t afford it. You opt for a Type B membership for 5 months. The Venetian Trading Company gives you 25,000 credits, but you must pay them 5% of your income for the next 5 months. This is better than the 7% they normally ask for neutral members paying month to month, but if you were really well liked, you would get it for only 1%, additionally if you were really well liked, you could get a 50 month membership, getting 250K at once and paying only 1% of your income for 50 months.
However, I have a small problem. I cannot figure out how a faction would decide upon how much of its capital to allocate to this Faction Funding scheme. You cannot give 0.05% to more than 2000 people, nor can you give away all your capital to everyone that asks just because they promise to repay it as a membership fee. I had a couple ideas as to dividing a majority % of profits evenly among all Type A members, and an account from which to pay Type B members, but I am unsure how these would be structured in a way that would be both beneficial for the faction as well as individual members.
At any rate, I think the fundamental idea is fairly sound, and merely needs balancing. With Faction Funding, I think that we can see something akin to loans, while staying away from complex debt derivatives, leveraging, etc.
So, any thoughts?
Post
Tue Jun 17, 2014 2:04 pm
#1
Faction Funding
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Imagination Fertilizer
Beauty may not save the world, but it's the only thing that can
Imagination Fertilizer
Beauty may not save the world, but it's the only thing that can