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Faction Funding

#1
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?
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Re: Faction Funding

#2
Maybe the problem is your suggestion assumes membership fees are the only source of income. These factions would control a region of space, right? They must have control of something tangible or there would be no point of membership. Otherwise, you could go to a bank and get a loan or something if all you wanted was a ship.
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Re: Faction Funding

#3
You could compare a faction to a company or organisation. As such, they'd get an income doing things companies do.

Instead of members having to pay the faction to be able to work for them, they'll get paid for the work they do.
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Re: Faction Funding

#5
I am not suggesting that the sole source of income is from membership fees, certainly factions will have their own assets and projects which make money for them as a faction which can certainly constitute the majority of their income. I am however assuming that some factions will charge a membership fee as well, and this fee system could act as another source of income for the faction as well as a means for individuals to raise capital without loans or to invest in a faction temporarily.

With my suggestion, membership fees would only really apply if you are some neutral party, that if you had good standing with them already, which you gain by doing work for them, membership would be free or they may even pay you a stipend.

What I am also suggesting is that this regular stipend could be slightly complicated to allow it to function in a way similar to both loans and investments. You could collect a large amount all at once and pay a little back, or you could invest a lot all at once to walk away with regular dividends.

It is in all honesty not a perfect system for anything it is trying to accomplish, it is merely trying to get around the arbitrary "we rather wouldn't" of complex debt mechanics, while still allowing for some chance to invest money in an organization and raise capital for individual projects.
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Challenging your assumptions is good for your health, good for your business, and good for your future. Stay skeptical but never undervalue the importance of a new and unfamiliar perspective.
Imagination Fertilizer
Beauty may not save the world, but it's the only thing that can
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Re: Faction Funding

#6
I'm not for the idea of membership fees at all, to be honest, although I suppose they do make a certain kind of sense. I simply assumed that all faction income would come directly from the work that the members were putting in, and that the workers would be paid a fee directly proportionate to how much they accomplished - apparently the opposite of what you thought, and rather in-line with the last dev update. I could be wrong, though.

To elaborate: In the last dev update, we saw Josh paid a fee directly proportionate to how much he accomplished. If he'd been a miner, he would have mined ore, all his profits would have gone straight into the faction's treasury, and a portion of whatever he accomplished (the bounty/fee) would be given to him. There was no "membership fee" that I saw, nor has there been previously... I actually haven't seen mention of membership fees anywhere, and it feels pretty natural to assume that there wouldn't be. After all, the faction doesn't work for you - you work for the faction. It's like taking a job. You don't have to pay to take on jobs in real life, and all your work goes directly to the company. It's not really too much like a government system where you'd have to pay taxes, I suppose, but if there were taxes, I suppose they would be from factions being hired by other factions to protect them. I made a thread on that somewhere, but can't remember where it is...
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Re: Faction Funding

#7
Talvieno wrote:I'm not for the idea of membership fees at all, to be honest, although I suppose they do make a certain kind of sense. I simply assumed that all faction income would come directly from the work that the members were putting in, and that the workers would be paid a fee directly proportionate to how much they accomplished - apparently the opposite of what you thought, and rather in-line with the last dev update. I could be wrong, though.
I would be ok with it as an option.

The issue is that a "faction" is used for all the different types of groups that can form.

A mining guild, a band of pirates, a trading corporation and a multi system empire all fall under a "faction".
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Re: Faction Funding

#8
Yeah, the problem here is that a membership fee would not work for ALL types of factions. For example, workers don't pay part of their income to the company, they serve and work for it, and they get paid either a commission (for one-time deals) or a flat rate (for continuous work). That being said, membership could be a good way to raise funds for a faction. It seems like Type A would be like stockholders, where they pay for shares of the company, and their decision is based on how well it's doing. Type B is more of a government and job deal, where you get money from your job (the flat rate) but have to pay part of it to the faction/government (taxes). That's all the thoughts I have now, I'll add on later, when I come up with more.

Edit: Oh, I just came up with an idea. Instead of having preset plans, these should be options in a toolset of different ways for factions to raise money. It could work with a checklist, basically, check off the features you want to include in your plan. So maybe I wanted to create a plan like Hyperion's Plan A. I would checkmark "Flat Rate" under Payment Option and checkmark "% of the faction" under Benefits. From there, suboptions for those will come up for each of the options chosen. For example, after selecting Flat Rate, there would be a suboption for "Amount Payed" (where you select how much they pay) and "Time Interval" (where you select how often the money is taken). Once you are done customizing your plans for your faction, you can set a name for it, and submit it.

On the member side of things, all they would see is what they are getting out of it, and how much they have to pay per set time. They could set up the amount of "cycles" they want to participate in, and then sit back and watch the money roll in. If a membership ended, they could either choose to cancel it, or renew it, setting up how much longer they want to use it. At any time, they could cancel it, and they get to keep the money they haven't spent on it yet. They continue to receive the benefits until the cycle is up.

Any thoughts, questions, or opinions?
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