Investment plan

Currently, staff members gain equity by working. Every hour of work equals one equity hour. Unfortunately, equity does not pay bills. For those who need need to pay bills, a salary is needed. The quickest way of paying a salary is through investors. An investor would put in a certain amount of money. That money would be used to pay the wages for the staff members. In return for investing money, the investor would get the equity of all payed hours worked by staff members.

If the project is ever sold, the equity hours will be a factor to calculate the price of the project. At a bare minimum, contract programming is $60/hour. The usual price is usually much, much higher. Often a typical price is $100/hour. If the project is ever sold, I would like to aim for a project price that pays out $100/hour. If the project price yields $100/hour, equity owners would be paid at the rate of $100 per equity hour. If the equity hour was purchased at $20, the gain from sale would be $80. Understandably the price of $100/hour seems high, but I think the price is reasonable given that professionally built web sites cost half a million or a million dollars to build.

To start off the investment system, I'm thinking about asking investors to invest money for 100 wage hours. If staff works at the pay rate of $12/hour, then that would be an initial investment of $1200 per investor. In addition, I'm thinking about adding an extra fee to pay for non labor expenses: books, hosting fees, etc. Perhaps we could assess a fee of $3 on top of every wage hour to be paid by investors. So an initial investment of 100 wage hours be 12 + 3 dollars per hour, or $1500.

There is the possibility that wages will change to recognize certain milestones in the project's history. For example, to encourage faster time to completion on the development project it would be reasonable to offer a financial incentive. Say a milestone of commercial release and 10 or 20 restaurants sign up. The wages could be increased from $12 to $15 per hour to recognize completion of such a milestone. To reflect the lower risk associated with reaching certain milestones, it is reasonable to ask investors to pay labor at $15 per hour instead of $12 per hour. For investors that are caught in the middle of a rate change, they will be offered the chance to continue at the new wage rate, or pull their remaining money out.

To account for investment money surplus, we will use a queueing system to determine how money is consumed from the money pool. Those who invest early will see their money converted to equity early. Those who invest later, may risk a wage rate change, and may not even see any of their money converted into equity.

For the first wave of investors, I think friends and family would be a good choice. This should be enough for our needs given the modest wages we are considering. Additional money can be tapped from venture capitalist, but this is not a preferable choice. I am somewhat suspicious of venture capitalists because I fear such individuals may attempt to meddle in our technical and business strategies.

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