Pennies from Many
When Social Networking Met Finance
Like many startups, Trampoline Systems, a British software maker, raised its initial funds from friends and family. It followed that with an infusion from angel investors. The company had a potential winner on its hands: Its software promised to plumb the sea of online data and communication to discern patterns in social networks—exactly the kind of things that big corporations obsessed with brand image salivate over. (Trampoline famously demonstrated its visualization software in 2006 by running it against a public database of e-mail messages from Enron.) But more capital was needed to commercialize it.
In 2007, Trampoline lined up roughly $5 million from a U.S.-based hedge fund. All was well—until the financial system nearly collapsed in the fall of 2008 and the hedge fund, like so many investors, retreated from the market. “The options were pretty stark. It was either close the business or do a kind of fire sale,” says Trampoline’s cofounder and CEO, Charles Armstrong, a 39-year-old ethnographer with a wild mane and a penchant for loud suits. Armstrong began exploring alternatives. He knew firsthand the power of online social networks, and figured he’d try raising funds over the Internet. Heck, he had nothing to lose. “We didn’t know if it would work out or not, and we knew that it was going to be hard work, but it was better than the conventional options,” he says.
Armstrong and his team worked with securities ...