Here is how it works:
A Project Owner makes available a certain number of ‘seeds’ which can be purchased by supporters. The funds raised can be used by the Project Owner to expand their business, launch their project, or used however they think best. However, if the Project Owner so chooses, they could offer to share the revenue raised by their venture with their donors, or deliver the finished product to ‘seed’ owners, such as by sending them the product itself, or offering subscriptions to the Project Owner’s services. The sky is the limit as to how the Project Owner can reward donors.
On Taproots, they are strongly encouraged to offer rewards!
Depending on the value of these ‘tangibles,’ the purchased ‘seeds’ might themselves become valuable in their own right. The Taproots platform allows supporters to buy and sell ‘seeds’ from each other! They can set the sale price of their ‘seeds’ and other supporters can then purchase the offered ‘seeds,’ if they so choose.
Thus, Taproots represents a ‘middle ground’ between crowd-funding efforts where the people donating merely receive satisfaction of supporting a good cause, and companies selling actual ownership in their operations, such as via shares on a stock exchange.
For example, an author might want to crowd-fund the production and marketing of a new book. An author would never take their book ‘public’ as if it was a company. That said, supporters might very well be willing to help crowd-fund. But what if the author offered free copies of the completed book to ‘seed’ owners, and went further, and offered to give all ‘seed’ owners a percentage of the profits of future book sales? In such a scenario, the donors now have a vested interest in promoting the book, too, since they know they will enjoy a portion of the profits. It becomes a win-win: The author gets the money to complete his book and an army of people promoting his book, and the donors to the project have an incentive for helping the author’s book succeed.
The roots can potentially deepen further. As the book succeeds, people looking for new ways to invest their money might decide they want in on the action as well, and might now buy some of the ‘seeds’ that are made available on the Taproots marketplace. New people = more book sales. More book sales = more valuable ‘seeds.’
As the value of the seeds increase, donors can sell some or all of their seeds on our marketplace, potentially earning a profit.
A business wants to expand its product line to include Widget X. However, the business knows it will take more funding in order to develop and produce the Widget. Believing that the Widget will be well received by consumers, the business considers ways to raise funds. There is, of course, the crowd funding option. The business knows a good viral campaign might help the Widget come to life. However, in crowd funding, people do not typically have a vested interest in helping the Widget succeed. Should the business take the company public? It would be able to raise capital that way, but introducing thousands of new owners greatly complicates things.
Solution: Taproots ground-funding. The business turns to Taproots, where it offers their Widget for free to all who buy at least 100 seeds for their project. In addition, the business pledges to reward such contributors with a ten cent reward, per seed, for every 10,000 Widgets that they sell. The campaign goes viral, as the donors to the project help spread the word about it, knowing that they will share in the profits.
The campaign goes so well, that the company now offers twenty-five cents per seed for every 10,000 Widgets sold. Suddenly, everyone and their mother wants to have some of the business’s seeds! As the value of the seeds increases, contributors begin buying and selling them, and some make a profit on their original contribution.
The business has received the funds it needed to develop, produce, distribute, and promote its Widget. The contributors have each gotten free Widgets out of the deal, plus a little extra as they shared in the revenue, and then saw the value of their seeds increase, too. Some were able to sell some of their seeds for a profit.
The Project Owners and Creators can structure their campaigns however they choose. They are not conveying actual ownership in their projects, but are encouraged to give contributors a vested interest in promoting and supporting the campaign.
Taproots will work with Project Owners and Creators to design a campaign that will create as much of a ‘win-win’ arrangement as possible.