According to Loom founder Chase White, there’s a familiar cycle that tech entrepreneurs go through: When they’re first getting started, they sell equity to angel investors, then they use the money to hire developers to actually build the product.

At a certain point, White (formerly the co-founder and head of product at Localeur) wondered, “Why not cut out the middleman?”

In other words, why not just offer that equity directly to developers? White said this allows startups to build a basic product, check if it can get any traction and then try to raise funding. And that’s what he’s trying to enable at Loom.

Entrepreneurs can post their ideas on site (the sensitive stuff doesn’t get posted on the public profile), then they get bids from freelancers who want to participate in the project. They can review the bids, browse freelancer profiles (those freelancers can verify their skills through developer tests on the site) and send a few initial messages.

Then, if an entrepreneur wants to hire a freelancer, they pay Loom $99 for the connection, which means they have access to unlimited messaging, unlimited file sharing and can exchange contact info.

The developers don’t have to be paid in equity alone. In fact, White said that 80 percent of the bids on Loom are for a combination of cash and stock.

He added that Loom leaves it up to the entrepreneurs and developers to decide what the compensation should look like — though this could potentially lead to some acrimonious situations.

“The goal right now is to facilitate the connections,” he said. “In the future, we’ll have a lot more conflict resolution and mitigation efforts, but that’s more of a long-term goal.”

The development-for-stock model isn’t an entirely new one. In fact, there’s a firm called CoVenture that specifically offers development and design work in exchange for equity.

You might also remember the “crowdcoding” site Late Labs, whose founder Justin Johnson is now an advisor with Loom. Johnson said that one of the problems at Late Labs was its attempt to build a broader suite of collaboration tools: “We tried to do that and manage the process and it broke down a lot. Chase is laser-focused on the actual value creation in helping people meet each other.”

White admitted that initially, Loom was also trying to charge an ongoing fee for these projects. After it launched in August, users “were essentially stealing the product — making successful connections and then jumping off the platform without paying fees.”

To avoid this situation, Loom moved to its current model of just charging for the initial connection.

“Entrepreneurs are savage individuals and they will do anything to protect their runway, which I don’t blame ‘em for,” White added.

And just to be clear, he’s opposed to the idea of raising outside funding, either. Loom, after all, raised a $600,000 seed round to hire its first employees.

Featured Image: WOCinTech Chat/Flickr UNDER A CC BY 2.0 LICENSE



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