How does a Smartup work?

A Smartup, in many ways, just operates like any company. For example, it has a workforce that is getting payed. One of the unique aspect of a Smartup is that it’s financing this workforce solely through crowdfunding and profits. No other financing mechanism are allowed. When a Smartup is in the Four Layers of Creation (the starting up process) it only can use crowdfunding. After the product has gone to market, profits are used to grow organically. So let’s start with Crowdfunding. How does that work for a Smartup?

Crowdfunding

Basically a Smartup is using crowdfunding as a method of financing its own crowdsourcing activities. During ‘the four layers of creation’ the Smartup is constantly crowdfunding. Each phase has its own ‘budget target’ and campaign strategy. A Smartup ALWAYS starts with a crowdfunding campaign for the validation of an entrepreneurial idea. If the Validation phase is completed and all the thresholds are reached, the crowdfunding campaign for the design phase starts. 

The big difference with ‘normal’ crowdfunding projects is that, next to the normal way of backing a project, people can buy a membership to the Smartup community. Or, if they don’t have the money to buy, earn a membership to gain access to the community. Being part of the community has real value because everybody who becomes part of the Smartup Community has two real tangible perks:

(below this paragraph you’ll find a flowchart that gives an overview of the following processes)

  1. You will be registered in the Book of Owners and are officially an owner of the Smartup.

    • This is a Google Spreadsheet that all community members always have access to (read-only).

    • All members have the exact amount of ‘ownership’. If the Smartup has 100 community members everybody has 1%. When there would be 1000 community members everybody has 0.1%, etc. 

    • When the product goes to market, the Book of Owners closes and no new members are allowed until the community decides to do another crowdfunding round. 

    • When the product goes to market and creates profits these profits can be used to pay out the community with dividend.

  2. All members have voting and information right. You will be able to follow and track all progress and are able to vote on crucial decisions. Also, depending on the license you bought, you will be eligible to work and earn money.

At the crowdfunding website you can buy three types of licenses that all give you access to the community. Two of them directly, one indirectly.

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Watch License

A license that gives you ownership and voting rights. You can follow progress, meetings, provide feedback and you can always upgrade to a Work License.

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Work License

A license that gives you ownership and voting rights. It also enables you to work for the Smartup. The money being raised through crowdfunding is available as budget to perform tasks.

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Campaign License

A license that gives you the opportunity to campaign for the Smartup and earn your Work or Watch License.

WITH A CAMPAIGN LICENSE YOU ARE NOT OFFICIALLY PART OF THE COMMUNITY AND ARE NOT IN THE BOOK OF OWNERS.

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Smartup Teams (the workforce)

If you bought a Work License you have the right to work and earn money within the Smartup. Working for a Smartup always happens in teams. Depending on the kind of service or product the Smartup is creating, you can subscribe, based on your own talent, skills and willfulness, to a specific team. When you are part of the team you can contribute to specific discussions and sign in to tasks that are set out by the captain of the team. In the Validation phase, each team has to choose a captain that represents the team in the Project Leaders Team. For Smartup Zero the teams are:

    1. Development Team

      The team that actually builds the actual product once the Smartup is in the production phase. Front end, back end, native, architecture, security, testing, all kinds of computer engineering expertise is needed in this team. The development team is most likely the biggest team of the Smartup that works with platforms like Github or Gitlab. During the Validation and Design phase, they do not develop yet. In those phases, they organize themselves and support, review and research development issues that surface in the validation and design phase. They have to be ready to start once they receive the scientifically reviewed Design Blueprint. 

    2. Design Team

      The team that performs all design-related tasks based on The Official Smartup Business Plan. Think of User Experience, Branding, Housestyle, Wireframing, User Interface, paper prototyping, mockups, Icon design, etc. The design team is working on the Design Blueprint that the development team needs to actually build the product. They are consulting the development team regularly as they progress. Before handing in the Design Blueprint to the production phase the first scientific review takes place. 

    3. Science Team

      Science plays a crucial role in a Smartup. Scientists should be seen as the compliance officers that check, based on peer to peer-reviewed facts and models if the product or service is created under the most sustainable and scalable conditions. The science team assists all other teams in their efforts to make the best decisions. All kinds of scientists, academics and researchers are needed. The main function of the science team is to perform the two scientific reviews where they first check if the design complies with the best sustainable practices in their fields and later check if the work of the development team complies with the market's assessment they made. The science team is the only team that can turn back a decision that is made in the general forum. 

    4. Media Team

      The media team has two main functions: 

      1. Internal communications

        Follow all the work of the progress and activity of the teams and report on the General Forum so the community can stay informed on the progress and issues. 

      2. External communications

        The Smartup has social media channels for the general public. The media team makes sure those channels are filled with informative and engaging content.  

In the media team, all kinds of different talented people in the area of communication, journalism, PR and social media are busy creating engaging pieces of content. During the creation of the product or service, a Smartup is completely depended on crowdfunding. It’s crucial that there is a constant line of communication from the internal community to the outside world. Articles, blog posts, translations, animations, the media team has a lot of work to do. 

5. Business Team

This team is responsible for creating a solid business proposition, marketing and financial plan.  They are developing business cases, making forecasts, crunch the numbers and, in general, make sure the product or service is ready to market under the best conditions. The business team also is responsible for The Official Smartup Business Plan and makes sure all the latest adjustments and decisions are updated and all teams always have the most up to date version available. The business team plays a crucial role in the Organisational phase of the Smartup. There they work closely with the science team and do the final market assessment and guide the community in choosing the first Executive team that is launching the product or service into the market. 

6. Operational Team

This team’s only focus is to streamline the cooperation between the teams. The operational team has an oversight function and operates like a commission where they discuss adjustments and procedures to improve the collaborative processes that lead to an improved creation process. They also look at ‘incidents’ between community members that are flagged as inappropriate or unfair. In this team can be people with experience as a Project Manager, Compliance officer, Legal consultancy, and Psychology professional. This team is constantly monitoring, documenting and adjusting the overall Smartup organization. Especially for Smartup Zero (the first Smartup), their role is crucial because their work is to watch the Smartup organize itself, make mistakes and create a guideline, almost like a Smartup constitution, for future Smartup to follow. 

Working and earning in a Smartup

Although money should never be the main incentive for people to work for a Smartup, a core principle is that good work should always be rewarded. That’s why the money that is being raised through the crowdfunding campaign is immediately available for the community to perform all the crucial work that needs to be done. The more money that is raised through crowdfunding, the more budget each team has available. This is a unique mechanism that also drives community members to spread the project in their own network for more backers. 

The currency and value is one of the many aspects that have yet to be clearly defined but it is very important to be clear to all community members from the start. For the long term, I personally feel that it would be ideal if we create an official cryptocurrency for Smartups. Obviously, this is not something that is available for Smartup Zero but could be subject to research by the science and operational team for example. For Smartup Zero these are the ground rules.

  1. Only when you bought a Work license and are part of a team, you are eligible to earn money in the Smartup. There are two general ways to earn money for workers:

    • Earn Karma points within your team and exchange those points for real money once the product or services brings in the first profits. This means that being active, positive, constructive and critical will be rewarded.

    • Work for money by winning assignments within your team.

  2. All team members can give each other karma points for their help and contributions. These points later will be exchangeable for money once the product is successfully marketed and brings in the first profits. (a solid and fair structure for this has to be designed)

  3. Good work is being rewarded with financial compensation

    • In each phase The Project Leaders Team have to set the budget that is needed in the next phase. That budget is the next financial targets that the Smartup needs to raise during the next crowdfunding round. 

    • Each phase has one designated team that takes the biggest chunk of the budget because that team is most important in that phase and needs to do most work. The other teams can get their budget from the community budget which exists out of the remaining money that is raised through crowdfunding. Per phase:

      1. Validation ---> Designated team: Entrepeneur

        1. The entrepreneur is the one who gets rewarded the most since he/she did a lot of work setting up the Smartup. 

      2. Design ----> Designated team: Design Team

      3. Production ---> Designated team: Development Team

      4. Organization ---> Designated team: Business Team

    • Captains set out tasks for their team and allocate budget for each task

    • Team members (workers) can subscribe to the tasks by suggesting approaches on the matter.

    • The team members rates the approaches

    • The team captain decides who and how many team members can perform the work based on the ratings

    • Other team members perform feedback, control, and support on the work that is being done (for Karma points). 

    • If they deliver they get a payout receipt from the team captain. That receipt they can send to the entrepreneur who then pays out the individual workers through PayPal or another preferred payment service.

  4. In the Validation phase, nobody gets paid besides the entrepreneur whose work is valued and validated. When validation is reached this means all the work the entrepreneur has done is been deemed good enough and deserves to be paid. Depending on the ‘original documentation’ of the entrepreneur (is it a one-pager or as evolved as a prototype?) the entrepreneur gets a maximum of 25% of the total crowdfunding amount.

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