11
votes
Purism (a creator of FOSS friendly hardware such as laptops and a smartphone) is seeking investment from individuals
Link information
This data is scraped automatically and may be incorrect.
- Title
- Purism - Investor Relations - Convertible Note
- Word count
- 991 words
They’ve already blown by their $3M goal and it’s only 6 days into the campaign. There is a lot of hate on the purism subreddit, but events like this make me believe the company is on decent footing.
That being said - they might be playing fast and loose with hoping for good faith on individual accredited investors. There’s a LOT of country-specific (and region-specific) compliance in this space for a reason. If what they are doing is legal it could be a grey zone many others use.
I mean the fact that they have to do this at all indicates they're not doing very hot. While convertible debt isn't too strange, even forgetting the weird crowd funding angle it's not a great look - it usually means you're not in a position of power relative to the lender since you have to sweeten the pot.
Add in that they're raising debt... by pseudo-crowdfunding? At 3% when interest rates have fallen off a cliff? With a bonus 8% in case of a liquidation event? That has to mean that they can't get much better traditional financing, presumably for a reason. The only pro for them is that they're going to get money from people who aren't going to ask to look at the SPC's balance sheet, or get a debt grading that's not going to be attractive.
The casual mention on the page that
is, uh, not confidence inspiring either. Be to an accredited investor (and to be legally allowed to own private equity), you have to either have a net worth >1 million or earn >200k in annual income. Somehow I'm not confident every dollar of that apparent 3m is by accredited investors per the SEC definition.
Idk the whole thing just seems so janky.
I don’t disagree with what you’re saying and I also misrepresented my opinion in my original post - when I said the company is on decent footing, I meant, “they still have consumer confidence”. Financing HW companies is really difficult, and I can’t see them being in amazing financial condition given what I know about them, but as long as they have consumer confidence there is a path to survival and eventual financial stability/success.
Working at a HW startup myself, it’s notoriously hard to finance. A lot of traditional financing options just aren’t available (because you’re a startup with no history) and VCs aren’t really funding consumer HW startups since they can’t get as much potential upside. That leaves a small pool of potential cash, and usually debt financing, so an equity crowd-fund like this isn’t as damning as you might think. It makes sense to even out debt financing with equity financing.
I also don’t have confidence that the entire $4M raised so far is via accredited investors. The question is: is what they are doing (pushing onus on investors) legal? If so that’s a huge coup. There are equity crowdfund platforms that handle this for you, but it severely limits the supply of investors (usually by administrative region). If other companies can do this, it could change the way HW startups finance.
From what i understand it will get converted to stocks of value equal to how much the note is supposed to pay including interest , so this isn't really a loan but looks to me like an IPO without actually being a IPO.
One advantage is that if their products are important to you (you would be willing to pay more then the price they are offering), this gives their fans a way to give more to the company while still getting something in return which is basically the ability to control the company and influence it . People are complaining that purism isn't good enough so what better way to prove then to get some ownership and vote for a better board of directors or better high level decisions.
This might be overly optimistic but I don't think people have expected linux/wikipedia/firefox/khtml will be as influencial as they are now, so who know.
There are a few major differences between Purism and the other open source projects you mention. They are all non-profit software projects contributed to heavily by volunteers. Purism is a for-profit hardware company. Even if they could rely mostly on volunteers, finding volunteers with considerable mobile hardware design experience is much harder than finding software developers. As a hardware maker, they face considerably greater up front and ongoing operating costs that need to be covered by sales of their product. The finances of OSS projects are usually kept in check by donations from large corporate benefactors (see the long list of Linux Foundation members).