Equity Forge

The specific problems we are addressing center on challenges in startup ecosystems worldwide, particularly concerning access to capital and employment opportunities. Globally, startups are critical drivers of economic growth. According to the World Economic Forum, startups created nearly $3 trillion in value in 2019, a figure on par with the GDP of a G7 economy. However, 74% of this value was created by startups concentrated in the top 10 performing cities globally. Outside of the top performing ecosystems (and even within them), startups often struggle to secure the funding necessary to hire the talented people they need to launch and scale their ventures. This lack of access to capital and talent stifles innovation and impedes economic growth, affecting not only the entrepreneurs themselves but also the broader community and economy. For workers seeking to advance their careers, this lack of funding for startup ecosystems translates into limited employment opportunities and a decreased likelihood of achieving asset ownership and prosperity.

According to data from the World Bank, access to finance remains one of the primary barriers to entrepreneurship, with an estimated 70% of small and medium-sized enterprises (SMEs) in emerging markets lacking access to adequate financing. This problem is not confined to specific regions but is prevalent across the globe, impacting millions of aspiring entrepreneurs and hindering the development of vibrant startup ecosystems.

Several factors contribute to this funding gap. One major issue is the risk associated with investing in startups, especially in their early stages when success is far from guaranteed. Investors often prefer safer bets with established companies rather than taking a chance on new ventures. Additionally, startups may lack the collateral or track record necessary to secure traditional bank loans, leaving them with limited options for financing.

Furthermore, startups face challenges in attracting and retaining talented professionals, exacerbating workforce development issues. Many skilled individuals are hesitant to join startups due to perceived risk and instability. While startups offer innovation and growth opportunities, uncertainties like cash flow instability deter top talent. This impedes startups' ability to execute ideas and grow. Addressing workforce development encompasses skill enhancement and career advancement opportunities, crucial for attracting and retaining talent. These challenges not only hinder startups' growth potential but also impact broader economic development and job creation globally. 

The traditional startup employment model presents a complex challenge for both employers and employees. Limited financial resources often hinder startups from offering competitive compensation packages, leaving employees in a tough spot. They must choose between risky roles in startups or stable positions in established companies, fueling high turnover rates and instability. Additionally, the model compounds the challenge of wealth accumulation without ownership, perpetuating financial inequality. Employees lack ownership stakes, limiting their pathways to prosperity, especially in startups. This financial disparity hampers employees' ability to achieve financial security and long-term prosperity.

DemocracyLab has built an open-source online platform connecting tech-for-good projects with skilled volunteers. More than 8,000 volunteers have used DemocracyLab to find inspiring projects to contribute to, creating an estimated $15,000,000 of public value for projects while creating career-advancing experience for volunteers. Our solution, Equity Forge, will be a for-profit subsidiary of DemocracyLab that broadens the platform's reach to include impactful for-profit companies. These for-profit companies can further incentivize contributors by offering opportunities for equity accrual.

Equity Forge will retain the core functionality of DemocracyLab, serving nonprofit, public benefit, and public IP projects dedicated to social impact. This will ensure a seamless transition for existing users while aligning with Equity Forge's commitment to fostering positive change. Nonprofit organizations play a crucial role in the global economy, contributing 3% of global GDP and making significant contributions to social welfare worldwide.

Equity Forge will welcome impactful for-profit startups to use its platform, creating an inclusive ecosystem where startups can engage with skilled professionals. We will quickly introduce a groundbreaking equity allocation model pioneered by Slicing Pie, which has served more than 20,000 companies since its launch. Using Slicing Pie, equity in a company is calculated based on the amount each contributor has “at risk”. Individuals working for the company put their time at risk. The value of their time is calculated by multiplying an agreed upon market rate wage by the number of hours worked. The model then calculates an equity split based on the value of each participant's contributions. The founder of Slicing Pie, has agreed to collaborate with us to launch Equity Forge.

Over time, Equity Forge plans to transition to a more dynamic assessment of the value created within companies. Future equity splits will not be based on a pre-set hourly wage but on a democratic assessment of the value of the work completed. An open-source platform called SourceCred made a noble attempt at this, but wound down its organization in 2022. We are scheduled to meet with a former leader of the organization to glean what they’ve learned and explore opportunities for future collaboration. SourceCred includes a number of key features that we have imagined for Equity Forge, including using cryptocurrency to track equity and establishing a marketplace where equity can be exchanged for cash, provided by investors.

We anticipate monetizing our value creation by charging a monthly fee to companies, plus charging a 10% share of the equity earned by individuals working for the company. In exchange, the contributor would be credited with an equal value of equity in Equity Forge. Under this model, Equity Forge would have partial ownership of a diverse portfolio of companies using its platform, and individuals would diversify the risk of entrepreneurship and increase their likelihood of building wealth. This approach will ensure a mutually beneficial relationship between contributors, companies, and Equity Forge, and will foster a sense of ownership and commitment within the Equity Forge community.

Equity Forge serves a diverse range of individuals and entities within the startup ecosystem, aiming to make a meaningful impact on their lives in several key ways:

1. Startups:

Equity Forge directly serves startups, particularly impactful for-profit ventures, by providing them with access to a pool of skilled professionals on a fractional basis. Startups often struggle to attract and retain talented individuals due to limited resources and the inherent risks associated with joining early-stage companies. Equity Forge addresses this challenge by offering startups flexible access to skilled professionals, allowing them to access the talent they need without the financial burden of full-time employment. This not only reduces labor costs for startups but also enables them to scale more efficiently, driving innovation, leading to economic opportunities and job creation.

2. Aspiring and Transitioning Professionals

Equity Forge offers aspiring and transitioning professionals flexible opportunities to engage with startups on a fractional basis. This approach allows them to contribute their expertise to multiple projects while maintaining stability through other sources of income. This workforce development focus allows professionals to gain valuable experience in the startup environment, expand their networks, and build their careers through diverse opportunities. Equity Forge supports professionals in achieving asset ownership by enabling them to earn equity in the companies they work with. This offers a pathway to long-term financial security and wealth accumulation.

Equity Forge also opens opportunities for individuals from underserved communities who have historically faced barriers to entry in the startup world due to systemic inequities and limited access to networks and resources. The platform seeks to democratize access to employment opportunities, recognizing talent based on merit rather than traditional credentials. This inclusivity allows individuals from underserved communities to participate and thrive in the startup ecosystem, contributing to greater diversity and inclusion within the industry.

3. Nonprofit Organizations and Public Benefit Projects:

Equity Forge will continue to support nonprofit organizations and public benefit projects. By providing access to skilled professionals on a fractional basis, Equity Forge helps these projects leverage talent efficiently and cost-effectively, fostering social impact and innovation. We anticipate that many individuals will gain experience working for nonprofit organizations (as they do currently at DemocracyLab), then use that experience to secure roles with for-profit companies through Equity Forge.

In summary, Equity Forge serves as a catalyst for positive change within the startup ecosystem by empowering startups to thrive, providing aspiring and transitioning professionals with meaningful opportunities, and fostering greater diversity and inclusion within the industry. By supporting a wide array of projects, including for-profit startups, nonprofit organizations, and public benefit ventures, Equity Forge drives innovation and growth across the board. Through its comprehensive and inclusive approach, Equity Forge aims to enhance economic development and improve the lives of individuals and communities worldwide. Additionally, Equity Forge's commitment to equitable compensation ensures that professionals can leverage their skills for social and economic impact.

Our team at Equity Forge is uniquely positioned to deliver our solution due to our deep understanding of the communities we serve: startups, aspiring and transitioning professionals, and nonprofit organizations and public benefit projects. Led by Mark Frischmuth, our Executive Director, our team possesses diverse expertise and firsthand experience in startups, technology, community organizing, and social impact initiatives. Our strength lies in our direct engagement with these target populations and our commitment to co-creating solutions that address their specific needs and challenges.

Mark Frischmuth’s leadership is informed by his experience with DemocracyLab, a platform that addresses inefficiencies in the tech-for-good sector. His background in the financial services industry enhances our understanding of economic dynamics and funding mechanisms relevant to startups. His educational background including an undergraduate degree in Philosophy and Master’s degrees in Business Administration and Public Administration help inform his management style and worldview. 

Our Board of Directors, comprising individuals with diverse backgrounds, provides strategic guidance to ensure our solution aligns with the communities' best interests. Their collective insights from various sectors such as policy, design, marketing, project management, and academia enrich our approach to solution design and implementation.

DemocracyLab grew out of the need for projects and civic tech community members to have better tools for matching projects and volunteers. Since launching our platform in 2018, we've noticed that most volunteers participate to gain experience and advance their careers. This observation guides our approach to Equity Forge, allowing us to effectively serve aspiring and transitioning professionals.

Our team consists of volunteers from professional backgrounds such as engineering, marketing, design, and community organizing. Many team members have firsthand experience working in startups or volunteering for tech-for-good projects, allowing us to empathize with the challenges faced by our target populations. Our team has 126 active members this week on Slack.

DemocracyLab democratically elects team leaders each quarter, ensuring ongoing community involvement and adaptability in our approach. Decentralizing authority in our organization helps to keep our team agile and in tune with the evolving needs and perspectives of the communities we serve. 

Our team’s proximity to the communities we serve enables us to meaningfully engage with them throughout the design and implementation process. We prioritize community input and seek feedback to ensure our solution is relevant, user-friendly, and addresses the real-world needs of our users. Our platform’s features, functionalities, and compensation models are co-created with input from startups, aspiring and transitioning professionals, and nonprofit organizations and public benefit projects.

In summary, our team’s proximity to and understanding of the communities we serve, coupled with our commitment to co-creation and inclusivity, uniquely position us to design and deliver a solution that addresses the specific needs and challenges of startups, aspiring and transitioning professionals, and nonprofit organizations and public benefit projects. We are dedicated to fostering a more inclusive and vibrant startup ecosystem that benefits individuals, communities, and economies worldwide.

Our pilot phase leverages the lessons learned and achievements of DemocracyLab, which has a proven track record of facilitating tech-for-good collaborations and connecting more than 8,000 volunteers with hundreds of impactful projects. Along the way, we learned that volunteers are significantly motivated by the opportunity to hone their skills, gain experience, and advance their careers.

Additionally, we benefit from the experience of Slicing Pie, which has been used by more than 20,000 startups since 2015 to allocate equity fairly among contributors. 

Both of these platforms have proven their concepts, and our next step is executing a business model pivot to merge DemocracyLab’s opportunity discovery platform with Slicing Pie’s platform for tracking equity accrual.

We are actively working on refining our model to better address these aspects for both skilled professionals and startups. The insights gathered during this pilot stage will inform future iterations and improvements as we work towards establishing a comprehensive system for compensation and equity in projects.

Additionally, we have explored the open-source tool SourceCred, which resembles the blockchain version of the value tracking system we've imagined. This exploration indicates the potential for integrating similar value measurement and reward mechanisms into our platform, further enhancing our ability to track and incentivize value creation within our community.

Overall, the pilot stage has allowed us to validate our concept, establish initial traction, and lay the groundwork for scaling our solution in the future.

We are applying to Solve to gain access to a network of experts, resources, and partnerships that can help us overcome various technical, legal, cultural, and market barriers we face in implementing and scaling our solution. As a platform that seeks to create a more inclusive and equitable ecosystem for startups, aspiring and transitioning professionals, and mission-driven projects, we recognize the need for strategic support in key areas.

1. Technical Expertise: We aim to use web 3 technologies to democratically assess value creation within projects and companies, offering a novel approach to ownership and equity distribution. Solve can connect us with experts who can guide us in the feasibility and implementation of these technologies. This includes assistance with integrating blockchain technology, smart contracts, and decentralized governance models into our platform.

2. Legal Guidance: Our business model raises significant tax and legal questions due to the innovative approach we are taking towards equity and compensation in projects. Solve can provide access to legal experts who can help us navigate complex regulations, particularly concerning intellectual property rights, equity distribution, and tax implications.

3. Cultural and Market Insight: Our solution's success depends on widespread adoption by startups and mission-driven projects. We believe that Solve's endorsement of our approach will increase our visibility and credibility within the social enterprise ecosystem. This can lead to greater acceptance and adoption by a significant number of innovative projects, enabling us to create a positive impact at scale.

4. Networking and Partnerships: Solve's vast network of partners, mentors, and advisors can help us forge strategic alliances with other organizations, investors, and thought leaders in the space. These partnerships can enhance our reach, provide valuable market insights, and open doors to opportunities for growth and collaboration.

5. Monetary and Non-Monetary Support: While funding is not our primary motivation for applying, Solve's monetary and non-monetary support can help us accelerate our progress and refine our business model. This includes access to grants, investment opportunities, and in-kind support such as mentoring and strategic advice.

6. Market Validation and Adoption: Solve's endorsement can help us gain market validation and establish trust with our target audiences, including startups, aspiring professionals, and mission-driven projects. This can facilitate the adoption of our solution and its underlying concepts, such as equitable compensation and value-driven collaboration.

In summary, we believe that Solve's support can help us address the challenges we face in implementing our solution and ensure its success in creating a more inclusive and equitable startup ecosystem. We are confident that Solve's resources, network, and guidance will accelerate our progress and enable us to make a meaningful impact on the communities we serve.

Equity Forge will democratize global business formation by making an innovative new business model accessible to aspiring entrepreneurs worldwide. No longer will early stage startups need to wait in line to kiss the rings of capitalists in order to raise money and hire teams to build their products. Equity Forge will make it possible for entrepreneurs to connect with talented individuals directly to collaborate on early stage companies, creating a community-driven startup ecosystem fostering human-centered values over profit maximization.

Equity Forge’s innovation will create the following effects for our stakeholders:

Companies will:

1. Attract the talent they need to develop and refine their business idea;

2. Adopt a proven methodology for fairly allocating equity in their company;

3. Minimize the need for startup capital by offering equity compensation to contributors;

4. Prioritize the values of the people on their team, rather than an external mandate of profit maximization.

Individuals will:

1. Access opportunities to contribute to impactful startup companies;

2. Gain skills and experience that increase their human capital and lifetime earning potential;

3. Build their network by contributing to geographically dispersed teams;

4. Earn equity in the companies they contribute to, fostering asset ownership and wealth accumulation.

The early stages of Equity Forge’s launch will not require any new technological innovation, merely stitching together DemocracyLab’s and Slicing Pie’s working interfaces. There will be significant tax and legal issues to consider, and we are eager to benefit from SOLVE’s assistance when addressing these challenges.

Later, Equity Forge anticipates integrating a model of measuring and rewarding value creation similar to that pioneered by SourceCred. SourceCred uses web3 technology to record value-creating activities, and uses AI to analyze the data created and the human team’s interactions with it. This approach very closely aligns with Equity Forge’s vision, but will require significant iteration to simplify and make accessible to the entrepreneurs and individuals we intend to serve. SourceCred’s code is licensed under Apache 2.0 and MIT open-source licenses.

In summary, Equity Forge will spur a bottom-up startup ecosystem fostering community-driven innovation while creating novel employment and workforce development opportunities for individual contributors, who will gain previously inaccessible opportunities to accumulate assets and build wealth.

Equity Forge’s theory of change centers on the belief that by connecting skilled professionals with startups and mission-driven projects, we can catalyze positive change within the startup ecosystem and empower individuals to create greater personal prosperity while contributing meaningfully to social and economic development.

Activities

Equity Forge will launch a new platform connecting entrepreneurs to skilled labor. The initial launch will rebrand DemocracyLab’s website and integrate Slicing Pie’s platform for tracking equity accrual. Later versions will adapt SourceCred’s dynamic value assessment model.

Companies adopting Equity Forge will list employment opportunities on the platform and gain access to global talent. 

Individuals will discover employment opportunities on Equity Forge, and contribute their time to impactful companies.

Outputs

Equity Forge will help new companies launch, and help individuals accrue equity in startups while gaining valuable professional experience.

Companies will attract the talent they need to launch successfully. They will minimize their need to raise external capital by reducing or eliminating their cash outlay to compensate employees.

Individuals will gain skills and experience that advance their careers while accruing equity in impactful companies.

Outcomes

Equity Forge will become an incubator for bottom-up business formation, accessible wealth creation, and experiential workforce development. Companies using Equity Forge will embody the values of their team members rather than those of external capitalists.  

Companies will launch and thrive, creating innovative new solutions to community problems and improving the quality of life for their employees and customers.  

Individuals will enjoy a more prosperous and meaningful life as a result of upskilling, attaining significant asset ownership, and strengthening their personal agency.

Overall, our theory of change hinges on the idea that by facilitating collaborations between skilled professionals and startups or projects, Equity Forge can create a ripple effect of positive change within the startup ecosystem. This approach not only benefits individual professionals and organizations but also contributes to broader social and economic development goals.

Our impact goals for Equity Forge are centered around fostering economic empowerment, promoting social inclusion, and driving positive change within the startup ecosystem. We aim to create tangible and sustainable benefits for our target populations, including skilled professionals, startups, and mission-driven projects. 

1. Economic Empowerment: Our first impact goal is to facilitate meaningful economic opportunities for skilled professionals, particularly those who face barriers to traditional employment or career advancement. We measure progress towards this goal by tracking the number of professionals who engage with our platform and the economic value generated through their contributions to projects. Key indicators include:

• Number of skilled professionals connected with mission-driven projects.

• Total hours of skilled labor contributed by professionals.

• Economic value generated through professional contributions.

2. Social Inclusion: Equity Forge is committed to promoting diversity, equity, and inclusion within the startup ecosystem. Our goal is to create an inclusive platform where individuals from diverse backgrounds can participate and thrive. We measure progress towards this goal by monitoring the demographic diversity of our user base and the level of inclusivity within project teams. Key indicators include:

• Demographic diversity of registered professionals (e.g., gender, ethnicity, geographic location).

• Representation of underrepresented groups within project teams.

• Feedback and satisfaction scores related to inclusivity and belonging.

3. Positive Change in Startups and Projects: Our ultimate impact goal is to drive positive change within startups and mission-driven projects, enabling them to achieve their objectives and create meaningful social or environmental impact. We measure progress towards this goal by assessing the outcomes and success stories of projects facilitated through our platform. Key indicators include:

• Number of startups or projects that achieve their stated goals.

• Quantifiable social or environmental impact generated by projects.

• Testimonials and case studies highlighting the transformative impact of collaborations facilitated by Equity Forge.

By tracking these impact indicators and regularly evaluating our progress, we ensure that Equity Forge remains focused on its goals of empowering individuals, fostering diversity and inclusion, and driving positive change within the startup ecosystem. Our commitment to transparency and accountability drives our efforts to continuously improve and maximize our impact for the benefit of our users and the broader community.

Our solution, Equity Forge, leverages modern technology to connect skilled professionals with mission-driven projects and startups. At its core, Equity Forge is a web-based platform that utilizes software and digital infrastructure to facilitate matchmaking between professionals and projects, enabling collaboration and value creation.

Key components of our technology include:

1. Web Platform: Equity Forge operates as a web platform accessible through standard web browsers. This allows users to easily access the platform from various devices, including computers, tablets, and smartphones, making it convenient for professionals and projects to connect regardless of their location or device preference.

2. Matching Algorithm: Our platform will incorporate a sophisticated matching algorithm that analyzes the skills, expertise, and preferences of professionals, as well as the needs and requirements of projects. By leveraging machine learning and data analytics, the algorithm identifies compatible matches, ensuring that professionals are connected with projects that align with their interests and capabilities.

3. User Profiles: Equity Forge provides users with customizable profiles where they can showcase their skills, experience, and interests. These profiles serve as a digital resume/portfolio, allowing professionals to highlight their expertise and track record, while projects can provide details about their goals, objectives, and resource needs.

4. Communication Tools: The platform will include built-in communication tools such as messaging systems and video conferencing capabilities. This enables seamless communication and collaboration between professionals and projects, allowing them to discuss project details, exchange ideas, and coordinate their efforts effectively.

5. Value Tracking System: Partnering with an established company Slicing Pie and inspired by open-source tools like SourceCred, Equity Forge is exploring the integration of a value tracking system that transparently measures and rewards contributions made by professionals to projects. This system aims to incentivize participation and recognize the impact of individuals within the community, fostering a culture of collaboration and accountability.

6. Data Security Measures: Protecting user data and ensuring privacy are top priorities for Equity Forge. Our platform will employ robust data security measures, including encryption protocols, access controls, and regular security audits, to safeguard sensitive information and provide users with a secure environment for collaboration.

By harnessing the power of modern technology, Equity Forge empowers individuals and organizations to work together towards common goals, driving positive change and fostering a more inclusive and vibrant ecosystem for startups and mission-driven projects.