Chad Perrin: SOB

12 January 2009

Open Works Escrow

Filed under: Geek,Liberty — apotheon @ 01:42

A while back, I seem to recall running across a Website that offered a micropayment escrow management service. It went something like this:

  1. You set up an account for a particular project.
  2. You set a reserve price.
  3. You promise to complete a given project once the reserve price is met.
  4. People donate money.
  5. The money goes into an escrow account.
  6. When the reserve price is met, you produce what you promised, and it is released to the world for free.
  7. When you produce what you promised, the money is released to you.

It was probably a year or two ago that I found this. A couple months after I found it, I couldn’t remember what it was called, and I haven’t been able to find it again since — nor anything like it. At the time, it had been used successfully to fund the authoring of novels and recording of classical music. With that in mind . . .

  1. Does anyone know where this site (or something like it) could be found?
  2. If not — is there someone out there that would like to partner up with me to make this happen?
  3. Failing that — is there someone out there who’d make it happen without me?

Note that, in the creation of a service like this, there are certain things I’m not prepared to do:

  1. I don’t know the first thing about the legal minutiae of managing other people’s money with a service like this. As such, someone better versed in such things needs to be brought on board — as an employee, on retainer, or as a partner.
  2. I absolutely do not have money to put into this. I mean, I could maybe afford something like domain registration and, if we’re really sure it’ll turn a profit, virtual server hosting — but for real money, I’m not going to be much help.
  3. If I’m involved in such a project, I don’t want venture capital firms taking control of the business model or getting 90% of the potential profits.

There are also a few things this service would have to provide, whether I’m involved in its creation or not, to really scratch my itch:

  1. Use of the service should not be effectively limited to people with money, so generating profits with up-front costs (e.g., “pay $100k and we’ll set up your escrow account”) is “bad”.
  2. A “bounty” mechanism needs to be in place so that unsolicited escrow accounts can be set up to serve a popular need — then a developer who delivers can claim the bounty. To really work well, I think such bounties would probably have to be claimable only by developers who already have a good reputation on the system.
  3. The service should absolutely not be limited to software development. When I say “developer”, it should be understood to include people who develop music, fiction prose, independent films, installation art, whatever.
  4. To meet escrow/bounty requirements, everything should be released into the public domain or under a recognized open source, free software, and/or copyfree license (and perhaps other standards of open work licensing — I’m open to suggestions).

To ease the process in the case where people want to use their own licensing terms that meet the spirit and letter of one or more of those classes of licensing, or to use a license that isn’t already officially approved by one of those sets of standards, I’d be only happy to provide on-site support for expedited copyfree approval/certification, though for “expedited” I think I’d need to make sure I got a share of profits or some other compensation if I’m not otherwise involved in the process (if only so that I can afford to spend the time going over the licenses in a timely fashion; time is money, as they say, and I still have to try to make a living somehwere).

I would, of course, lean toward OWL as the choice for default distribution terms, with public domain as my second choice. I would not play favorites as far as blocking any given license that satisfies the requirements outlined above from inclusion in a list of options.


  1. What would you think is a fair administrative cut? 5%?

    Comment by Sterling Camden — 12 January 2009 @ 01:55

  2. I’d think no more than that, to be sure — so 5% or less, probably. Of course, I think the business model would need a fair bit of analysis to really answer that definitively, but I would certainly hope that the rate would be no more than required by PayPal for a business account (of the sort that allows one to take credit cards in exchange for a percentage paid to PayPal).

    I’m assuming that by “administrative cut” you mean “everything the developer doesn’t get”, rather than something like “the administrator gets this cut, and others such as the copyfree guy get their own cuts”, because if that’s what you mean we’ll soon see the developer only getting about 30% of the total pledged money.

    Comment by apotheon — 12 January 2009 @ 02:10

  3. Most credit card companies run around 2% surcharge on transactions. Divvy the remaining 3% among admin, licensing, etc. and you’d need a lot of business just to pay for hosting.

    Comment by Sterling Camden — 12 January 2009 @ 03:23

  4. Assuming an average virtual server hosting plan (say $40/mo.), and assuming very modest open source projects (say $1000 reserve), you’d only need 16 successful solicitations for donations to pay for hosting. There are, of course, other probable costs — such as legal and accounting help to get started (though once the overall process is specced out you’re pretty much done with those two costs).

    I, personally, don’t need to get rich off this. I’d just want it to pay for my time, in the long run. Getting rich would be nice, though.

    Also . . . the 2% surcharge is only one option. For high-volume business, credit card companies offer flat rates as well. The 2%(ish) surcharge would make sense to begin with, but if the escrow service became really popular it would make sense to switch to the flat rate fairly quickly.

    Comment by apotheon — 12 January 2009 @ 04:21

  5. The idea has merit. It certainly seems more likely to succeed than some other similar plans I’ve seen go down the tubes.

    In one case, I forget the name of the association — developers could band together online and work on a project, and when they went to market, they’d each own a portion of the resulting company. This was during the dot-com boom, so everyone believed that you could get rich that way, no matter what your idea was. Unfortunately, the couple of projects for which I signed up never really got off the ground. Starting with everybody remote made it difficult for parties that didn’t even know each other to get coordinated — especially when everyone treated it as a “spare time” project.

    Having the funding drive the development might work out a lot better.

    Comment by Sterling Camden — 12 January 2009 @ 04:26

  6. That does sound like a great idea. I hope you get it going. I might even be tempted to try and use it.

    Comment by Joseph A. Nagy, Jr. — 13 January 2009 @ 05:45

  7. […] is a former Harvard law classmate of Obama, chief counsel to former FCC Chairman Reed Hundt, Open Works Escrow – 01/12/2009 A while back, I seem to recall running across a Website that offered […]

    Pingback by Posts about Investors in Startups as of January 13, 2009 | The Lessnau Lounge — 13 January 2009 @ 01:02

RSS feed for comments on this post.

Sorry, the comment form is closed at this time.

All original content Copyright Chad Perrin: Distributed under the terms of the Open Works License