Crowdspirit is a project to create a consumer electronics design community, that shares revenue with it’s participants, and that involves the community in the decision making process in a way that has not been attempted previously.

I ran across the Crowdspirit project when it first started, and it’s founder, Lionel David, posted a comment to my blog about his idea for creating a community that designs, funds, markets, and shares in the profit of the sale of consumer electronics. At that time, Lionel was even using this revenue sharing idea to put together the team that was launching Crowdspirit itself.

In order to illustrate and clarify the processes and thinking behind Crowdspirit, Lionel David recently answered a few of my questions via email:

Sam Rose:To get an idea about how all of this will work, I wanted to give a hypothetical scenario: For instance, if I submit an idea for an mp3 player that includes WiFi networking capability. This is something that I’ve been thinking about for a while now. So, assuming the Crowdspirit communty likes the idea, where does it go from there in the CrowdSpirit process?

Lionel David:
1. Let’s take a business case where a person submits an idea of a product similar to an mp3 player with a WiFi function to the CrowdSpirit Platform. This person is called an INVENTOR in our world.
2. The first stage will be to check if this idea is already existing or not and secondly if the we are allowed to use this idea, meaning if no patents have been issued to protect the idea. In that stage, people, who are called CONTRIBUTOR, will perform research based on some tools that we will provide to the community. People will be also allowed to vote for the idea, whether the idea is already existing or not.
1. If the idea is already exisiting or if we’re not allowed to commercialy use the idea, the process ends at this stage.
2. If the idea is not existing or if we are allowed to commercialy use the idea, we move to the next steps which is the case in the present business case.
3. Once the idea is accepted after this first stage, meaning that we have a chance to market such product, the idea is move to a market place where the crowdspirit staff and the experts will assess the potential of the idea based on a very detailed analysis of it. The inventor will receive a financial proposal based on its level of contribution. In our “mp3 player with WiFi” idea-case, it’s more of a common and simple idea that a lot of people can have, so we will offer a classical share of the revenue. √èt would be different if the inventor would have a full prototype with a patent to sell. In that case, we will make a better financial proposal.
1. Either the inventor refuse the proposal and the process ends at this stage.
2. Ïf the inventor accepts the proposal, all the potential Intellectual Properties (including patent) will be contractually transfered to Crowdspirit to get the full ownership for marketing the product. In our case, there is no IP to transfer as an idea cannot be patented. As a reminder, a patent is a detailled technical solution to an existing problem which is not the case with our business case.
4. The idea is then move to the classical Idea “brainstorming” place where all the CONTRIBUTOR will contribute on the idea and vote for the best one. The idea will become now a project. The people will have access to an “project dashboard” for assessing the potential of the project in order to avoid wasting time on useless project. We can imagine that a new contributor is proposing to add a bluetooth function to this player, for instance.
5. Once the project has reached a sufficient level of vote and contribution, the project will be moved to the Design platform where all our very skilled and technical staff will help the community to formalize all the specifications of the products (Functionnal, technical, esthetic, etc..). It’s important to note that CrowdSpirit has all the technicall skills for designing the products, so it means that we will not ask the community to provide us with 3D drawing or whatever…we have all the skills..of course if somehow wants to provide such contributions…he’s more than welcome.
6. In parallele of this task, the INVESTORS will start financing the product for which they assess the best revenue potential. So it will be a kind of vote but definitively much more valuable and accurate than a simply clikc on a “vote” button. Moreover, those investors will finance all the developpement costs which are the most important fix cost of this project. Of course, they will be aware of the risk, meaning that they can loose their money, but they will be also aware about the potential interesting Return On investment in case of success. Basically, we will allocate a share of the revenues to them like for the inventors and the contributors
7. Once both we get all the required investment and all the required specifications, we will start producing the first prototype. These first prototype once produced will be directly send to a community of TESTORS who can come from our community but who can also come from outside to avoid that people are too much influence by our project. So their opinion should be more neutral than people of the community. Defintively, those one will get prototypes to play with them to thank them. those testors will have to provide us with a detailed report of the testing in order to ensure that this product is still fitting a market.
1. if the tests of the product are unsucessfull, we can go back to the design/investment loop to produce a new prototype
2. if the tests are sucessfull, we will move the product to production
8. At this stage, we are now close to sell the first product. A new actor is coming on board : the AMBASSADOR. Those guys are responsible to make the linkage between the retaillers and our distributors. Basically, we will provide them with all the commercial package for introducing our products to the retaillers. If the retailler is interested, he will have to simply get in touch with you distributor and create a profil on our community platform by mentionning the name of the ambassador in order to allocate him a share of the revenues. This process will be in place for small retaillers, typically the small shop at the corner of the street. We will of course take care by ourselves of the big retailler accounts.
9. At this stage, the sale of the products is starting and the first users will start encountering the first issue with the products. This can be because they don’t know how to use the products or because of a software/firmware issue or a hardware issue. We will ask then the SUPPORTER to perform the first level of support for these users. By the way, these supportors did already produce all the technical and user guide of the products. In case of too difficult issue, the supportor will transfert the call to our call center in order to move forward on a classical support process.
10. Of course once the first revenues will be generated, they will be shared with the community based on the share revenues rules as described on the original products but we are not yet at this stage.

Sam Rose: The “hard” question that people are asking about Crowd Spirit is about the “INVENTOR” giving up, or selling the rights to their invention in order to participate in Crowd Spirit.

I understand that you may not be able to discuss every detail of your strategy here yet.
From your last response, it looks like you are saying that in Crowdspirit, an “INVENTOR” does not transfer his ownership of IP on an invention to the Corwdspirit company entity. Rather, it looks like you are saying that the “INVENTOR” instead signs over exclusive marketing rights.

Lionel David: No, there is a misunderstanding in that case. First of all, all the inventors will accept “interim” terms and conditions before submitting their idea. This T&C (Terms and Conditions) will temporaly transfer all the IP to Crowdspirit until the end of the negotiation. Then The Inventor will receive a commercial offer from CrowdSpirit based on the value of his idea. The value will be evaluated by the CrowdSpirit experts following 2 axes : The feasability of the idea and so its production & distribution cost and its revenue generation based on its market potential. Based on the CrowdSpirit commercial offer (royalties of the product sales), the Inventor will either accept or refuse. If he accepts, then all the IP will be contractually and permanently transfered to the CrowdSpirit Community, if he refuses the IP will be retained by Crowdspirit during 6 months.

Sam Rose: You said that Crowdspirit will share revenue based upon the level of sophistication of the idea or prototype that the inventor is presenting. It looks like you are saying that Crowdspirit will be flexible and be able to work with people who just present an idea, as well as people who already have a patented prototype of their technology invention. It also looks like you are saying that you’ll propose more financial compensation for people who are offering a patented technology.

Lionel David: Correct, but you need to keep in mind as previously mentioned that CrowdSpirit will also evaluate the value of the idea based on the 2 axis : Feasibility and revenu generation. So in practice I’d say that a people who is offering a patent will receive a better offer than a people who is submitting a simple idea but in theory the other hand side is possible. Example of a patent without a market potential whereas a simple idea can generate incredible revenue…so there is no generic rules..

Sam Rose: So, let’s pretend that I come to you with the same idea that I offered in my last question: a wifi-enabled portable MP3 player. If I just submit this as an ‘idea”, what would the agreement that I create with Crowdspirit about the rights to Intellectual Property look like, exactly? If I submitted it as a patented technology, what would the agreement that I create with Crowdspirit about the rights to Intellectual Property look like?

Lionel David: Let’s spend some times, discussing about IP in general.

If you simply submit the idea “wifi-enabled portable MP3 player”. In theory, you cannot patent this idea as there is no technical solution to a problem. So in practice we could imagine to offer you nothing and to steal you this idea for producing a product without rewarding you (this is somehow what DELL is doing with its initiative Dell Ideastorm). Of course, we won’t proceed like this as it’s definitively not fair and not in line with your strategy. We cannot live without the community. So, you will receive a standard commercial royalty, which will be around 5% of the Gross margin : GM = Sale price minus cost (production, distribution, etc..).

In terms of IP, in theory, there’s nothing to transfer, but our generic T&C will anyway cover this aspect and will offer you a royalties as if your idea could be patented. In case of patent and if you accept to sign the T&C based on our commercial offer, this is exactlyt the same process and all the IP will be transfered to CrowdSpirit.

Crowdspirit is a project to create a consumer electronics design community, that shares revenue with it’s participants, and that involves the community in the decision making process in a way that has not been attempted previously.
I ran across the Crowdspirit project when it first started, and it’s founder, Lionel David, posted a comment to my [...]