I thought of this some time ago when I was raising some capital for my first start up (which blew up after year 1).
We were a team of 3 cofounders working on a financial portal startup. After a few months we needed funding, so we set up some basic rules and went out to talk to friends and family to round up some investments. The process was tedious and time consuming, having to pitch our project to dozens of people over a period of a few weeks, and ending up with 2 friends involved who wanted to make business decisions with us, where we didn't want them to.
I thought at the time that this process could be improved if we could've offered to sell part of the company to strangers through online means.
Maybe we could sell say 20% of the company through online auctions, for example on Ebay.com. The same line of reasoning to offer it in a classified's section of a newspaper, or online publication, like Craigslist. We could even divide that 20% into 20 lots of 1%, and release them into the market consecutively, maybe even at different prices depending on whether the last lot had demand or not. We would charge using Paypal for example, and price the lot to cover for Paypal commission costs.
My question(s) would basically involve knowing if this has been done before successfully, and what sort of implications would you expect from it? For instance, by selling 20 1% lots of shares, you would have a very heterogeneous base of investors with little voting power over business decisions. Would this be preferable over fewer investors and more power to them? And from a legal standpoint, would this scheme even be legal? Wouldn't it be a sort of private stock exchange?