So far i like this idea and you are a VC so that is a plus!

But I am not that familiar with SL or US financial regulations so a few questions go begging and a couple of comments:

Are you suggesting that the fund lends money in the virtual space to virtual entities or it lends money to real people in the real world for their virtual exploits?

Are you talking about a money lending business with real assets as security instruments or are you suggesting VC investments with high risk and no securities?

Does SL have a law structure which would enforce or allow for defaulters to have their SL property expropriated for repossession against failed loan repayments?

If the loans/investments are made with virtual entities what would stop people from securing a loan and then reselling the Linden dollars and doing a bunk?

Are we talking mickey mouse scales of investment or considerable amounts? How much would a stadium cost in SL to build +/- for example?

Observation:

If the CH Fund Management company is setup externally and the group (public) invest in this company in real money, the CFM will need to go through all the regulatory issues of registration and monitoring and even licensing for a deposit/investment type of institution, whereas if the CFM is setup in SL and the public invest in Linden dollars then there is no jurisdiction for the real world regulations to come into play and it would be less of an onerous a task or not?

Sorry a lot of questions but valid i think.

And i think the idea has potential.

I just thought of this also, searched to see if it had already been done, and this is what came up. Awesome. There are tons of people who already have sl biz experience but either don't want to put their own money at risk or plain don't have the reasources. This is one of the best ideas ever.

I also like the idea, and I've done some looking around to see about financial services in general. Since there are no real resources in SL other than Land and Talent, lack of collateral is generally the limiting factor in such ideas. The 'banks' I found will only lend money for land (often at 20% or more) , and they insist on holding the title until the loan is repaid.

The Lindens have no obligation to release personal info attached to an account, so there is really no recourse if the person sells the L$ and disappears...

Another issue is the reporting of income from the business. There are no regulatory bodies to enforce accounting standards. How are CoGS calculated? What is a person's time worth? How are their hours tracked?

Ok, this is how it might work.

Since you don't have an ipo exit opportunity, you would only be able to exit through M&A (ex. sell your business to another business (IBM, MTV, etc) in second life or outside. Failing that you'd want to make it a loan.

We do this all the time in venture capital, using something called a convertible debetnture. IF the business rocks, and gets bought, our "loan" converts to equity and we get a big piece of the sale price.

If the business doesn't rock or can't be sold, the "loan" stays as such and has to be repaid plus interest.

To secure the loan, I'd expect "real world documents", i.e. since their is no governing law, nor court system, enforcement in SL is nigh impossible. So what you'd do is loan them the money in real life and transfer the funds into SL.

If they failed to enforce, you could take their land, or real world collateral and enforce such through the RL courts.

However, in most cases, you just right off the investment since venture capital is all about portfolio style investing (i.e. 1 or 2 investments are starts, 3-4 are zombies, and 3-4 are dogs).

As I said, I like the idea, and I'd like to see it go. Here's a bit more feedback on similar ventures

http://valleywag.com...id-scheme-230813.php

I am not a great SL fan, so definitely not very familiar with it.

But looking at it all I see are middlemen and promoters, places for money to stick to without creating value.

Having said that, I think this is a good sort of idea for CH to give "free rent" to - workspace on whatever forge is in use - and let it be a self-organized sort of thing.

I wouldn't touch it with a barge pole but that's b/c I don't understand SL AND I think SL is boring ;-)

I am going to vote it a 5 b/c it fits very well with the idea of letting a crowd form and work on something which could be a money-maker. Even though I personally would have to invest far too much time on Fantasy Island to even begin to understand what's going on. And I do worry about the dilution and middlemen.

Sign me, Old and Dangerous and Cranky

Sorry, but I hate this because it depends on Second Life.

Read 'SECOND LIFE: Virtual world's supposed economy is a pyramid scheme' at http://valleywag.com...id-scheme-230813.php
to get the full story.

In a nutshell SL is a machine for making money for Linden Labs and nobody else. There is no effective way to realize your profits in actual dollars, at least at present. Until this changes, nobody putting money into Linden Dollars should expect to make real profits.

The idea is sound, but you need to find a better place to implement it.

Dennis, there is plent wrong about that article. Personally, I quit my job and have been working full time within secondlife. I've invested less than $50 in Second Life and I am averaging over $450 USD/week, and yes, I HAVE cashed this out.

You should try things out yourself and not trust everything you read.

Can somebody explain how the investment/loan is secured ? If it is though "real-world documents", like the author himself suggests, then the investment has to be in real-world currency, with real-world collateral. It's a SL fund at all. Why mention SL courts ?

I meant to write: it's NOT an SL fund at all.

There's no liquidity in Second Life, so you can't get out more than a few hundred dollars without shifting the exchange rate so far that you lose your profit.

Second Life as a "financial investment" is starting to look more and more like the Dot-Com bubble to me, where everybody's so busy being excited about it that they're not stopping to think about where the money's actually going and what's actually happening...

Call me old school, but I think businesses should create value, not just shift money around.

My thoughts exactly! The dot-com bubble was like a pyramid scheme too.