Gaming the Startup Bus stock market game

TUSCON, Ariz.--I'm not a stock market whiz, but I'm trying to play one on a bus.

For the last 35 hours, I've been riding on the Startup Bus, chronicling the entrepreneurial exploits of a couple dozen techies trying to build new companies from scratch in just three days. We're all on our way to the South by Southwest Interactive Festival in Austin, Texas.

And while that has been an illuminating experience, another element of the project has got me captivated as well: trying to win the Startup Bus stock market game.

This virtual exercise is an adjunct to the larger project. It poses the scenario that each of the several dozen new start-ups that the teams on the six buses are building has a viable stock in which anyone can invest. Pick the right stocks, and make the savviest moves under the rules, and you could earn Wall Street glory, Startup Bus-style.

The game is actually quite simple. Shares appreciate 1 percent an hour, and when the teams hit certain milestones that rate accelerates. Share price valuation "is based on your share price and the number of shares people hold in your start-up, so it's like a very simplified version of demand and supply...and it's probably better regarded as a confidence metric in your start-up by the audience," wrote Startup Bus founder Elias Bizannes in an e-mail explaining the game to the 160 "buspreneurs" rolling across America toward Austin.

The milestones are linked directly to the steps the teams must take to move their fledgling businesses forward: Form a team; have an end goal and agree on share equity; register a domain; start a team Twitter account, a blog, a 30-second elevator pitch, and a press release; launch the product; and so on.

This is smart marketing. Because anyone can play the stock game, its real purpose was to give the public at large another way--beyond reading bus-related blogs and following the flood of tweets about the project--to feel involved in the Startup Bus.

"The whole point is to promote awareness about Startup Bus," said Brandon Leonardo, the "conductor" running the San Francisco-to-Austin coach known as the Silicon Valley bus, "and to give [people not on the bus] a chance to buy in."

But while the dozens of buspreneurs are the ones who are putting their skin in this game, the Startup Bus organizers are hoping they're not actually playing the stock market.

"We don't want people on the inside playing the game," Leonardo continued. "We want them to be working on their start-ups." In other words, if they're playing the stock market game to try to win virtual resources, they're not investing their real resource--time--wisely. But to be fair, it's clear that not all those on one of the six buses are heeding that advice, at least as evidenced by the fact that several buspreneurs are atop the game's leader boards.

As of this writing, there were about 800 people playing the game, including an unknown number of teenagers that somehow stumbled upon it. One culprit may be StumbleUpon, which some players have used to promote the game.

Winning strategy
There are several facets to success in the game. One is clearly a clever selection of stock purchases. Through the game's dashboard, you can see any stock's price at any time, and its history since the game began. You can also see how it's performing relative to the average stock. The stocks that have done well so far seem to continue to do so, which means that it's still possible to make money by buying higher-priced shares.

But there are other elements that can help players, and in a big way. The most lucrative is referrals. Any time you get someone to click on your referral link, such as this one, which is mine, you earn a virtual dollar. Another helpful, though much more subtle tool, is buying your way up the experience ladder. Players begin as novices, but can spend $100 to move up a rung, the benefit of which is that they earn an additional $10 per hour. There are five levels, so you can spend up to $400 to improve their lot. Though that means $400 less to spend on stock purchases, it also means as much as $40 extra per hour in dividends.

Another big, albeit onetime, boost is signing up for an account on the location-based business card service, Hollrback, which is a Startup Bus sponsor. I'm wondering how many people who signed up for their account did so and will never return to the site. At the moment, I plead guilty. But I certainly found the $100 in capital helpful in building my empire.

Finally, players can earn badges for hitting various milestones of their own, things such as owning at least 250 shares; selling 50 or more shares in a single transaction; owning shares of more than five startups; referring 25 people to Startup Bus; and so on.

I'm usually terrible at these games, and I expected to be terrible at this one too. But perhaps because I chose stocks wisely from the get-go, or because I quickly availed myself of the Hollrback sign-up bonus, or perhaps more likely because I turned to my Twitter followers for help clicking on the referral link--which was itself aided by uber-techie Robert Scoble favoriting the tweet, I soon found myself in eighth place. And in sixth place for total number of referrals.

Having seen that success, my lust for more kicked in. There's something about visible evidence that you're doing well at something that makes you want to do better. At that point, I hadn't bought my way to the higher levels, but when I realized that the benefits outweighed the cost, I dived in.

Because of my tweet asking for help--and, I admit, two subsequent ones--I've had a steady flow of referral bonuses. And with the hourly pay-off being $60 because of my investments in leveling up, I found myself checking the game's leaderboard constantly.

However, because I gave up $400 in short order to level up so quickly, I lost my top-10 spot--and have yet to regain it, and believe me, I've been trying.

And of course, the choice I made, that the long-term benefit of the hourly bonuses outweighed the cost, was pretty much exactly the "balance" that Leonardo said the game's designers wanted to build into it. Players would have to choose whether they wanted the cash now, or bet on being able to catch up later.

No correlation
Because this is a stock market game, you'd expect that there would be a strong correlation between a stock's price and buyers' belief in the product or company behind it. But that's not really the case, Leonardo said.

Instead, because teams have been able to reach out to their own social networks for support, those who have done well--in terms of the total valuation of their stocks--have not necessarily done so because of any particular promise of what they're building.

That's in part, Leonardo said, because the game was launched when all players knew was teams' names, and not necessarily what they were creating, it's likely that the link between share performance and real product value is illusory. Plus, Leonardo added, because the list of start-ups that players looking to buy shares see is in alphabetical order, those at the top had a natural advantage.

Of course, when it comes to advantages, there's little better when playing the market than getting and trading on inside information. This, of course, can get you locked up in the real world, but in a virtual stock game, there's nothing wrong with it, right?

So when I got a tweet yesterday afternoon from the official Startup Bus Twitter account warning me to "Be careful. The bus economy is looking shaky--there may be a stock market collapse," I realized I should take action.

This warning was clearly related to the one wild card in the game, the so-called "Act of God."

According to Leonardo, the game has a built-in mechanism that will, at certain points, make something happen that could affect one company or another. It could be that a fictional TechCrunch article comes out about a company, which would boost its stock's fortunes. Or it could be something harmful. As Leonardo explained it to me, these acts of God would be random and would tend to hit one company rather than the whole market. But the tweet I got--which was sent to me, but which was visible to anyone following @TheStartupBus--seemed to suggest that something bad might befall the entire market.

What to do with that information?

After thinking about it for awhile, I decided that I should act on it. The best way to do so, I figured--and maximize my chances of improving my place on the leader board--was to divest myself of all my shares. After all, my overall assets would only grow, and if the market did collapse, being in an all-cash position might vault me ahead of those above me who were heavily invested in stock. So, one by one, I went down my list of investments and hit sell.

Except for one. Having spent most of yesterday shadowing Bouncr, one of the teams on my bus, and having put a lot of my money in its shares, I simply couldn't bring myself to get rid of its shares. Especially since the story I posted on the start-up earlier today likely boosted its share price.

I also couldn't bring myself to tell anyone else about the impending doom. So either I'll reap the benefits and be able to swoop in with my giant vault of cash and dominate the rest of the game, or I'll feel awfully silly for abandoning the start-ups whose meteoric growth helped me to an overall gain of 21.28 percent.

I just hope I can crack the top 10.