Enough is enough already. This has to be the 100th article I have read on Second Life. Each of them is more pathetic than the next. Some may disagree, but can someone just give me a hint of what is actually taking place here. Second Life's Michael Milken By Robert Holden TheStreet.com Virtual Reporter 12/11/2006 2:01 PM EST Click here for more stories by Robert Holden Second Life's virtual economy has seen the addition of high-yielding bonds, thanks to an adventurous venture capitalist who expects bigger opportunities to come shortly. David Chan, whose in-world avatar Kavai Onizuka operates the Kavai Conglomerate Group, was first introduced to the virtual world in 2004. Second Life, the 3-D online world created by San Francisco-based Linden Lab, already has its own currency, the Linden, but Chan has introduced the first virtual corporate bonds. Chan says he sold 250,000 Linden, or nearly $1,000, in bonds last week. "I began to look into the possibility of either establishing a bank, go public or issue bonds," Chan says. "The first two choices were deemed too complex, and I went with issuing bonds to enable my company to expand further." Soon after Chan drew up his first virtual creation (a coffee table), the Macau, China-based entrepreneur opened a construction business in Second Life. Within two years, Chan's company branched from construction to real estate, consulting and research and development, without the requirement of any personal investments. "Over time, I generated a bit of proceeds," Chan says. "My entrepreneurial side quickly started to identify various business opportunities in other aspects. I never invested a single dollar in Second Life in terms of business." However, Chan saw that major companies began putting large amounts of money in Second Life, including Dell (DELL - commentary - Cramer's Take - Rating), Toyota (TM - commentary - Cramer's Take - Rating) and Cisco (CSCO - commentary - Cramer's Take - Rating). In his opinion, the introduction of big name real-world entities meant that it would be only a matter of time before the virtual financial markets matured into something that could support more advanced financial services. "Before my bonds were issued to private investors, I decided to expand that offer to the public as I saw the Second Life economy began to mature," says Chan. "We would love to turn this financial Wild West into a viable market, and hopefully we will be the first company to seize this capital market." Currently, Chan's process for issuing bonds is manual. The company's tech back-end is still under development, so Chan is required to formulate bond issues manually. The company is establishing an infrastructure that will soon automate the investment process. The bonds are similar to real-life bond issues; they are purchased in a limited pool of 10,000 Linden (just more than $35) an issue. Currently, Chan's pool stands at 3 million Linden (roughly $11,000). "The bonds are not tradeable yet, but could be as our technology level is increased to support that infrastructure," Chan explains. The bonds sold last week range in duration from short three-month commercial papers to two-year bonds; the yields also range accordingly, from 15% to almost 21% annually. The capital generated through bond sales will be invested in various ventures that Chan's company has in the pipeline, ranging from real estate developments to financial institutions within Second Life. Chan plans to keep all of his company's investments within the realm of Second Life. "The business environment of Second Life possesses the same challenges today as it did two years ago, and this is why I still find myself enticed to expand my reach here," Chan says. "In the short term, we will be using the funds to invest in upcoming opportunities, and possibly help our company achieve our goals." While the inquiry has been slow but steady, many are hoping this builds credibility for the virtual world with investors. The greater objective, though, is to help create a mature financial market in Second Life, one that might evolve into a stock exchange for Chan's company, as well as the countless others, regardless of size. The addition of bond sales in Second Life, even for a small company such as Chan's, shows the virtual world's ability to handle more advanced financial services. "The yields available in Second Life are greater than ever," Chan observes. "Through these bond issues, it could help companies and investors seize bigger opportunities coming around the corner."
Think of it as a derivative of a derivative of a derivative on things ranging from business transactions to dating. But don't be fooled into thinking that this company's "service" is some new virtual economy. The whole thing is built on on shaky ground. Basically you got a 21st century internet version of the old kids game of playing "house." Yeah, you can make money, but we're not even talking anything big. My brother's on this damn thing, and from what I saw, the basic transaction from some store was the equivalent to a fraction of a cent or something. Its great if you want to meet people, really hard to make serious money. Speaking of, the biggest thing there seems to be owning a store where you sell something (But you better know how to code that widget) and even bigger is the so-called real estate. Keep in mind, this is "land" that only exists on some computer hard drive. Land speculation on there, from what I saw, reminded me of a slow-moving tulip mania.