Startup media company launches controversy (2)

The shares affiliated to the membership card as complimentary can be traded among members, and some members had already sold their shares to other members by Tuesday.

Zhu said the company planned to sell shares on Taobao at 1.2 yuan per share, but later switched to membership cards upon a lawyer's suggestion as Taobao does not recognize private equities as a product that can be traded on the platform.

"The pattern of raising money is similar to crowd-funding, which is popular among startups in many other countries including the United States, and which encourages people with the same interests to put money together to achieve a goal," said Zhu.

The membership contract does not specify high returns or interest to members, said Zhu.

"Sales of membership cards were not public offerings, because so far we have only five shareholders as all the money collected from membership card sales is now under the management of one shareholder," said Zhu.

No further online sales of membership cards will be launched, as a company in Zhejiang has offered 140,000 yuan to buy some 120,000 shares.

"The money will be enough to sustain operations because we are expecting our first business revenue soon," said Zhu.

A source with a Hangzhou-based private venture said he supports Zhu's experiment with raising funds from online platforms.

"The funding environment for startups in China is harsh ― we are dealing with serious money from investors, so it really takes time and effort to decide whether we invest in a project," the source said.