Among all the VC and angel investors we’ve interviewed over the past seven years, there is one constant.
Investors back the entrepreneur first. The idea invariably comes second.
This process of investment decision-making has just taken the next step in its logical evolution, an online marketplace for investing in people (not companies).
The recently launched Thrust Fund (‘thrust’, not ‘trust’) is the brain-child of three social entrepreneurs — Saul Garlick, founder of ThinkImpact; Jon Gosier, founder of AppAfrica; and Kjerstin Erickson, founder of FORGE.
The three are using the site to offer up equity in their life’s earnings in exchange for an unrestricted upfront cash investment. Under their structure, investors do not acquire a portion of the entrepreneur’s venture; neither do they have any official say in how the investee uses the money. They simply receive a proportion of the entrepreneurs taxable personal income over the term of the investment; their lives.
Valuing themselves at USD$10M, Garlick and Gosier are each offering three percent of their future earnings in exchange for a USD 300,000 investment, while Erickson is offering a six percent stake in her future earnings in exchange for USD$600,000.
This prompts me to make the following offer:
Entrepreneurial publisher seeks $300,000 for three percent of future lifetime earnings.
Assuming that I work until I’m 65, that gives me approximately 30 good years of entrepreneurial activities to earn an average of $300,000 a year (total $9 million), returning my investor $300,000. It doesn’t sound like a particularly compelling investment strategy.
Any takers. 😉
However, the assumption, I’m guessing, is that investors would typically expect a similar success ratio to the returns they plan for in the VC game.
Some entrepreneurs will generate an average return. Others will crash and burn. But the logic in a VC company investment portfolio is that a small number will be the next ‘Google’ (in this case, in physical human form), providing a return great enough to offset the losses and still make the portfolio big bucks.
At a time when the transparency provided by social networking makes it easier for investors to examine people’s reputations, there could be legs in this model.
The downside is that it might also create a new breed of ‘wank-repreneurs’, spouting the following seven word question in airport queues, up-market bars and to anyone who’ll listen:
“Do you know how much I’m worth?!”
First spotted on Springwise.