Want to bet a simple venture capitalist on the next generation?
I recently read an article from the New Yorker “Is selling stocks per se the way of the future?” by Nathan Heller. The principle of the article is simple. The Liberman brothers, Daniil and David, two Russian expats, decided to sell shares in their future life. They formed a company called Liberman Co. and are hustling in Silicon Valley offering to sell some of their current soul to venture capitalists (Sam Lessin of Slow Ventures invested) for a chance at a much bigger soul in coming years.
It’s a fascinating amalgamation of chutzpah, greed, and Valley/Tech arrogance, seasoned with a hint of FOMO (fear of missing out). Personally, I think the Libermans and their investors might want to revisit an old Broadway show, “Damn Yankees” and their resident VC, Lola.
Adding insult to injury, the brothers also went to the SEC with the idea of taking their company public. Their current pre-money valuation is $400 million with no revenue, as well as a checkered financial history with more failures than successes. How can you refuse this?
But wait, maybe the idea of selling your future personal earnings for today’s dollars isn’t crazy. In 1997, David Bowie issued “Bowies Bonds” for $55 million, giving investors an interest in future royalties from his music copyrights.
All of these patterns are traded on the idea of future income or FUTURE POTENTIAL. Now, if the personal idea is intelligent, it is too small, too modest. Let’s go big.
For example, “Jones” needs capital to move his life forward. One way is to borrow, to go into debt. But Jones has no fundable equity, so that route is closed. OK, instead he could take a stock investment based on his future earnings. Upstart, a public company, offers so-called “human capital contracts” that give money to promising young people for a percentage of their future earnings or value.
Liberman/schmiberman, let’s think like a real VC, let’s think about how to evolve and really change the world.
I propose to bring together 10 banks (any group of financial entities), and strongly suggest (an offer they cannot refuse) that they each put $10 million, available to invest. We’re using the $100 million to lend $10,000 to each of the 10,000 young men and women between the ages of 15 and 25 who reside in “lower circumstances and neighborhoods” in our city, in exchange for a bet on their future. . Don’t get lost in the weeds, the exact terms of the refund repossession can be fine-tuned by a coterie of green-eyed lawyers.
It is a simple bet of the venture capitalist on succession. If we assume a standard VC distribution curve on expected returns, we can postulate the following: 35% of the group will return zero, 40% will return the initial investment, 20% will return 2-3X, and 5% will return 50-100X. If you run the numbers, the result is that you’re changing lives and making money at the same time.
In a cohort of 10,000 men and women, there’s a good chance there’s a Bill Gates couple and a Jonas Salks couple. There will be winners and losers, but a few of these youngsters will create exponentially outsized results, uncapped benefits, and the net-net will be a win-win. Consider some health care to ensure a long life and your return on investment increases.
Now, let’s group this initial cohort with another cohort and make them public. Then we would have $500 million for the next 50,000 young people, and then we could start securing returns, slicing and slicing, launching synthetic derivative investments, and yes, indeed, we could change the world – that every entrepreneur wants to do.
Heller writes, “Those who are desperate take desperate measures, sometimes with destabilizing results. Vulnerable people are at risk, and there is a long way to go from the bottom up. Provide a modest step ladder, with some non-recourse financing, coupled with positive incentives and benefits, and voila, an investment in human capital might outperform some of the others you have in your portfolio.
And you would sleep better at night.
Rule #726: Imagine 10,000 people ringing the NYSE.
Senturia is a serial entrepreneur investing in technology start-ups. Please email your ideas to Neil at [email protected]