Is this the future? Invest in people… and take part of their income

Two years ago I wrote a post Will there be capital markets for equity in people?

That appears to be coming true with the launch of Upstart, a startup from a group of ex-Google employees. Venture Beat writes:

Would you fork over a small portion of your income for the next decade in exchange for funding?

The team behind Upstart, (pictured, above) a new crowdfunding platform, is willing to bet that this will be a viable option for scores of recent grads and budding entrepreneurs. The startup launches today with a new model to give grads a modest amount of risk capital, using their future earnings as collateral.

Upstart works a bit differently from other crowdfunding sites. Unlike with Kickstarter, backers can invest in people — “upstarts” — rather than in teams, projects, or ideas. Upstarts can use the funding for almost anything, and in return, they pay their backers on a monthly basis for 10 years, verified annually via tax returns. It’s a fixed fraction of income, and the max interest rate an upstart could pay is a 14.99 percent annual return.

It would be interesting if this is an idea whose time has come, as we move to more diverse models of venture funding. I earlier wrote:

It is unlikely that highly liquid marketplaces for personal equity will emerge, at least until there are standardized contracts for selling personal equity, that have been shown to be enforceable by law, preferably across jurisdictions. However in the shorter-term there could well be enough transactions for valuation criteria for individuals to emerge.

This would be a strong driver of the reputation economy, where reputation measures would be probably the most accurate indicators of the value of personal equity.

It will be fascinating to see whether Upstart succeeds, with deep interest from both sides of the market for personal equity.

  • Is this the future …. or the ancient past? There’s nothing novel about this idea. Just Google “voluntary slavery” for models of how this would play out – complete with examples of possible contracts.

    • Sharing a portion of income is hardly slavery. This is an exchange of cashflows for parties that place a different time-value on money.