Is taking equity in individuals the future of venture capital and human potential?


News that the investment firm of former Facebook VP Sam Lessin, Slow Ventures, has invested $1.7 million in YouTuber Marina Mogilko has reinvigorated the debate over whether investing in individuals is a good idea.

The deal gives Lessin 5% of Mogilko’s creator earnings for the next 30 years, but only if her earnings reach a certain threshold.

I first wrote about this idea in 2010 in a piece Will there be capital markets for people?, in which I looked at what had already happened in the space, and then again in 2012 writing about the startup Upstart, which tried to establish the same model. (Upstart subsdquently reverted to a more traditional personal lending model based on AI predictions, went to IPO last year and is now valued over 10x hgher at more than $20 billion).

The initiatives of Upstart and Slow Venture have evoked strong responses on the moral issues, in both cases being likened to “indentured servitude”.

Lessin has written a piece to explain his stance, The future of investing directly in people (subscription). He makes the case that personal debt is often not the best path for individuals, and is often not available to them anyway. Lessin says:

There are so many reasons for investors to like new forms of equity investing in people.

In a very uncertain world, it is far better to bet on people and their continued ingenuity and resilience than it is to bet on a single company.

Further, one can make a strong argument that the path to the greatest returns will lie in putting people in a position that frees them to pursue their best options over their lifetime rather than remain stuck in suboptimal positions to service fixed debt and traditional commitments.

And let’s be honest: With the world awash in money and with very low interest rates, financiers are very open to exploring new investment opportunities—perhaps more so than ever before in human history.

While many challenges remain with this model, I think it absolutely has a place in what is unequivocally a capitalist society.

This has to be a positive choice, as in people wanting to amplifying their earning potential and enjoyment of the present, starting from a place of choice.

This model should absolutely not be an entertained for people who are in a poor financial position and desperately need money.

How the boundaries between these situations are navigated needs to be explored. But Mogilko is happy with the deal, allowing her to invest in what she sees as the potential of her business, and I don’t think she should not be permitted to enter into it.

This is of course a test case, with Lessin hoping to apply the model to the career of thousands of promising individuals, creating a new asset class.

What do you think? Should investing in individuals be part of a capitalist society?

Image: Mauro mora