Lat week Rafe Furst (my mentor/adviser/poker coach) wrote a blog post on “Investing in Superstars” which spread virally through the startup/investor communities. The concept is simple but extremely polarizing:
Imagine you are in your early twenties, out of college several years and your best friend, who recently came into an inheritance of $300K cash told you they could think of no better way to invest the money than to invest it in you. Not the company you started, not as a loan, but invest it in YOU, as if you were a startup. In return your friend said all they wanted was 3% of your gross income for the rest of your life. Do you think you would take it?
Now what if your friend said that they didn’t care what you did with the money or how much you made each year. If you wanted to sit on a beach in Nicaragua learning to surf, go work in the Peace Corps, stay at home and do your art projects, whatever you want it would be fine, just as long as you made sure to always pay the 3% of whatever you make (as little as that may be).
And finally, what if your friend said you could buy out of your obligation at any point for $6 million in cash. Then would you take the deal?
I know what you’re thinking. It’s completely insane right? Words like indentured servant and CRAZY are probably popping in your head right now. But, let’s push aside all the logistical numbers, equity, buyout multiples, and think about the overall concept for a moment.
How would you live your life differently if you didn’t have to worry about finances for the next year or two?
Would you still be working your job? Would you travel the world? Would you take a year off like Stefan Sagmeister to figure your life and how you plan to make a huge impact in the world? Would you spend a year launching your idea and collecting investment? What would you really do with the freedom? That’s the BIG idea here.
Rafe and Phil are investing into people to help them figure that out. And they are betting that you will figure it out sometime in your lifetime, and buy out of the contract. Financially, they benefit because you buy out out of the contract. Idealistically, they benefit because they helped you find your way in life.
For the investee, you just accelerated something that would have already happened. So, let’s say you’re going to be a millionaire when you’re 40, but you had to work 10 years to get comfortable to take “that leap.” Now, rather than hitting it when you’re 40, you hit it when you’re 35. The 5 years you save in time can be tremendous. You could turn that $1M into $10M. You could take those 5 years off. You could do whatever you wanted. The opportunity cost is tremendous.
Let’s take it a step further. Let’s say that someone started a $100M venture fund to invest into people, not ideas. How would that revolutionize the investment community? How many smart, creative, innovative, talented people would not climb the corporate ladder, or work for investment banks, law firms, etc? How would you pitch yourself to investors over your lifetime?
Would I take the investment if it was offered to me? I have absolutely no idea. But it has definitely changed the way I think about my future.
