IPOs of Individuals Likely to Be Next Big Thing
COMMENTARY | 2013 has seen an emerging trend lurking in the shadows, only peeks glimpsed occasionally, but likely to be thrust into the limelight soon. That trend, according to New York Magazine, is the personal IPO, or Initial Public Offering. That’s right: Just like a freshly-minted corporation, individuals are likely to soon begin selling stock in their future earnings. So far several individuals have done the deed and some online investment companies have gotten in on the game, including Pave and Upstart.
Thus far, however, personal IPOs have been rather limited, offering a tremendous opportunity for growth. Pave and Upstart, along with other investment venues, have allowed people to sell shares of stock in their future earnings�but only to a limited degree. The contracts on such shares are time-limited, lasting only a decade at most, and operations so far are small-scale and intended to assist young professionals and college graduates with entrepreneurial pursuits.
The goal so far appears to be to protect investees. Investees’ earnings are largely protected: If they make less than a certain level of income they pay nothing to investors and there are percentage caps on payments. Regardless of how lucrative an investee becomes, he or she gets to keep the vast majority of his or her earnings. And that limited window of investment, a decade or less, means that many young investees, sometimes known as “prospects,” will hit their maximum earning potential well after they are no longer beholden to investors.
Would investors be more generous, and individuals more likely to utilize IPOs, if the pot were sweetened? Would investees be willing to sell a generous minority share of their lifetime future earnings in exchange for investments lucrative enough to guarantee financial security, thus allowing them to pursue their entrepreneurial endeavors full-time? As a writer and cartoonist I would be tempted to weigh a large minority share of my lifetime future revenue in exchange for an influx of financial capital that would allow me to pursue my passions on a full-time basis. If I became a renowned novelist, columnist, or syndicated comic strip artist my investors would receive a lifetime of lucrative returns.
While there are many potential ethical pitfalls to investing in “human capital,” the opportunities are extremely intriguing. How many talented young people could improve society by being freed from their day jobs thanks to generous investments? Inventors, entrepreneurs, and artists could become financially independent at a young age while their minds and bodies are still vigorous and energetic, pursue their respective crafts to the utmost of their ability, and improve society while enriching both themselves and their original investors.
