Can an investor in this situation force someone to work? Can they sell their share of a particular worker to another investor? Sounds like something we abolished a while back...
Entrepreneurs offer their life’s future earnings for an investment
11–20 of 29 posts
Re: Entrepreneurs offer their life’s future earnings for an investment
#12These types of schemes are not even worth discussing, they're horrible for investors, and if the first venture doesn't work then does the investor buy more of the person? So that their their initial investment isn't lost? At want point does the person having sold 80% of their future earnings just stop working because they don't see it as worthwhile.
Anything is worth discussing if both parties see the benefit. The "not even worth discussing" mentality would have stopped a lot of successful businesses and individuals if that's the attitude they took at the beginning.
Re: Entrepreneurs offer their life’s future earnings for an investment
#13I feel sorry for the people trying to do this. They will be in debt forever. You only understand the downsides of debt once you make an effort to get out of it. These people will never be able to do that. The graduate student is signing a part of her future income away in her 20s before she has even earned income.
it's financially brilliant from the kid's perspective, assuming she is successful. she gets a 5-year head start in business. compound that head start all the way to retirement, and its surely worth more than she paid.
Re: Entrepreneurs offer their life’s future earnings for an investment
#14These types of schemes are not even worth discussing, they're horrible for investors, and if the first venture doesn't work then does the investor buy more of the person? So that their their initial investment isn't lost? At want point does the person having sold 80% of their future earnings just stop working because they don't see it as worthwhile.
Anything is worth discussing if both parties see the benefit. The "not even worth discussing" mentality would have stopped a lot of successful businesses and individuals if that's the attitude they took at the beginning.
I chose my words poorly, I should have said this has been attempted before and I don't see any difference in this persons plan, except that they seem even less likely than those who proposed this earlier to make a lot of money, and I don't think anything in the world has changed that will make this a workable solution.
Re: Entrepreneurs offer their life’s future earnings for an investment
#15Anyone with experience in funding a company through equity financing would never put their personal equity into an agreement like this. And I wouldn't fund someone who is as fiscally irresponsible with their personal finances.
Companies are much bigger than the entrepreneurs that start them. Say this woman sells 6% of her earnings to get $600k for her C corp. The C corp could literally turn around and fire her with very little consequence (except maybe some stock acceleration and severance). Then what? She has traded 6% of her future earnings and she doesn't even have a job at the company she started and limited upside in the venture she started. Super risky.
This is why we have corporations. To separate personal and corporate responsibility. Doing something like they are suggesting is as crazy as repealing the separation of church & state.
Re: Entrepreneurs offer their life’s future earnings for an investment
#16I feel sorry for the people trying to do this. They will be in debt forever. You only understand the downsides of debt once you make an effort to get out of it. These people will never be able to do that. The graduate student is signing a part of her future income away in her 20s before she has even earned income.
it's financially brilliant from the kid's perspective, assuming she is successful. she gets a 5-year head start in business. compound that head start all the way to retirement, and its surely worth more than she paid. http://www.paulgraham.com/equity.html
There's a lot of assumptions that need to go correctly for this agreement to work. In my experience, assumptions like this rarely work out.
It's very dangerous to enter into an agreement where you are assuming that things will go well. If your assumptions don't pan out, you will be in big trouble.
She shouldn't just look at the upsides but also the downsides. If things don't work out, does the person really want to be paying 6% of their meager retirement income when she's 80?
I think it's pointless to even plan more than 6 months ahead as priorities and situations change. I cannot imagine entering into an agreement for a lifetime.
Money is a very psychological thing. There's a big reason why people get paid after they have delivered work and not before.
A graduate student in her 20s does not have the experience to see all the potential downsides of an agreement like this. That is what makes it dangerous.
Re: Entrepreneurs offer their life’s future earnings for an investment
#17Life imitates art. Has anyone else read The Unincorporated Man by Dani and Eytan Kollin?
"A brilliant industrialist named Justin Cord awakes from a 300-year cryonic suspension into a world that has accepted an extreme form of market capitalism. It's a world in which humans themselves have become incorporated and most people no longer own a majority of themselves."
Re: Entrepreneurs offer their life’s future earnings for an investment
#18I think the financial pressure of bootstrapping is such a powerful motivator that I dunno if giving an unproven entrepreneur 600k is such a good idea.
So to break even, she will have to make 10 mil$, not doing the math on opportunity cost, taxes, etc. Sounds dubious.
an entrepreneur making 10mil lifetime? a reasonably bright kid could prob make half just by climbing the corporate ladder.
Re: Entrepreneurs offer their life’s future earnings for an investment
#19This particular execution - a lump sum of $600k for a lifetime's earning percentage of a successful non-profit entrepreneur - seems absolutely insane to me , but I've wondered about a similar arrangement under more narrowly contrived circumstances: Invest in promising (18 and over!) students by paying off their school for percentage of their salary, rather than dumping huge loans on them that demonstrably reduce thei…
The version of this that I've seen work is the "Northern Exposure" one (remember that TV show?).
I had a friend whose MS in Nursing was paid for by a state government and in exchange she had to agree to work for a number of years (I think 3) at a hospital in a low-income neighborhood that was having trouble attracting good nurses. Yes, she was paid, etc! It worked out great since she got a free education and found out that she enjoyed working with that particular population and the state had one more highly qualified nurse on its roster.
Win-win incentives like these have a fighting chance, "opportunities" that are heavily weighted in one party's favor tend to not do so well.
Re: Entrepreneurs offer their life’s future earnings for an investment
#20Earlier quoted context omitted.
So to break even, she will have to make 10 mil$, not doing the math on opportunity cost, taxes, etc. Sounds dubious.
an entrepreneur making 10mil lifetime? a reasonably bright kid could prob make half just by climbing the corporate ladder.
You make that sound like such an easy and sure thing.