Thursday, March 04, 2010

From the Archives: Personal IPO

Going all the way back to 1995, I've speculated that promising young people should be able to sell a claim against their future income stream. Back then, I called it the Personal IPO. The original idea came to me after rock star David Bowie sold the infamous "Bowie Bonds," backed by the royalties from his music catalog.

I even blogged about this back in 2005, when I cited the example of my buddy Ramit Sethi. (Side note: If you had invested $50,000 in Ramit back in 2005, you'd be doing pretty well right now!)

15 years later, it's finally happening. VentureBeat reports that the Stanford grad Kjersten Erickson's Thrust Fund (I guess the name is a play on "Trust Fund" but will probably cause snickers nonetheless) is implementing my Personal IPO concept.

She's selling a 6% stake in her future income for $600,000. That implies that the NPV of her lifetime income must be at least $10,000,000.

I love that the concept is finally getting a hearing, but fear that it will crash and burn because of mispricing.

A lifetime NPV of $10,000,000 is pretty much as we'd all like to believe that success is just around the corner, most of us would gladly take $10,000,000 in cash right now for all the money we'll make in the future.

That being said, if someone is really interested in owning a piece of Chris Yeh, I'll be happy to sell you a 1% stake for $1,000,000.