Every once in a while I stumble upon something interesting. Like, really interesting. If it’s also related to one of the topics I chose to cover in this blog, then I’m also writing about it.
Today, it’s about investment – which clearly falls under the financial resilience topic, something that I write about a lot. But it’s a very different type of investment. I have mixed feelings about it, and this article is mainly an opportunity to organize my thoughts around the whole idea. So don’t expect anything other than a few ramblings.
Very briefly put, a VC company thought to invest in humans. Not in the way you’d expect, though. like sending them to university, train them, etc. Nope. This investment is a huge upfront payment, which entitles the company to 5% of the creator’s earnings for 30 years. Here are more details about this story.
The first “investment” is a person who already has a relevant YouTube followership, so it looks like the company is looking for audience-based businesses. The upfront payment is, hold your breath, $1.7 million. After the creator receives this amount, 5% of her earnings will go to the company. For 30 years.
And now let’s ramble a little…
How does the company know the person will keep her audience? Her drive? Her passion? Her talent? How can you make sure that some audience based business will survive for 30 years? The trends are changing basically every year. If I had to think about some creator that I know from 30 years ago, I simply cannot identify someone that will qualify. Not even from 20 years ago.
Ok, maybe they think about royalties that will continue to accrue over years. Still, I don’t know. 30 years is a lot.
Or maybe they chose 30 years to create a more profitable distribution curve. Maybe during those 30 years there will be something really big, and a lot of flops. The big hit should make up for the flops.
30 years is basically the amount of time a person can work during his life. This is a lifetime commitment. Like a marriage.
Another question: is this an exclusive deal? If not, this is a problem for the investor. The creator can sign with another 19 investors, and they will all cover 100% of the creator revenue.
Another option would be for the creator to cash 10 x $1.7 = $17 millions, (basically giving away 50% of her revenue) then just put the money into some carefully picked stocks. Off of those gains she can live comfortably with half, and hopefully all investors will be happy with the other half. Sort of like a custom-made index fund. Definitely something to think about.
The upfront payment is huge. Still, this can’t take out the “enslavement” feeling that I get from this thing. Or maybe this is the direction in which the world moves? Like a modern patronage?
Very curious how this will play out. This is certainly very disruptive for the creative arts. Not to mention investment. In the near future, your portfolio may consist of a few shares and index funds, and, just to balance it, a few carefully picked creators that will contribute 5% of their earnings to your wellbeing, for 30 years.