What I Actually THINK About The Life Investment (Hint: I Wouldn't Take It)

For the last couple days, I've been pushing the story of The Life Investment - this new approach to venture funding in which three social entrepreneurs have offered up a portion of their future earnings annually for perpetuity in order to get an up front investment today, with which they can scale their organizations, invest in their own financial sustainability, or generally give themselves a head start. The conversation has understandably generated a pretty high volume of responses, so here's what I think in no particular order:

This is not indentured servitude. One of the most boring and lackadaisical critiques of the idea is that it somehow constitutes a form of wage bondage that deserves to be called indentured servitude. Calling it that dramatically undersells the real problem of wage slavery that people around the world continue to face and fails to acknowledge the agency of the individuals in question.

This makes more (financial) sense to me from a for-profit perspective. The inspiration for the model that the Thrust Fund is using was investor Rafe Furst's model. The difference is that his includes a buyout clause and a built in sliding scale of return based on what type of impact the person creates.

Sasha Dichter is right to say that this implicates a broken model of funding in the nonprofit sector. Acumen Fund's Sasha Dichter wrote a good post reflecting on how, for him, this sits poorly not because it's not an interesting idea on the part of the entrepreneurs, but because it demonstrates the gaping hole for smart funding in the social sector. He's totally right. But.

The entrepreneurs in question feel that this is empowering, not desperate. The three in question here are skin in the game, make big bet types. That's why they're building organizations and taking chances that most wouldn't. This, to them, is not a perpetuation of nonprofit funding stereotypes but a chance to rejigger incentives in a way that gives them what they need now.

Most of the entrepreneurs I've asked about this would only take on a "Life Investor" who is already some sort of trusted mentor. Again, they don't see this as a form of bondage but a cementing of a relationship.

The idea of a 'lifetime' is scary than the reality. If you play this out, in pure financial terms it would take lifetime earnings of $10 million for the entrepreneur to pay back more than their initial loan. If they can find someone to take that offer, that's pretty damn smart financially. But the idea of being in debt forever is a big thing for many to stomach.

And so for the real million dollar question: would I take these terms?

Absolutely not, and here's why:

1) The Dollars Just Aren't Enough: For me, $300,000 just doesn't go far enough to really be worth considering an exchange like this. Northwestern sunk more than $500,000 into the various programs I built there and even with that we were scrimping and scraping to make it all work. With $300,000, I would still likely need to look for other investment to get any venture I was working on to where it needed to be. These circumstances change with different people, but the financials just don't make sense for me.

2) I'm Obsessive About My Freedom: At the end of the day, I'm planning on being wealthy. Not because I care about having stuff - I don't. I'm just obsessive about my freedom to think about what I want to think about and work on what I want to work on. I've pretty well hacked together that freedom since about half way through high school, but in the long run independent financing is the only path. This makes the idea of the lifetime debt, even though I know it is a potentially good financial deal, unpalatable to me. But I'm weird.

3) (The Big One): I Already Made A Decision To Shift Away From Pure Social Impact. This is the one maybe worth noting. I think that what I'm good at is bringing together people around a big new disruptive idea to make it happen. I did that at Northwestern for a few years and got, on the one hand, the satisfaction of having helped set some folks on a path where they'll be contributing more than I think they would have otherwise. On the other hand, I got four years of endlessly fighting inane bureaucracy, stupid turf battles, and status quoism. And frankly, I didn't even have to deal with the rat race of donation based fundraising.

How the hell do we set up our social change sector like that and expect people to stay there? My "career" (whatever that means anyway) will be full of impact for social good - sometimes direct, but knowing me more likely infrastructural like the tools I'm building with Assetmap or the education systems we set up with the Center for Global Engagement. But it won't be done in any way that resembles a nonprofit career these days. That path just seems too broken, and too abysmally destructive of passion and energy.

Photo Credit: Seattle Miles