We love assets that throw off cash:
Dividends from stocks…
Rental income from real estate…
Income from the people we own.
“Uh… what?” you might be asking yourself. “People we ‘own’?”
Yes, you read that right.
Let me explain…
The $1 Trillion Impetus
There’s a new type of crowdfunding that’s gathering steam.
It lets you buy stakes in people – or more specifically, in peoples’ future earnings.
The impetus for this sector getting started is the outrageous level of student loan debt in the U.S...
It recently hit $1 trillion.
To pay off their debt, young people take jobs that are a bad fit.
They spend the next several years, if not decades, strapped with loans. They’re unable to save, invest, or buy a home. No one wins, including the economy.
Enter Pave with a solution.
Pave is an online platform that connects two types of people:
“Talent,” i.e., young people who have good earnings potential…
And “Backers,” i.e., investors seeking to profit from the Talent’s future income.
Backers give Talent a one-time upfront payment. In exchange, they receive a percentage of the Talent’s income over 5 or 10 years.
Talent can use the funding to go back to school, to refinance their student debt, or to start a business.
The advantages for both sides are considerable:
How It Works For Talent
First, Talent applies to Pave and is screened using a proprietary process.
This process, developed in part by a famous labor economist from Yale University, estimates the Talent’s future earnings potential.
Then it calculates the percentage of the Talent’s income required to get Backers a fair return. The maximum level of income sharing is 10%.
(For example, if we own the right to 5% of someone’s $100,000 income we’d receive $5,000 per year in income.)
But the Talent receives more than cash:
They receive advice and mentoring from people who have a financial incentive to ensure they succeed!
How It Works For Backers
Backers can invest in individual Talent – or to diversify and make the most impact, they can invest in groups of people for which they have an affinity:
Film directors, veterans, environmentalists, educators, neuroscientists – or even Columbia University graduates, or female entrepreneurs.
Backers earn financial returns – monthly income adding up to 7% to 9% IRR – while feeling good about making a difference in young peoples’ lives.
Pave handles all the administration and makes sure Backers get paid. The minimum investment is $500, and Backers can invest through their IRA.
If the Talent ends up becoming a famous artist or the next Mark Zuckerberg, they have the right to end the agreement by paying back 5x the initial investment.
Intrigued about using Pave to make a financial return while making a difference?
Or since Pave is raising money from investors like you to help grow its business, perhaps you’re intrigued about Pave as a start-up investment…
On the “con” side, this is an unpredictable early-stage investment, with little in the way of historical returns to help us estimate the financial risk.
On the “pro” side, they have a scalable business model – they earn a 3% origination fee and a 1.5% servicing fee, for average revenue per “Talent” of $1,080…
And their business plays into some “mega-trends” that might help it succeed (the crowdfunding trend, for example, and renewed efforts to solve our trillion-dollar student loan problem).
Pave is currently raising money on AngelList, one of the high-quality platforms we cover here at Crowdability.
In a twist to traditional fundraising, 25% of the funds they raise will go towards growing Pave’s business, and 75% will go towards an investment in the Talent.
It’s a way to dip your toe into the new world of crowdfunding of people, and a way to get some upside potential from the business itself.