Part-Ups and Personal VC
I’ve decided to create a new buzzword: Part-Ups.
A part-up is a startup which the principals are pursuing part-time as part of a deliberate strategy, rather than as simple moonlighting.
Increasingly, I’m meeting people who are pursuing a portfolio career where they spend some of their time on cash cows, and some of their time on part-ups.
Take my friend Auren Hoffman, for example, who uses cash businesses like the Stonebrick Group to fund his real work of founding technology companies.
I know more part-up founders, but since some of them have day jobs, I won’t name names….
Of course, a part-up really isn’t the ideal solution. As Ramit and I discussed at lunch today, the issue is paying the bills while waiting for a liquidity event.
That’s why I dusted off an old concept of mine from the 90s: the personal IPO. Except in this context, I think it should be termed a personal VC investment.
Let’s take a bright guy like Ramit, who can generate ideas and companies on a weekly basis. The problem is that he faces the choice of either taking a job to pay the bills (which would suck up all of his time), or finding enough freelance work to do the same (which sucks up all one’s time in a different way). What he needs is his $50,000 per year.
Now imagine a rich investor who believes in Ramit. He can’t invest in a company like a VC, because not all of Ramit’s value creation methods involve companies.
What he needs is a way to invest money with a claim on Ramit’s future value stream.
Enter the personal VC investment. For $50,000, he purchases a claim on 5% of Ramit’s future value creation, up to, say, 10X his investment. If he believes that Ramit will find a way to create $10,000,000 in value for himself, he, the investor, can make $500,000.
Is this a good deal for Ramit? Maybe, maybe not. Depends on if he can convince someone to loan him the $50K on better terms (or just find a rich sugar mama). But it’s certainly food for thought.