Also: why or why not?
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The only reason to answer is 1) You have an extremely immediate need for capital 2) you believe you won't have made at least 2X your salary in aggregate above your current salary over 10 years
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Right. I'm curious mostly as to 1. If I can kill your credit card or student loan debt and your salary increases it's a win for both
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I think this also depends on the career trajectory of a person, if there's supposed pretty sharp upward trajectory than that tradeoff is massive I think this arrangement makes sense for a massive upfront cost (school, surgery) that increases that trajectory
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Yeah. So what if there's a scenario where I pay off your student loans in exchange for equity in you? Could potentially be a win for both parties
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potentially - the question becomes for that individual person how much is student loan debt actually hampering them? For some people it's not a lot, for some people it's a ton
@TonioDeSo has been working at this concept for a while -
Yeah, I think we'd both agree it makes a lot of sense in the case of education. My question is how much more broadly it could be applied. e.g. if you're paying 18% on credit cards you can't get out from under...
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Like Nikhil said, been working on this category for a while. I think the market for Austen's ideas isn't quite there yet - cost of capital is prohibitive. Once it's competitive I think someone will build a great business in it.
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If cost of capital is prohibitive now I'm not sure it would ever make sense. The big thing you'd fight on top of cost of capital is selection bias. You need to hit inflection points where the capital moves the needle on future earnings.
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Easy for me. Killing debts now with the money and investing the leftover would be a huge net positive and greatly improve overall cashflow.
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But then you're betting your salary won't increase, no?
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Because I would take that bet. The likelihood in my eyes that your income goes up, say, 10-20%, is non-trivial
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Having lived in Ukraine (when I was there it was 4 per USD) I wouldn't buy Hryvna earnings at all :)
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Definitely. Equity > loan.
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One caveat. I'll give you 10% in one and only source of income for the next ten years. Obviously, it can be the most lucrative one. I suppose we can start negotiations from that point.
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Nope. It's all or nothing. All earnings. Do you still do it?
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In that case, no.
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Further explanation. I'd consider on all earning for 10 years at a reduced percentage (certainly under 5 percent) or at 10 percent for a reduced term. Or at the terms set for earned income but not capital gains. Or at terms set but for the price of anticipated peak year income.
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Damn, now I'm mulling it over again. I mean, your proposal could easily cost more than a loan if things go wildly well--even to the point of wiping out ten percent of equity I could use to attract other investors.
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But at the same time you are taking a risk of seeing negligible return if I don't earn at all over ten years. Back of my head says this is pretty fair. It's not eternal, ten years is a long time but fixed. In principle, there's a lot to like about the arrangement.
End of conversation
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