Would you sell a stake in yourself or your future earnings for an upfront payday? Are you willing to give strangers control and scrutiny of your everyday life decisions? These are some of the questions you must consider before floating yourself in an initial public offering.
An IPO is a type of public offering where companies sell a stake or shares in themselves in exchange for cash. The money is used for business expansion or lets founders cash in their sweat equity.
While the concept sounds like indentured servitude, numerous people have done it with mixed results. Platforms exist that facilitate the process.
Individuals opt to float themselves for different reasons. Student loan debt is a dominant reason. Some seek a self-IPO to help sponsor their goals of collegiate and/or professional sports. Still others do it to fund advanced education or even as social experiments.
Below we explore key benefits and downsides of a personal IPO and offer tips should you opt for this route.
The Case for a Personal IPO
Raise cash or capital quickly: A personal IPO is a legitimate method to quickly raise some money or capital. Funds can be used to pay down student debt loans, invest in further education, a different skillset or even support a passion. You get the cash upfront, with conditions attached of course, and you can get on with life.
Incentivized accountability: To be sure, most people struggle with life goals. A good example is getting in shape even when you know it’s right for you. Floating shares in yourself can provide that added impetus to pursue goals since you’re accountable to other people, in this case, your shareholders. Failure to hit milestones leads to your shares losing value and loss of future capital.
Potential of evolving into something bigger: A personal IPO might develop into more than just a financial transaction. Shareholders, who at times are more experienced, may invest in your business ideas as angel or seed investors. You get valuable and objective advice to succeed both in life and in business since shareholders have a financial incentive to see you thrive.
Get objective life advice: We tend to exercise objectivity when giving advice if our money is at stake. Shareholders have a financial incentive to secure their interests, and thus they’ll usually offer advice that aligns with your overall well-being. If someone has to put their money where their mouth is, they’ll think long and hard about it!
Downsides of a personal IPO
You cede control over part of your life: Shareholders “own” you. They have a financial stake in everything you do. You must weigh every life decision with them in mind. Additionally, you are accountable to shareholders for any decisions you take in life. Occasionally, stakeholders vote on issues forcing you to live with a decision whether you like it or not. Ignoring these decisions puts your “personal stock” in peril and leads to loss of future capital.
Lack of regulations: Personal IPO’s are unregulated. You float shares in yourself at your discretion. Should anything go wrong, you’ll be hard pressed to find adequate legal redress or support.
Expensive method to raise capital: A personal IPO is a costly way to raise money, including the sheer feeling that someone else owns you. You’re better off with traditional forms of credit that charge lower interest than, say, giving 7% of your future earnings for the next ten years to shareholders.
Competing shareholder interests: As in any publicly listed company, shareholders in personal IPOs have varying interests. A shareholder who gains a controlling stake in your shares has, in essence, more say on what you do or don’t do. Their goals may not always align with yours or the intentions of other stakeholders.
Floating yourself in a personal IPO is ultimately a decision only you make. Have a clear purpose and specific goals about what you intend to do with the money. Vet the decision thoroughly and explore other options. Should you proceed, stay in touch with your backers, you never know where those relationships might lead.