In the US, corporations have equal, if not more, rights and privileges than individual people. We can see an imbalance when it comes to political voice, tax rates, and privacy.
Companies also have access to better and more affordable financial instruments than people do. We want to change that.
Venture capital
When a company wants to raise money to work on an idea or to stay in business, it can raise money through venture capital fundraising. In this scenario, an investor invests money in a company in exchange for a percentage of ownership in that company. The investor takes on the risk of losing the money they invest for the potential upside that one day the company will have an exit (i.e have an IPO or get acquired) and multiply the amount of money they originally put in. This form of financing is not structured as debt. If the company doesn’t work out as hoped or goes bankrupt, the founders can shut down the company and never have to return the original sum of money to investors. A company can raise money this way even when the company only consists of one founder without any other employees.
Yet, when an unincorporated person wants to raise money, their options are limited to forms of debt. They can take out a loan, for example, which they’ll need to pay back with interest.
At Humanism, we’ve developed a legal innovation in which people can create their own personal companies to fundraise through. They can exchange a small percentage of their future economic output over 15-30 years in exchange for a sum of investment money today.
How Humanism works — a simple example
Let’s say a 20-year-old knew they would make exactly $100k every year for the next 30 years. By age 50 their total income would be $3M ($100k*30 years = $3M).
In this scenario, Humanism would give that 20-year-old $150,000 today (5% of $3M) in exchange for 5% of their annual income over the next 30 years. It’s like time traveling and making an agreement with your future self.
The great thing, is that this arrangement is not structured as debt. They do not owe a fixed or ever-growing amount of money or additional interest. If their income drops and they make $50k one year, then they don’t still owe $5k. They’ll only need to contribute 5% of $50k, or $2.5k. If one year they make $200k, then they’ll pay $10k.
Libermans Co.
We’ve tested this out with our own founders, which you can read more about in The New Yorker. If you’d like this to become more mainstream, share the article and this webpage with your networks.
Historical comparison
Similar to how the 30-year home mortgage may seem standard today, it was actually invented and standardized pretty recently—in the 1940s. We'd like to do the same for personal investments.
Before the modern mortgage, potential home buyers had to put 50% down and then pay the other half (plus interest) over a short five-year period. That effectively gatekept homeownership and reserved it for the very wealthy. Only one in ten Americans could afford to own a house. When the Great Depression hit, millions of Americans lost their savings and jobs and found themselves at risk of foreclosure. To remedy this economically precarious situation and make homeownership more accessible, President FDR introduced a number of legislative programs, including the creation of the Federal Housing Administration and the modern mortgage. By the year 1960, homeownership increased to 62%, and has stayed above 60% ever since.
From history, we saw how much more abundant the future could be when ordinary people weren’t hamstrung by the status quo market. Today, the only people who can raise money from investors are those who know how to incorporate a company with the state of Delaware and pitch to investors. At Humanism we want to make it easy for the average person to raise money and not be hamstrung by a lack of capital.