Buying A Share Of Future Earnings

Here's an idea. What if you could buy a share of someone's future earnings?

What if you could loan money to low-risk, future high-value individuals in exchange for a piece of their future earnings? For example, MBA students, law students, MD students, etc.

If you just took MBA's at Top 10 MBA schools, your initial target market size would like something like: Top 10 MBA schools: 500 students x 10 schools x $100,000 x 5 years x 10% penetration = $250M in loans in 5 years. Expand the schools slightly, increase the target student body and you probably get $1B in loans, a pretty decent size market.

In my business school class, some students are getting a "free ride" or made money before school. Many, however, are graduating with thousands of dollars of debt in school loans, credit cards, etc., and are currently unable to get a loan for the house or condo they want even though they have tons of future potential earning power. They are a good investment, highly likely to pay back (at least as a portfolio), and have exceptional future earning power (they’ve been pre-screened by the admit committees).

How do you capture a piece of their future earnings in a reasonable way? You might structure this as a loan with low interest and then a balloon payment after 5, 7, or 10 years. You would allow low-risk students to borrow while in school and for a few years after graduating. You would also act as the consolidator for all their debt (school loan, credit card, and a line of credit). You’d have to be creative about how you raised the initial capital. The good news is that if it worked, it would be evergreen – the alums become the future lenders.