Mainstream Medicis

Here's the latest novel idea in the world of social start-ups that's got the blogosphere buzzing: 1-to-1 investing. That's right. Forget about funding companies, says investor/entrepreneur/tech consultant Rafe Furst. Instead, find an individual who you really believe in and invest in that person - as if the person [and not any one company] were the start-up.

Then, take it beyond the idea of a loan or a give-away by working out a return on that investment that would make it so you can get, say, 3% of that individual entrepreneur's gross income for the rest of their lives - however much or little that would be. And finally, make it so that this social entrepreneur could buy out of the deal at any time, so long as he or she gives you at least one year's notice. Sound far-fetched?

Don't tell Furst. He and colleague Phil Gordon recently made such an investment, and Furst wrote about it a couple of months ago on his blog, in a post entitled Investing in Superstars. In that post, he offered readers a mock-up of what he called a Personal Investment Contract, which he drew up to formalize the deal with the young social entrepreneur he is supporting. (Furst refers to her in his writing simply as "Marge" so as to protect her identity.) Furst said he wrote about it because he wanted to encourage others to invest in individuals, as well. "People are the important thing," he says.

Not surprisingly, Furst has received a lot of feedback on his post: people who have read it either love or hate the idea. One reader wrote that "the risk for the investor to end up with a bunch of sub-par talent that can't deliver" would be high; another reader praised the idea as "a brilliant effort that puts the money behind what's most important: the people." Still others suggested potentially dangerous loopholes. "What if Marge marries an even bigger superstar and they decide that Marge should stay home and raise the kids?" one reader asked. "What if Marge is in an accident and there is an insurance settlement? What about inheritance money? Life insurance payouts?" One disgruntled reader even accused Furst of creating "a form of slavery."

Since then, several other "social investors" have stepped forward to endorse Furst's idea, including Ashni Mohnot, a fellow PopTech blogger, who stirred up the blogosphere anew this past week by writing a post to tell people that she'd just founded Enzi, a startup based on a similar concept -- one that lets individuals invest in the education of talented students in exchange for a share in their future income for a fixed period of time. "We just started a pilot at Stanford University," she wrote in a comment on Furst's blog post last month. Mohnot, a Stanford alum, said she envisions her company to be "a Kiva-like marketplace inviting not only accredited but also retail investors to invest in these students." She says she is working to "create a paradigm shift in education finance by offering future income (equity-based) loans as an alternative to debt-based funding." Mohnot says that her goal "is to remove the financial barrier to education."

Sure, people-to-people investing is a novel idea -- in the social enterprise field. In the nonprofit sector, the notion of 1-to-1 investing in social advocates has been around for several years. In 2007, Contribute Magazine wrote about the rise in ad hoc funding circles focused on backing individuals with a mission. Paul Farmer, for example, along with several other professional New Yorkers, have been rallying around a medical student from Burundi who is building a clinic in his war-torn country; a Hunter College professor is establishing a library in the rural outback of Uganda, and a publishing executive is building another library in Tanzania -- all projects which only organized charities could or would have carried out 10 or 15 years ago. Charlie Wolf, a patron of the doctor-to-be from Burundi, put it this way: "There's always been a problem with social funding in general in that it's often detached from the individual donor. But not anymore. Being a patron gives the one-to-one funding arrangement some kind of personal identification, some kind of personal experience." And there are other benefits. Adds Farmer: "With smaller-scale philanthropy as well as with these new small funding groups, you know where the money is going. It doesn't get trapped in the United States or get squandered on consultants, and smaller organizations are much more nimble, much more able to respond to changing conditions and challenges as they occur."

Still, though, Furst seems to be the first to come up with the idea of formalizing not only a payback on such social-entrepreneurial investments but suggesting a specific type of contract to close the deal. What do you think of this kind of 1-to-1 investment/donor model being applied to social entrepreneurs? If you are a social entrepreneur, would you take such a deal and sign a PIC if offered?

Let us hear from you. Seems like Furst and Mohnot aren't alone in thinking that this type of arrangement has legs and a lot of potential impact.