Pave lets investors take a stake in youth's potential.
Pave lets investors take a stake in youth's potential. - 
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Some years ago, David Bowie sold Bowie bonds. Investors gave the rock star money, in return for a cut of the future royalties on his music. Now young people just starting out can do something like this. There's a company called Pave that lets financial backers invest in the future of promising young people. If their careers take off, the investors get a cut of their success. Sal Lahoud is co-founder and CEO of Pave, and he tells Marketplace Morning Report host David Brancaccio why Pave in making an investment in youth.

Brancaccio: Now explain the model a little bit here -- investors buy stock in young people?

Lahoud: Pave is trying to democratize access to funding for young people. Young people become the platform and try to find individual  backers who invest in them. The way that happens is through an agreement that we’ve pioneered where someone receives funding and payments are linked to income, so you only pay when you earn.

Brancaccio: So a lot of people hear this and say, gee I wonder how this compares to potentially taking out a loan from a bank to fund -- often your student loans -- but maybe just your launch into the world?

Lahoud: First of all, the structural differences. If things go badly when you take a loan, you still have to pay the loan. This is different. There’s a trade off. You’re not taking the risk if things don’t go well, and in exchange for that, people are going to do better if you succeed because payments are linked to income.

Brancaccio: From the investor’s point of view, how can they be assured that they’re not entering a relationship with someone who is really a deadbeat? Someone who wants to take their money and not make any money after graduation, and therefore legally -- according to the contracts you’ve drawn up -- wouldn’t have to pay the money back?

Lahoud: We try to be agnostic to the type of career or the type of background someone has, and we verify everything that is verifiable. We leave it to backers to decide what they’re interested in investing in. And I think it’s really up to you, and that’s one of the advantages. Things are changing, we are in the zeitgeist of people wanting to do much more with their money than just make a profit.

Brancaccio: But it’s not, Sal, indentured servitude? I mean you’re in hock to a human being.

Lahoud: You have to define things in the sense that, what financial liability makes you take a decision you otherwise wouldn’t take? Loans do. Because whatever happens, you have to pay that loan back. This is liberating because you only pay if you do well. And I think, you know, as with everything that is new, there is always going to be a discussion, but we really think is a real model that should exist at a very wide scale for society.

Follow David Brancaccio at @DavidBrancaccio