Ask HN: "Y Combinator for people?"
Hello fellow HNers!

In the last week I've been thinking about an idea that I'd like to share with you.

In one sentence: It's a fund which gives high-interest loans of about $100,000 to entrepreneurs.

Here's a rough sketch of how it will happen: (all numbers listed here are just suggestions and will probably vary)

The fund chooses people who will receive the loan, in a process similar to how YC chooses hackers. The goal is to choose people whose chances of becoming millionaires are as high as possible. Those people are then given the loan. The loan consists of $10,000 paid immediately, and $2,000 paid every month for five years. All money will be lent at an interest of 20% per year. The entrepreneur may pay off any portion of the loan at any time he wishes; Additionally, there will be a deadline, say 5 years, by which he will have to pay off the entire loan.
Entrepreneurs are not expected to report to the fund about their progress, or to explain what they would do with the money.

Why is it good for the entrepreneurs?

It's a little superfluous to explain, but anyway: The entrepreneurs will not have to work for money. They could spend all their time studying or hacking or working on a start-up without any investment or whatever they want.

Why is it good for the fund and its investors?

The fund will make a return on the investments paid to it. Assuming the selection process is 85% successful, the total interest generated by the fund will be 5% per year. If entrepreneurs will be willing to take the loans at higher interest rates (I would personally agree to 30%,) the fund interest could exceed 10% per year.

(Note about this calculation: it turned out to be a much more complicated one than I thought. If you think I made a mistake and you have the correct result, please examine it very carefully before posting. As for my assumptions, I assumed successful entrepreneurs will pay off the loan after three years, and that unsuccessful ones will take all 5 years, and then only $10,000 will be scraped from the guarantors.)

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The trickiest part, of course, is choosing the entrepreneurs.

The goal is to choose people who have the highest probability of becoming rich in the allotted five years. If that can be done well enough, the fund can succeed. I think it can be done, and in a similar way to how YC selects hackers.

It should also be noted that even an entrepreneur who has failed to get rich by the end of the four year can resort to taking a job at a big company. One year of that will pay off most of the loan, and will allow him to take a separate loan from the bank to cover the rest. This means that a 85% successful selection process doesn't require that 85% will become millionaires: If 60% become millionaires, and 25% get a "good" job at a big company, then this will also work.

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I would say that this idea is sort of "Y Combinator for people", in contrast to the original Y Combinator which is targeted at companies. Actually it seems like a logical step: If the most important ingredient of a start-up is a determined entrepreneur, why not invest directly in the entrepreneur?

So I hope you have some constructive comments about this, and I hope even more that someone reading this will pick up the glove and do it.