I think there are multiple $1B+ business opportunities in providing financial services specifically catered to non-W2 employees.
Here’s my rationale and vision:
Here’s my rationale and vision:
In traditional financial services, W2 income reigns supreme.
As a bit of history, the use of the Form W-2 was first established by the Current Tax Payment Act of 1943 as part of an effort to withhold income at the source.
The first Form W-2s were issued to employees in 1944.
As a bit of history, the use of the Form W-2 was first established by the Current Tax Payment Act of 1943 as part of an effort to withhold income at the source.
The first Form W-2s were issued to employees in 1944.
The W-2 became the primary source of truth for information about an employee's income.
Financial services infrastructure was built around this source of truth.
In particular, loan underwriting—for mortgages or personal loans—became heavily reliant on stable, growing W2 income.
Financial services infrastructure was built around this source of truth.
In particular, loan underwriting—for mortgages or personal loans—became heavily reliant on stable, growing W2 income.
This was (mostly) fine in the old world.
The traditional way of working was to take a single, stable job, stay in it for a long time, and then retire.
The traditional financial services infrastructure was built for that traditional way of working.
But the ground has shifted...
The traditional way of working was to take a single, stable job, stay in it for a long time, and then retire.
The traditional financial services infrastructure was built for that traditional way of working.
But the ground has shifted...
We are in the midst of a massive change in the way people work.
To be clear, it was happening before COVID—but has accelerated meaningfully since.
• Entrepreneurship
• Freelancing
• Gig-economy work
All of these are on the rise—but are unlikely to create stable W2 income.
To be clear, it was happening before COVID—but has accelerated meaningfully since.
• Entrepreneurship
• Freelancing
• Gig-economy work
All of these are on the rise—but are unlikely to create stable W2 income.
As this change accelerates, there are millions of people likely to be left behind by traditional financial services infrastructure.
Good luck getting a mortgage or attractive personal loan from a bank if you have 1099 income—let alone trying to get them to understand a K-1.
Good luck getting a mortgage or attractive personal loan from a bank if you have 1099 income—let alone trying to get them to understand a K-1.
Take two people:
• Person A: $100K W2 income
• Person B: $150K 1099 income
Person A is much more likely to get a mortgage or loan—they get more leverage on their income in the economy and have a greater chance to build wealth.
Person B is effectively "taxed" at a higher rate.
• Person A: $100K W2 income
• Person B: $150K 1099 income
Person A is much more likely to get a mortgage or loan—they get more leverage on their income in the economy and have a greater chance to build wealth.
Person B is effectively "taxed" at a higher rate.
There has to be a better way.
But there are no incentives for traditional financial services institutions to modernize—they move slow and won’t do the additional work to develop an underwriting method for other forms of income/wealth.
This spells one thing:
Opportunity!
But there are no incentives for traditional financial services institutions to modernize—they move slow and won’t do the additional work to develop an underwriting method for other forms of income/wealth.
This spells one thing:
Opportunity!
There are going to be multiple $1B+ businesses built around solving this—and related—problems for new age workers.
Most importantly, by removing this "tax" on alternative work as a barrier to entrepreneurship, we will spark a new golden age of entrepreneurship.
This is GREAT!
Most importantly, by removing this "tax" on alternative work as a barrier to entrepreneurship, we will spark a new golden age of entrepreneurship.
This is GREAT!
Who is building the most exciting future in this space? I want to learn more! DMs and emails open.
I talked about this general idea on a recent episode of Where It Happens with @howardlindzon.
You can listen to the episode below (or Spotify/Youtube). podcasts.apple.com/us/podcast/whe…
I talked about this general idea on a recent episode of Where It Happens with @howardlindzon.
You can listen to the episode below (or Spotify/Youtube). podcasts.apple.com/us/podcast/whe…
Follow me @SahilBloom for more threads on business, finance, technology, and entrepreneurship.
I also write about these topics in my weekly newsletter. You should join the 68,000+ others and subscribe! sahilbloom.substack.com
I also write about these topics in my weekly newsletter. You should join the 68,000+ others and subscribe! sahilbloom.substack.com
From the looks of my DMs, there are a bunch of cool companies building in this space.
The opportunity is massive!
The opportunity is massive!
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