Meet the Man Who Sold His Fate to Investors at $1 a Share

 

On January 26, 2008, a 30-year-old part-time entrepreneur named Mike Merrill decided to sell himself on the open market. He divided himself into 100,000 shares and set an initial public offering price of $1 a share. Each share would earn a potential return on profits he made outside of his day job as a customer service rep at a small Portland, Oregon, software company. Over the next 10 days, 12 of his friends and acquaintances bought 929 shares, and Merrill ended up with a handful of extra cash. He kept the remaining 99.1 percent of himself but promised that his shares would be nonvoting: He’d let his new stockholders decide what he should do with his life. Every year, tech-industry entrepreneurs make a similar decision. Taking on investors is usually one of the first steps in Silicon Valley’s well-established path to outrageous fortune. Merrill wasn’t running a startup per se, but he had plenty of great ideas and ambitions—videogames he wanted to develop, a data backup service he wanted to launch, a whiskey-tasting society he hoped to form. He needed venture capital, but as an ordinary guy, he had limited access to capital markets. That didn’t hold him back. He simply relied on the support of the motley group of programmers, bloggers, and baristas he knew in Portland. It was Silicon Valley–style finance, writ small. But, like many entrepreneurs before him, Merrill soon learned the downside to taking on outside funding. In the ensuing months and years, 128 people bought shares of Merrill, and he fell victim to competing shareholder interests, stock price manipu­lation, and investors looking for short-term gains at the expense of his long-term well-being. He was overwhelmed by paperwork and blindsided by takeover interest. He found himself beholden to his shareholders in ways he had never imagined, ruining personal relationships along the way. Through it all, Merrill clung stubbornly to the belief that since an IPO had worked for Google and Amazon, it should work for an individual too. He isn’t alone in this theory. Upstart.com, a company founded last year by Google exec David Girouard, offers a bit of capital in exchange for a cut of a college graduate’s future earnings. Other startups, like Pave and Thrust Fund, solicit investments in entrepreneurs for a return on their future ventures. (And of course David Bowie, European soccer players, and a minor-league baseball player have all sold shares of their earnings.) But Merrill has taken it further. He felt that more people would invest in him if they knew they were going to have a say over which projects he pursued. To enable this oversight, he paid a developer 500 shares and $500 to build a website that allowed shareholders to vote on his priorities and projects. The developer also coded a trading platform so Merrill’s stock could be bought and sold after the IPO. Anybody could now get a piece of him; you just had to click a Buy button on KmikeyM.com (the site is an abbreviation of Merrill’s full name: Kenneth Michael Merrill). Initially, shareholders voted on a variety of small projects. On February 15, 2008, for example, Merrill asked whether he should make a short video to market shares in himself. His investors voted that idea down, but a month later they approved an investment of $79.63 in a Rwandan chicken farmer. “I figured they’d make good decisions for me, since they had money on the line and wanted to see their investment appreciate.” The corporate oversight got more complicated in August 2008, when Merrill moved in with shareholder number seven: his girlfriend, Willow McCormick. Though they’d been dating for two and a half years and generally got along great, it wasn’t an easy decision for Merrill. McCormick taught grade school, and her idea of fun was playing Boggle at night with her friends. Merrill couldn’t stand Boggle. He was more interested in things like planning the whiskey-drinking group with his buddies. “His ideal relationship was one in which we lived harmoniously independent lives, and I think mine was a little more traditional,” McCormick says. Steve Schroeder, one of Merrill’s oldest friends, was upset that he hadn’t been consulted about the move-in. He may not have put much money in—just $139 for 66 shares—but that still gave him 4.8 percent of the voting stock. McCormick had only 19 shares, so technically Schroeder’s opinion should have carried approximately three times as much weight. If Merrill was now going to spend more time at home with his girlfriend, he would have less time to pursue activities that were priorities to shareholders with larger stakes. Merrill hadn’t intended to give shareholders control over his private life, but he realized that Schroeder had a point. “I figured they’d make good decisions for me, since they had money on the line and wanted to see their investment appreciate,” Merrill says. McCormick didn’t see it that way. Merrill started spending more time with Schroeder and his other shareholder friends, who jointly controlled a large block of stock. To McCormick, it seemed like a corporate takeover of her boyfriend and gave new resonance to the famous book about corporate buyouts, Barbarians at the Gate. “There were a ­couple of friends I did have some issues with, and they had a big say in how Mike spent his time,” McCormick says. But when she tried to talk to Merrill about it, he would offer what he said was a ­simple solution: “Buy more shares.” McCormick seethed. “I didn’t want to play into it,” she says. “I felt like my status as a girlfriend earned me his ear, like the way a first lady has the president’s ear.” When they started dating, McCormick and Merrill had a series of conversations about whether Merrill should get a vasectomy. At first they agreed that it was a good idea; neither thought they wanted kids. But now that she was a ­little older, McCormick wasn’t so sure. “I started to have stirrings,” she says. “I was feeling less certain.” Then, on August 10, 2008, Merrill asked the shareholders to decide whether he should get a vasectomy. He didn’t tell McCormick that he was going to bring them in on it. As the CEO of himself, he simply wrote a note to his shareholders explaining his position on the subject. “Children are a financial drain,” Merrill wrote. “The time investment of raising a child is immense. The responsibility is epic. The impact on future projects would be drastic. In light of these factors, it makes sense to reduce the chances to nearly zero and have a vasectomy performed.” McCormick was furious and embarrassed. “He made our personal life public without consulting me,” she says. It got worse when the ballots came in. Schroeder voted yes. Josh Berezin, a grade-school friend and political consultant, voted yes. To McCormick, it wasn’t just a referendum on the vasectomy. It was also a referendum on whether Merrill’s friends thought he should have kids with her. It was, she says, “a judgment on me.” It wouldn’t be the first time that outside investors tore apart a close relationship among a company’s principals. For recent ­examples, look no further than Eduardo Saverin, Mark Zuckerberg’s onetime pal who was pushed out of the company he helped found. And like Saverin, McCormick decided to fight back.