What is a personal holding company?
There's been a lot of recent buzz on Twitter about Personal Holding Companies (PHCs). I've personally written about how the primary goal for me in 2023 is to lay the foundations for my own Personal Holding Company, Positive Sum Labs.
There's been a lot of recent buzz on Twitter about Personal Holding Companies (PHCs). I've personally written about how the primary goal for me in 2023 is to lay the foundations for my own Personal Holding Company, Positive Sum Labs. For those unfamiliar with the idea of personal holding companies, I wanted to write a primer post on it.
What is a personal holding company?
A personal holding company is a company whose primary purpose is to hold other companies, operated by an individual. In other words: one entrepreneur, multiple businesses.
Why start a personal holding company?
Traditionally, there have been multiple options for people who wanted to start businesses:
- Bootstrap the business: if you have low starting costs, you can begin with a small initial budget, and re-invest profit back into the business to grow it.
- Raise venture capital: if you're working on a company that has a reasonable shot at becoming a unicorn (a billion+ dollar business), then you might consider raising investment from VCs, who'll typically encourage you to grow rapidly and spend quickly
A personal holding company gives you greater flexibility; you can create a combination of cashflow businesses and moonshot businesses. You can enter into sectors and industries that fulfil your own interests. You can learn about and explore new asset classes, such as real estate, and you can use profits to buy or build new businesses to grow.
Perhaps more importantly, you can be completely in control of the way you work. Prefer to work with a small team and be remote? You can, as you haven't taken investment. Prefer to work across a variety of projects at the same time, and use leverage to manage them all? You can
What are different models of starting a personal holding company?
While the idea of a personal holding company has been around for quite a while, there has been a resurgence of interest in them, as people realise the incredible leverage you can build over time by building digital products and working online.
The approach you take initially be largely be framed by the amount of starting capital you have at your disposal.
For me, I am operating with a very small amount of starting capital, so I'm looking at experimenting with two approaches:
Creator-Driven Personal Holding Companies
Michael Karnjanaprakorn outlines one potential approach to building a PHC: following the creator playbook:
The advantage of this approach is that it requires little/no upfront cost. You can upload to YouTube today, and that begins the journey of building leverage in the form of media.
This is one experiment I'm running, with the launch of my YouTube channel, as well as the writing on my blog here.
Building cash-flowing tech companies
The majority of my professional experience is in building digital products - I taught myself how to code from a young age, and have been building digital products online, for myself or for other companies, for around 5 years now. The benefit of being able to build and launch these products end to end myself is that I'm able to reduce the cost of launching a digital product significantly, putting my time in, instead of initial starting capital.
I'll be experimenting with both of these strategies (they're not mutually exclusive) and monitoring the success rate with each to determine which direction I double down on.
What are some examples of personal holding companies?
There are already some people building Personal Holding Companies online. Some examples include:
If you're interested in following my journey building a PHC, you can subscribe to my newsletter to receive my weekly Build Log series, outlining the whole process.