M'Learned Web: What are Internet millionaires like?

Internet millionaires might not be what you'd expect: For one thing, where are all the paintings? Robin Bynoe explores

They say that art is where money goes when it has nowhere else to go. Consequently, art dealers have always tended to be barometers of the amount of spare money swilling around in the economy. This time, it's different. Most of the money is software and Internet money, the art dealers will tell you, and the Internet millionaires just aren't like the traditional sort.

It's a monstrous generalisation, but interesting, like most generalisations.

For the art dealers, the implications are simple: the new millionaires don't like paintings. They may like images, like Bill Gates, who buys them in cartloads and puts them in his database, but they don't like the texture and funkiness of a painted surface: "Probably something to do with staring at flat screens all day". It goes further than that, though.

Internet millionaires aren't like the old sort. At any rate the ones who stare at flat screens all day aren't; the angels who put risk capital into start-up software companies behave just like those who invest in any other type of business.

What are Internet millionaires like?

They are, famously, young. Becoming fabulously wealthy in your mid-twenties is more like being a rock star than a captain of industry, even if the form the wealth takes, shares whose value suddenly spirals upwards on an IPO or a take-over, is the sort familiar on the stock exchange.

Like rock stars they tend to stick to what they do best. For the old-style entrepreneur, everything can be resolved into a balance sheet, and the quest for the ideal balance sheet leads in real life to a restless shuffling of disparate businesses, as companies are acquired, rationalised and bought out. The new millionaires tend to put their money back into more of the same, or else, if they get bored, take all their money out and go and do something completely different.

Generalising from limited experience suggests that they are more generous than the run of the wealthy.

Crucially, they go it alone. Captains of industries are surrounded by advisors: bankers, accountants and lawyers. So are rock musicians, although their advisors' ties are more colourful. In each case the content may be innovative but the structure and the expectations are well-trodden paths, and everyone knows what expertise is required and where to get it. The new millionaires are successful precisely because they started doing something no one had thought of at all. They tend not to come from conventional business backgrounds and they may have picked up accountants or solicitors who were friends or did the conveyancing on their parental home.

Furthermore, although things are changing, the software industry is traditionally suspicious of lawyers and documentation. Again there is a contrast with rock music. Both industries depend legally on copyright and other invisible rights that tend to slip through your fingers if you don't write things down. The music business is document-driven. There's an industry standard deal to cover most eventualities. That's still far from the case with software.

And how do they look after their money?

Where there is sudden wealth there is the Inland Revenue. Their interest in large sums of money exceeds even that of accountants, lawyers and bankers. With the captains of industry and the rock stars there are well-tried courses of action and plentiful advice designed to ensure that the Revenue gets as little of the wealth as legally possible. In contrast, the new millionaires are ill-prepared. Many of them pay up manfully, which upsets the people who wish they were their accountants, lawyers and bankers, and themselves even more.

There are things that can be done. Some, like avoiding estate duty, are of relatively little interest when you are twenty-five. Others involve strings of offshore companies with directors in Sark, who turn up in due course in exposes in the Sunday Times. This may be a worthwhile gamble if you are making your last magnificent throw at the age of seventy, but it will undoubtedly earn you a figurative red sticker in the Revenue's database, and that is a burden to carry through life if you are only twenty-five.

But there are things that can be done. There is even investing in art. After all, the property millionaires of the 80s felt a duty to buy paintings whether they liked them or not.

However innovative you are, there are some rules that should not be broken lightly.

Robin Bynoe is a partner of the Charles Russel law firm in London. If you want to respond to this article tell the mailroom.