Upstart to finance business plans
By Angie Cho, The Dartmouth Staff
Published on Tuesday, August 21, 2012
Upstart, a company founded earlier this year by former Google Inc. executive David Girouard ’88 Th’89, will make its platform available at Dartmouth this fall to help students overcome the restraints of student loans and raise capital for their entrepreneurial dreams, according to Nathan Sharp Tu’12, who was part of the pilot group of students.
Students involved with Upstart can create a profile with their achievements, goals and a desired funding amount ranging from $10,000 to $50,000, according to Bloomberg Businessweek. In return, students pledge one to seven percent of their income over a 10-year period, with no repayment in years when income is less than $30,000.
“This way you never have to pay back the principal,” Sharp said. “Student financing consists of taking out a loan where you owe back the principal and interest over time, and it helps to pay it back as soon as possible.”
The loan does not come directly from Upstart itself, but through “backers” who are willing to invest in the student, according to Sharp. These backers are found through “affinity groups” based on hometown, previous jobs and alma mater, and can commit funds to students in increments of $1,000.
“The backers are often coming from careers in which you’re entering, so they’re not just financial backers but also mentors,” Sharp said.
Upstart facilitates connections between backers and students and takes three percent of the transaction from the backer to the student and 1.5 percent of the transaction from the student to the backer, according to Upstart Product Manager Paul Gu.
Upstart began in March when founder Girouard raised money for the company, and he began forming its team in April, according to Gu.
“I joined because I think that we’re tackling a really big problem that impacts just about everyone I know,” Gu said. “I was recently a student at Yale University, where a lot of my classmates felt a lot of pressure to go into finance or some career that’s stable and has a relatively high income. The option of going into something you’re really passionate about is often too big of a financial risk that a young person is able to take on.”
Gu said he believes that Upstart has a “creative and intellectually interesting solution” for choices that have “huge implications for society in terms of what people put their minds and energy toward.”
The pilot program was originally launched with seven students to gauge initial interest and work out logistics, according to Sharp.
The Upstart team learned from the pilot that the company would likely draw significant interest from students across all disciplines at both the graduate and undergraduate level, according to Gu.
“Once the whole process was explained, the message of opportunity came through,” Gu said. “It’s not too financially scary or too complex.”
Sharp, a pilot graduate, received $50,000 from backers and used the money for his loans and a stipend to live on while he develops his business idea, ClutchRetail.
Sharp and his partner, Greg Kimball Tu’12, are developing an online marketplace that allows shoppers to place offers on any products across the Internet. These offers can then be fulfilled by any merchant carrying those products, according to Sharp.
“As an entrepreneur, I like that [Upstart] gives an up-front amount,” Sharp said. “Also, the company has a real interest in my success because if I do poorly in life, they lose money, so they have every incentive to give you as much as you need to succeed.”
The team plans to launch the platform this fall for students and recent graduates of Arizona State University, Dartmouth, Rhode Island School of Design, University of Michigan and University of Washington, according to Bloomberg Businessweek.
Gu said he hopes to use on-campus events to target individual students this fall alongside online marketing.
Although Girouard is an alumnus of the College, Dartmouth was chosen for its alumni connections, support from the College and its recent focus on spreading entrepreneurship, according to Gu.
Sharp, whose business is still in the development phase, believes this platform can revolutionize how student debt is structured.
“It’s a really cool model,” Sharp said. “I’ve never seen support like this from the government or any university.”
The first on-campus Upstart information session at the College will take place on Sept. 25, according to the Upstart website.