By now, you’ve probably heard of group investing, cloud funding, crowd funding, and any of the other myriad of funding options that let individuals chip in small or large amounts of money to help a startup idea or project get off the ground and rolling. Kickstarter and sites like it have revolutionized how many new ideas are being funded for development.
Up until now, though, these have all focused on the ideas, not the people behind them. This is fine, since most of innovation runs on ideas, but ideas come from people and often, those people can’t flesh out an idea without time to concentrate on it and get it right. That’s where the appropriately-named Upstart comes from.
Instead of funding ideas, the crowd funding site lets people invest in other people. Perhaps that promising college student has a great idea that could, eventually, go somewhere, but he needs to finish school first – and may not be able to do so due to lack of money. Upstart him so he can get ahead.
Or maybe its a recent graduate who is working a dead-end job and has all the credentials to really be in a position of creative importance, but doesn’t have the connections or resources to make that happen. Upstart her and she’ll have the boost she needs to quit that dead job and find something more suitable to a career that matters.
The other side of Upstart is this: those who receive the funding must pay back through a percentage of income. These Upstarts pay back their financial backers on a monthly basis for 10 years, based on their tax return reporting for income at a fixed fraction. The maximum interest rate is 14.99% annually, making Upstart more of a crowd-funded loan program. This, in turn, gives incentive to the Upstart to do something with their funding and get somewhere.
Upstart was started by former Google, PayPal and Yahoo executives as a way to boost recent graduates through their early career stages, helping them find the right track and get there. CEO Dave Girouard, former President of Google Enterprise, says the idea for Upstart came after his own career walked through a “blessed ladder of ascension” that he saw many others never reach.
Students or recent graduates create LinkedIn-style profile pages on Upstart and blog or otherwise share experiences or ideas, academic pursuits, etc. Backers can then provide funding and/or mentorship to help these motivated kids get off the ground and into a career ladder or business startup. The site incorporates a learning engine that helps match backers with upstarts by finding those with experience or background in specific industries or fields and newbies looking to get into them.
The basic idea is to give these 20-somethings a small cash infusion to allow breathing room and a fallback to encourage them to take more risks professionally, which often leads to better returns. Many grads are faced with taking a boring, but steady and cushioned job or going into the dynamic, but unstable startup arena (either as an employee or founder).
‘The payment is designed to be friendlier than a student loan and accommodate life events, even unemployment,’ said Girouard.-The company makes its money by taking a cut of the transaction, which isn’t dissimilar to any other crowdfunding site.