So many young entrepreneurs are stalling dreams of starting a business in favor of taking a steady, stable job to make ends meet. We’ve all seen the numbers, but as a painful reminder: the unemployment rate in the US for people between 18 and 29 is 12 percent; two out of every three college students takes out an average of $23,000 in college loans; and the average millennial shoulders $12,700 in credit-card and other kinds of debt. We’ve been called “Generation Screwed” and more of us are moving back home, But, with the help of a new startup there might still be a way to pursue our career aspirations without having to resort to plan B to pay the bills — the answer lies in crowdfunding.
What if there was a Kickstarter for people?
Former Google Executive Dave Girouard starting asking that question after meeting young people, many whom he interviewed for jobs at Google, “who were about to graduate college and had great ideas for startups or research projects…and most of them said, but I’m going with Plan B, which was some kind of job at a big company.” What this means is that a lot of talented people are settling for jobs they don’t want, and others cannot find work at all in this highly saturated market.
Girouard has developed a creative solution to this problem and wants to fund fresh talent through his new company, Upstart.
With Upstart, students can raise personal funding in exchange for a share of their future income. The money raised could go towards anything from launching a startup, working at a social enterprise or becoming an artist. Currently available at five universities (Arizona State, Dartmouth, University of Michigan, University of Washington, and Rhode Island School of Design), students can create a profile with their achievements and goals, and indicate how much money they want to raise through Upstart’s social network. With this data, along with the student’s GPA, Upstart calculates how much of their income they’ll need to share with investors in order to raise the funding they are requesting.
Prospective investors can then browse through the “upstarts” and choose who they want to back for however much they choose, in increments of $1,000. Upstart’s current pilot program with the 5 selected universities has 13 backers including Andy Palmer, a serial database entrepreneur and Frank Moss, professor at the MIT Media Lab and managing partner of Strategic Software Ventures.
In return for the loan that might range from $1,000 to $100,000 or even more, Upstarts commit up to 7% of their future income to pay back investors over the course of as many as 15 years. Beyond the financial capital, there is also the valuable element of mentorship that these investors can provide — helping students to develop and implement their ideas. As Venture Beat suggests, “The hope is that the extra cash will give 20-somethings a bit of breathing room and encourage them to take professional risks.”
Taking professional risks isn’t on the radar for most 20-somethings trying to navigate the competitive job market, but according to research from Kauffman Foundation, 54% of recent college grads say they want to start their own company. For every millennial that takes a corporate job instead of pursuing their own venture, that’s fewer jobs created for other millennials. Girouard says that “Upstart-backed graduates could generate as many as 1 million new jobs over the next decade, even if many may never see their dreams fulfilled.”
This comes at a time when the wealth gap between younger and older Americans now stands as the widest on record. According to the Pew Research Center, the median net worth of households headed by someone 65 or older is $170,494, while the median net worth for younger-age households is $3,662. A key reason for this, notes the Daily Beast, is that “indebted parents are not leaving their jobs, forcing younger people to put careers on hold.” Since 2008 the percentage of the workforce under 25 has dropped 13.2 percent, while that of people over 55 has risen by 7.6 percent (according to the Bureau of Labor Statistics) ! If young people had the money they need to live on, they might just make post-grad decisions based on their entrepreneurial interests rather than their bank accounts.
TechCrunch’s Anthony Ha’s raises an interesting question in response to Upstart’s model. He asks:
Do people really need more incentive to become entrepreneurs — if anything, I’m hearing complaints from investors and entrepreneurs that it’s too easy to start a company nowadays, leading to startups that aren’t driven by big ideas.
Yes it’s true that the world doesn’t need a dozen mobile apps that essentially do the same thing, but giving students from different parts of the country (outside Silicon Valley) the opportunity to build something is extremely valuable. While an early idea might be a mobile app, with some direction that could easily morph into something else. Of course it won’t work out for everyone, says Girouard, but “will we cause more people to take risks? Yes,” he said. “Will some fail? Yes. But over time, we think it is a good thing.”
Still, another point to raise is the fact that joining the Upstart network is limited to students enrolled in universities. Getting to college isn’t easy nowadays, and although Upstart will be broadening its reach beyond the tech Meccas of the country, and encouraging non-tech business growth as well, there are still young people out there whose opportunities are severely limited without access to capital — both financial and social. These are questions worth thinking about if Upstart really does become the Kickstarter for people.
In the four months since it launched, Upstart has backed seven recent college graduates. The goal is to fund 70 more this fall, and then eventually turn itself into a broad nationwide business. It’s business tagline reads: “Upstart: The Startup is You” reflecting an interesting trend in recent years of applying the language of startups (bootstrapping, beta, launch, etc.) to frame individual growth and personal development. In the recent book “The Startup of You” authors Ben Casnocha and LinkedIn co-founder Reid Hoffman introduce the idea of “permanent beta”:
With Upstart, investing in personal growth could make the difference between moving back home and starting a business that can provide other college grads with opportunities they wouldn’t get standing in line for jobs that don’t exist. As the Upstart team notes, in the last couple of decades, 65% of job growth has come from businesses with less than 500 employees. That job growth depends on investing in the personal growth of talented young people, and Upstart might just be the perfect solution.
- Money, Mentoring and a Claim on the Payoff (bits.blogs.nytimes.com)
- Former Google Exec Dave Girouard Starts a “Kickstarter for Young People” (allthingsdigital.com)
- Upstart Offers Dartmouth, Michigan Entrepreneurs Startup Funding (bloomberg.com)
- Former Google Executive Dave Girouard Launches Crowdfunding Service Upstart, Raises $1.75M (techcrunch.com)