Upstart: How the Crowd Helps Build It

Upstart, a crowdfunding platform for student new businesses, is just in its beta stages of testing with a few select pilot schools, including Arizona State University, Dartmouth College, Rhode Island School of Design, University of Michigan and University of Washington, but already it’s receiving a lot of attention.

Why do you think that is?

Well, it could be that the company is being launched by a past Google executive: Dave Girouard, former VP of apps. In fact, almost the whole team is former Googlers.

It could be that the idea is, generally, a pretty nice one that everyone can get behind: graduates in any field can raise capital for a small business in exchange for a portion of their income as repayment over the next ten years.

It could be that the pilot schools cast an expansive net across the country and offer potential opportunities to a wide variety of students.

But I suspect it has to do with another factor, as well, and that is the pending election, which has cast America’s entrepreneurial future as a damsel in distress that needs to be rescued, hinged for or against the “we built it” rallying cry.

Whatever side of the sentiment you land on, the truth is that entrepreneurs require different sources of support in the early stages, even as they make personal sacrifices to get a business up, running, and profitable. Upstart is just another tool that young people can use as they launch themselves from the academic world into the working world.

What I like about Upstart is that it encourages students to think about the return on their investment in practical terms when they build their business profiles (work that they would have to do on a formal business plan as well). Based on that information, students can practically decide how much to ask for and how to repay it. Other checks that help minimize the risk to upstarts and backers are:

-All profiles have to be approved to go live.
-Investors can only offer support in increments up to $1,000 (minimizing the risk).
-It’s not just monetary support, backers can offer to be mentors or share other resources.
-Upstart funds can be used for a variety of purposes, including business building, loan repayment, craft focus, or pursuing further specialized education.
-Repayments are capped at 14.99% annual return to backers and are deferred in years where an upstart’s earning power is less than $30,000 with another year added to the repayment period.

These checks and balances, I think, help backers and upstarts make sound decisions at a time in their life where risk-taking is recommended, but not always profitable.

It will be interesting to see what comes of Upstart’s pilot program. What do you think we will see? How else do we see the crowd helping America’s entrepreneurs young and old?

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