

Ex-Google executive's new venture helps students avoid corporate life - bhavin
http://www.reuters.com/article/2012/08/08/net-us-upstart-launch-idUSBRE8770OP20120808

======
DenisM
_The backers - acquaintances, alumni or other accredited investors - provide
funding that will typically range between $20,000 and $50,000 in exchange for
an agreed share of the graduate's future income over a 10-year period._

Well, I am skeptical, but also glad someone decided to try it out - the
chances are slim, but this is so unusual some unexpected good may yet come out
of it.

------
efnx
At first this sounds a little like indentured servitude. That too, solved some
problems of its time. A little weird though, the concept.

------
jetti
"The backers - acquaintances, alumni or other accredited investors - provide
funding that will typically range between $20,000 and $50,000 in exchange for
an agreed share of the graduate's future income over a 10-year period. Upstart
determines the portion of future annual income to be shared based on the total
sum raised and the person's qualifications, including academic record and
field of study."

I'm failing to see how this is any different than a loan, with the exception
you can pay a loan back early AND you know how much you owe the lender. This
just seems like for $100k (based on the 5 backers at the minimum $20k that is
quoted above) you could be paying many times that for success that is
unrelated to the money that you received.

~~~
chimi
Risk and reward. No bank is going to loan a company at this stage money and
there's no guarantee the investors who are providing this money will get any
return at all and there is no collateral, so the founders should pay more for
the money.

~~~
jetti
See the wording for me makes it seem that the backers would get a percentage
of ANY income that the person makes, regardless if it had to do with the
project funded or not, for 10 years.

~~~
lsc
yeah, that's also how I read it; but I just see that as 'paying MORE' than you
would on a regular loan.

Of course... depending on how they do the percentage, it could be, you know, a
good problem to have; I mean, if you end up paying a percentage of a very
large income, presumably those dollars have a lower marginal value to you than
when you were just getting started. And wealthy contacts, especially wealthy
contacts that have an interest in seeing you do well are an incredibly
valuable thing to have.

And it really couldn't be too crushing on the low end, as it's not like
student loans, these would be subject to bankruptcy.

I mean, it seems like a reasonable idea; at least, more reasonable than most
student loans.

------
shalmanese
There's an interesting Quora discussion on the legality, logistics and
mechanisms behind "human shares": <http://www.quora.com/Can-you-buy-human-
shares>

------
simonbrown
Since when were college graduates "students"?

------
tim_sw
Are the "upstarts" personally liable for the funding if they can't pay it
back?

~~~
simonbrown
No.

> Girouard noted the funding is different than a loan because there is no
> guarantee of repayment.

~~~
jetti
To be fair, there is no guarantee of a typical loan either.

~~~
lsc
the typical loan given to a person of that age in America is... different from
the sort of loan you or I might take out. It is guaranteed both by the
government and the debtor. You can't get out of American student loans through
bankruptcy.

Personally, I think this is incredibly destructive; Banks will loan money as
'student loans' to people they'd never think of giving similarly sized regular
loans. People that obviously have little chance of paying the loan back.

------
eli_gottlieb
_Girouard noted the funding is different than a loan because there is no
guarantee of repayment._

That's how loans are supposed to work.

