How about some VC funding for you?
When it comes to raising capital for a new venture entrepreneurs have a tough job selling their (mostly unproven) idea to Angels, crowd, venture capitalists and banks. Every good investor worth his salt would evaluate the potential of the idea, current market scenario and a plethora of other factors before parting with their money. Notice anything missing? Nobody bats an eyelid about the poor guy building the company (unless he/she comes from IITs/IIMs). So instead of selling a product why not sell one self. Or at least that is the idea behind new companies like Upstart and Pave who allow wealthy donors to invest in people rather than their ideas.
So how is this any better?
Well the most important difference is these platforms allow not only entrepreneurs to raise funds to fund their ventures but also helps students to pay their tuition fees while they are still in college in exchange for a certain percentage of their future income. The applicants are not charged during the time where they are not yet employed. This is a big deal at least in US where tuition fees are quite high and leave students in a huge debt by the time they get out of campus. The interest rate to be repaid is calculated based on the university, the course enrolled for, the student’s GPA and other standardized test results. Also in case of Upstart the maximum amount to be repaid is capped at five times the loan amount, so don’t worry about emptying your bank account if you happen to build the next Facebook or Twitter! All that students need to do is create a profile and pitch themselves like a Kickstarter project and hope to get sponsored.
Can this model be applied in India?
- Sure enough, the main advantage being the cost of education in India is way less than what it is in the US, so an investor need not have a huge bank balance to get going.
- We Indians take college education very seriously than the US counterparts and for the right reasons. A person who has only completed high school in US may not be judged as much as their Indian counterparts because in India a college education is not only important for a job interview but also for a marriage interview J
- There are a lot of students who do not complete their college education despite having a good score in the board exams because their families may not be able to support their education or they may not be able to secure bank loans.
What are the problems that this model faces?
- In India there are many banks that provide education loans at subsidized interest rates so unless donors are able to match that or provide some other assistance such as helping students find a job faster (in turn helping them repay the loans) there may not be much takers.
- The algorithm used to determine a candidate’s ‘worthiness’ and expected risk in loan repayment will tend to favor the students with higher grades or those from top institutions who may not even require such assistance as much as first time graduate coming from a low-income background. Some ‘desi fine-tuning’ should be able to address this problem.
- While investors in India are quite vary to invest in off-beat projects, investing in a person based on score generated by an algorithm without knowing zilch might sound preposterous to many!
So tell us what you think of this model of investing in humans and not MVPs and PPTs? Should companies take the plunge and sponsor deserving students to close the perennial talent gap? And if did would it be akin to bonded labor?
Editor’s Note: The article originally appeared here.