A new organization being piloted at the Rhode Island School of Design this fall will help recent graduates raise capital in exchange for a percentage of their future income. Through the program, called Upstart, graduates can put the money towards starting a business, paying off student loans or other goals that will help build their career.
Upstart utilizes a crowd-funding format in which users build online profiles, and backers can fund the users of their choice in increments of $1,000. The users then share up to 14.99 percent of their income with their backers for the subsequent 10 years. They can defer payments in years where they make $30,000 or less, or they can pay extra in years when they do well, according to Upstart's website.
The organization was founded by a team of former Google employees who are familiar with the struggles students face with debt after graduation, said Jeff Keltner, founding team member of Upstart. "We believed it's bad for the country and economy if people were forced into jobs that they didn't love based on financial pressure."
"With traditional debt financing, you take out a loan, and it doesn't matter if you're doing well or not - payments are the same and there's no sharing of risk," Keltner said. "Most early stage businesses finance themselves with equity, and we wanted to bring a sense of equity to personal financing."
The average 2010 college graduate carried $25,250 in student loan debt. This often forces recent graduates to opt for more financially-stable jobs rather than pursue their dreams, said Greg Victory, director of career services at RISD.
Upstart is also unique because backers serve not only as investors but also as mentors for the graduates.
Backers tend to find that it is in their "best interest" to mentor the graduates because they are the "future of this country," Victory said. "It's not a donation, and while many expect a return, a lot of them don't."
Upstart's pilot program is also being launched at Arizona State University, Dartmouth, University of Michigan and University of Washington, according to the website. RISD is the sole art school participating in the pilot program.
"It's important for us to be at a place like RISD where there's a different student than at other universities," Keltner said. "We wanted to have diversity in the early days to make it clear that this wasn't targeted to one kind of student, but useful to a wide array of students with different interests after school."
The freedom Upstart gives students after graduation fits RISD's model of "artrepreneurship" and the "innovative spirit" on which it was founded, Victory said.
Matt Kulp, who graduated from RISD in 2012, majored in furniture design and is the first RISD student to participate in the program. He is currently building an Upstart profile and going through the review process. Kulp said he aims to apply the ideals of European design tradition to North American home products.
Potential Upstart users set their own fundraising goals, according to the website. If Kulp's profile is approved by the organization, and if he raises enough money in the allotted amount of time, he will officially become an upstart.
"Without Upstart, I'd have to defer my ambitions for a few years," Kulp said. "I would be looking for a job at a big tech company because I would need some sort of secure income to get my debt out of the way, and that's not something I'd want to do."
By investing directly in graduates, Upstart offers a freedom after graduation that is becoming increasingly rare. "An artist can put a lot of time into applying for funding, but grants are very competitive," Kulp said. "What's cool about Upstart is that people who give money can give very directly to a certain cause instead of having no control over where it goes."
There are no set timelines for the expansion of Upstart, but the organization plans to spread to other schools based on the amount of interest from potential upstarts and backers.
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