Upstart “provides mentorship and some financial security so that a student can follow an entrepreneurial path.”
For Vincent Lucero, Upstart came along at the right time. His gaming company, Soaring Squirrels, was just lifting off in the spring and he was looking for money.
A friend directed the recent University of Washington graduate to Upstart, which offers a platform for multiple investors to drop relatively small investments into the accounts of budding entrepreneurs — a phenomenon called crowdfunding.
Lucero was part of a pilot project for Upstart, itself a startup only 4 months old. The Palo Alto, Calif.-based company officially launched on Aug. 8 and, starting in September, plans to expand its service to students at five universities, including UW.
The money Lucero received was not for his company, however. It was an investment in him. Rather than funding startups, Upstart investors fund individuals.
“[Upstart] provides mentorship and some financial security so that a student can follow an entrepreneurial path,” said Matt O’Donnell, professor of bioengineering at UW, by eMail.
Besides providing financial support of $25,000, Upstart linked Lucero with tech professionals to guide his entrepreneurial pursuits. One was Russel Simmons, co-founder of Yelp.
Simmons was one who invested in Lucero, so Upstart organized a lunch between the budding entrepreneur and the seasoned high-tech pro.
“He ran me through what made Yelp successful,” Lucero said.
The funds Lucero received were not a loan. Upstart founder Dave Girouard says the financing is more “equity-like.”
Recipients repay the investors a maximum of 7 percent of their income for up to 15 years after the deal is made. They pay nothing in years when their income is less than $30,000 a year.
Investors’ returns are capped at 15 percent annually, and recipients can buy out their payment obligations at any date.
Ed Lazowska, who holds the Bill & Melinda Gates Chair in Computer Science & Engineering at UW, says this financing model will give students an incentive to take more risks and look at options away from the region’s tech giants.