paying them a subscription of $10 to $200 per year. (Unlike Upstart investors, though, fans on Ziibra don’t get an equity stake in the artists they back—instead they get exclusive access to prereleases. Mor calls it “Kickstarter for careers.”)
That’s exactly the kind of thing Girouard hopes the upstarts will try with the money they raise, which averages around $50,000. “If they are an entrepreneur and they need living expenses to get off the ground, which is one of the primary use cases, then that is a good amount for a year, assuming they don’t do anything too crazy,” Girouard says. The other primary use case: retiring student debt.
Girouard says the idea for Upstart first hit him when he was still at Google, running the team of more than 1,000 people behind Google Apps (i.e., the enterprise versions of tools like Gmail, Calendar, Drive, Docs, Sheets, and Slides). Google gets so many job applications—about 75,000 arrived in one record week in 2011—that it has had to develop software algorithms for predicting whether applicants will be a good fit inside the famously geeky, data-driven company.
“We can look at a 25-year-old and very quickly assess whether he or she would be successful at Google,” Girouard says. “My whole thesis was, if you could use the same algorithms to predict whether he or she would be successful beyond that, in the business world, that would be pretty useful.”
At first, Giroaurd wasn’t sure how to turn that insight into a business. Once you’d collected applicants’ resumés, academic transcripts, and credit scores, and ranked them according to their future success, how would you assign a value to that potential—and how would you create a marketplace where people starting their careers could actually raise money?
Girouard’s first idea was to build an auction-style site where applicants would build personal profiles and let investors decide how much they were worth. Then he met Paul Gu, who had stopped out of Yale’s computer science and economics departments to join the inaugural group of Thiel Fellows in 2011. After Gu’s project to build a local-commerce startup had petered out, he had begun playing around with regression models for predicting people’s income, with the idea of starting some kind of investment vehicle. “He said he wanted to create a new financial instrument that was more like equity than debt, based on what somebody earns,” Girouard recalls. “I said, ‘Wow, come out and join me.’”
He did, and Gu’s regression models grew into Upstart’s pricing engine. The software looks at the data submitted by approved candidates (the program accepts less than 10 percent of all applicants, Girouard says) and calculates how much they can raise for each percentage point of their future income. It’s then up to the applicants how much of their income to commit.
On the high end, for example, Upstart’s engine might look at a student graduating from a top business school and decide that he or she is worth $20,000 per 1 percent. If that person decided to share 7 percent of their future income—the maximum amount—then they’d be allowed to raise up to $140,000 through Upstart. The smallest Upstart packages are for $10,000 (below that, it’s not worth the management expense, Girouard says) and the largest so far was for $170,000.
The next part of the process is reminiscent of Kickstarter and other crowdfunding platforms. Applicants post their profiles on Upstart’s site, often including videos and other supporting materials. Potential backers can browse the profiles and decide whom to fund, and for how much. If applicants hit their funding goal, they get the cash and become official upstarts.
The first payments are due almost immediately—starting the January after they get the money—and continue for 10 years. Upstarts who earn less than $30,000 in a given year don’t have to pay, but that year gets tacked on to the other end of their term, for a maximum of five extra years.
There are provisions that spare upstarts from owing extravagant amounts of money, should they hit it truly big. For the first group of applicants brought into the program in 2012, payments were capped at
