Article in Startup, Tech Industry categories.

Startup Starter: How Upstart is Going Beyond Crowdsourcing

Starting is always the toughest part. Not to be overly cliché, but to quote Confucius,  "A journey of a thousand miles begins with a single…

Starting is always the toughest part. Not to be overly cliché, but to quote Confucius,  "A journey of a thousand miles begins with a single step." Before startups become startups, ideas need to be solidified into feasible business models—including projected revenues and profits. Yet, with many startups failing to reach maturity, it is tough for newcomers to amass sufficient funds when many investors are largely skeptical of future return on investments.

This is where Upstart comes in. A startup that helps recent college graduates from top colleges launch their own startup, Upstart provides an opportunity that many would forego given the economic state.

Dave Girouard, ex-enterprise unit president at Google and founder of Upstart, quickly recognized that while it was easy for computer science college grads to find a job with technology companies like Google, many of the more creative-types were failing to pursue their entrepreneurial ideas after college because of the financial insecurity associated with such ventures. Upstart helps you raise money, drawing from a number of company-specific backers, in exchange for a modest percent share of your income for 10 years. The financial support can be used in a variety of ways, from paying student loans to immediately building your business—making your product, testing your market, and building your team.

Venture Capital Firm, Angels, Kickstarters or All of the Above

The crowdsourcing market has grown from $33 million to $128 million over the last two years and is only expected to keep growing. Platforms like Kickstarter have become de rigueur for anyone trying to get a project off the ground. Kickstarter, however, does not allow you to invest in a project or startup. You can only receive a reward, which can range from signed goods to dinner with the author. Unlike Kickstarter, systems like angel investors—affluent startup investors that provide capital in exchange for convertible debt or ownership equity—and venture capitalists have formed firms that regularly fund startups during their seed-stage. While these investors provide hefty sums, not many startups are lucky enough to be selected for funding.

Upstart, in a class of its own, is providing a channel for young people to get into entrepreneurship by giving them a formula to follow. Many startup founders often lack knowledge of the different steps that go into making a startup successful. Upstart, beyond funding, also provides mentorship to its funded projects. Investors are not passive, but serve as guides throughout the development of a startup, creating a personalized relationship with mentees that allow for a more fruitful startup evolution. The ethos of the process is that investors are investing on the person rather than the startup—the idea being that investors have enough resources to support a potential loss and that the experience of serving as a mentor is a return in itself.

Inaugural Class Profiles

Upstart founder Girouard knew from the project’s inception that he wanted to appeal to applicants from all majors, not just computer science majors. The first batch of funded projects ranges from startups in the music industry to public law as well as funding anywhere from $10,000 to $50,000 (the maximum allotted capital). Duke University graduate Melanie Plageman, for example, is working on a project that would enable cheap and reliable mobile internet access in Kenya. As we’ve profiled, Africa is experiencing a technology boom. Plageman’s efforts will thus use new innovative technology to extend the communications infrastructure in the African country.

Other efforts include Dartmouth Business School graduate Nathan Sharp, whose PayorPass provides merchants a better way to manage inventory risk. Currently Upstart is only available to graduates of 10 selected universities, though the number will increase as the project matures. Girouard states that Upstart-funded projects could produce as many as 1 million new jobs over the next 10 years. As he states, "Will we cause more people to take risks? Yes," he said. "Will some fail? Yes. But over time, we think it is a good thing."


More Articles By Isaac

Recent Articles

Previous post Amazon Primed For Success! October 5, 2012
Next post Do Apps Hypnotize Retail Shoppers? October 11, 2012