A couple of “different”and interesting US crowdfunding platforms were set up at the end of last year to basically crowdsource Human Capital Contracts with the emphasis being unsurprisingly on recent graduates.
In our words the arrangements seem to work as follows:
- A bright graduate registers their project with the crowdfunding operation subject to certain eligibility criteria
- They are known as “prospects” (Pave) or”Upstarts” (Upstart)
- They quantify the funding for their project eg repay student debt, fund a further degree (MBA or PhD or whatever) start a business or whatever.
- The platform using their own algorithms (or in one case the one that Google’s uses to assess potential recruits) to see if the project qualifies and what the “payback” should be.
- Backers (again subject to certain eligibility criteria associated with higher risk investment) review the project and offer funding and mentoring services.
- The prospect/upstart reviews the offers and decides which to acceptand these for the basis of a contract
- Contracts are drawn up between the parties.
- The individual pays back (with interest) the backers over a 5 or 10 yuear term on a monthly basis.
- The repayments are normally expressed as a % of their “ adjusted” income.
- The platform charge fees both on the initial backing and the repayments.
It’s predictably just for US citizens and the eligibility criteria for backers is that they are Accredited Investors which in practice means “Your income exceeded $200,000 in each of the two most recent years, or your joint income with your spouse exceeded $300,000 for those years, and a reasonable expectation of the same income level in the current year. OR Your individual net worth, or joint net worth with your spouse, exceeds $1 million, excluding the value of your primary residence.”
The prospects/Upstarts annual adjusted income is reconciled back to their IRS tax returns.
Platform fees in one case are 3.5% of the initial backing and 1.5% of the repayments.
A, sort, indicative rate of return of 8% ish is loosely mentioned.
Brilliant – just hope the idea, eventually, migrates across the Atlantic.
Whilst on the crowdsourcing topic there’s an aggressively ambitious one underway at Indiegogo where Ubuntu Edge are looking to raise a world record (in Crowdsourcing terms) $32 million for their smartphone and it’s a reach it or bust scenario whereby if the don’t reach their target all bets are off!
It’s at $11.4 million with 65 hours to go. We’ll leave you with their video!