Today, I’m excited to announce the launch of Avenify, a startup that allows students to sell equity in their future income to investors in exchange for funding to attend school. Our approach to student financing is simple and outcomes-based, leveraging Income Share Agreements (ISAs) to attack the student debt problem from the supply side.
Because ISAs allow students to obligate a percentage of their future income in exchange for upfront capital, ISAs behave more like equity than debt. Terms are expressed as a fixed percentage of income (3% of pre-tax salary, due monthly for 120 months, say), so there’s no “balance due,” in the traditional sense, and if a borrower’s income drops to $0 (or below a minimum income threshold), so do their payments.
On the flip side, students may end up paying back more than they would with a loan — up to a point. Payback is capped at 2.5 times the amount borrowed to prevent the ISA obligation from becoming usurious. With ISAs, we’re able to cap downside risk for our borrowers while allowing investors to capture some of the upside value they create for students. To read more about ISAs, see our explainer here.
On one side of our marketplace, students can apply for up to $15,000 in funding per semester. Applying takes only 5 minutes, and eligible borrowers can be offered terms in as little as a day.
We believe financing should be more accessible, so rather than check the applicant’s credit score or request a co-signer, we use the student’s academic profile and work experience to set the terms.
If a student qualifies for funding, they’re offered terms, which typically range from 1–5% of pre-tax income for 120 months after graduation. Once students accept the terms we’ve offered, investors can view their profiles on the fund portal.
Rather than work with banks to lend out capital, we work with individual investors, who support our students by buying equity in our Fund (the Avenify Fund I). Buying ownership in the Fund entitles investors to shares of our borrowers’ incomes once those borrowers graduate and get jobs.
For Avenify Fund I, we’ve selected 34 of the most promising applications from 2,000 students on our platform. They’ve requested $310,500 in funding, an average of about $9,000 each. They range from an Aviation student at Embry-Riddle (with an offer letter from United), to a Doctor of Pharmacy candidate at Belmont University, to three students attending Lambda School (an online coding bootcamp).
We don’t discriminate when it comes to major, but we do look for funding amounts that match well with what we expect our borrowers to be making post-graduation. We believe a future teacher who wants to borrow $3,000 can be as good a bet as an engineering student who wants to borrow $15,000.
At Avenify, funding disbursement represents the beginning of our working relationship with borrowers, not the end goal. We’ve tied our success to our students’ successes — one of the only student lending companies to do so.
Avenify’s lending model represents the first step towards a higher education system that aligns incentives between educators and learners, with costs and credit availability that correlate with the job market value of the education received.
Starting today, our inaugural fund is open to accredited investors. Sign up to learn more about the fund and invest in student success.
Come help us build a world where anyone, anywhere can afford an education.