Upstart Brings Personal Funding to People With a Vision
Upstart's concept is simple enough: you can raise capital from backers by promising them a small percentage of your earnings for ten years. This isn't funding for your movie project or for your startup idea; it's funding for you personally to make your dream real. It's available to students or recent graduates of five US colleges for the moment.
To become an "upstart", as the company calls them, you start by building a profile where you describe yourself and your goals. Using income statistics Upstart then calculates how much you can raise per % future income you can commit. You then decide how much funding you want to ask for.
Backers can then fund you in increments of $1000. Some might also choose to mentor you to make sure their investment pays off. After you have received this funding you share with the backers a part of your income on your tax return for the next ten years. Payments are in any case capped at 14.99% annual return to backers and when you earn less than $30000 you defer the payments by a year up to a maximum of five years. At any time you can buy out the obligation.
You can use the money to start a business, to pay off student loans, to develop a craft like writing or to gain working experience. The choice is yours and the backers have no say in what you do.
Upstart is a clever idea and a great way for people to make their dreams come true. It provides another way to raise some capital and gives you a rare chance to do something like writing a book, that can pay off long term but is hard to do when you have a full-time job.
Some comments online have compared Upstart to slavery and questioned the ethics of this approach, but it seems to me more like an investment like any other since you don't in any way own the person nor can you impose your mentorship. If an upstart earns well the backers do too. If they earn nothing the backers' percentage will not amount to much.
But I can see other legal and administrative difficulties. I assume that the founders have checked that their idea can be implemented legally in the USA but it is going to be hard to make this work outside the US because every country has its own laws and these laws don't stay the same for ever. Administration, too, can be costly because they will need to track every upstart's tax returns for 10-15 years and take care of all the accounting. This is way much more complex than running, say, a photo sharing site.
Yet difficult is not the same as impossible and sometimes it is better to do hard things because its what the others do not do; for the same reason I often tell my students to master skills that seem hard because that will differentiate them from their peers. By making this work Upstart will not only give the world an interesting new way to fund personal dreams, it also makes sure that competitors will not be able to enter the market so easily.
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