Four months after leaving Google Inc
Upstart, a service that is launching in limited form on Wednesday, lets university graduates raise money from other people online so that they can start their own businesses, pursue a research project, or chase a personal dream, rather than take a "safe" job in the corporate world.
"There's this overwhelming desire to not follow the traditional path of bolting yourself to a desk and climbing the corporate ladder," said Upstart founder Dave Girouard.
But he said too many graduating students have college loans they need to repay and do not feel they can take a chance.
Part social network, part crowdfunding service in the style of Kickstarter, Upstart provides an online forum where participants post personal profiles with their background and goals in the hope of attracting at least five financial backers.
The backers - acquaintances, alumni or other accredited investors - provide funding that will typically range between $20,000 and $50,000 in exchange for an agreed share of the graduate's future income over a 10-year period. Upstart determines the portion of future annual income to be shared based on the total sum raised and the person's qualifications, including academic record and field of study.
Girouard noted the funding is different than a loan because there is no guarantee of repayment.
"It's really a contract that has some contingent payments in it," he said.
Upstart is the latest example of so-called crowdfunding and peer-to-peer online lending services that have sprouted in recent years. Kickstarter, which lets people raise money online for "creative projects" such as films, clothing and even building robots, has seen $250 million pledged to projects by more than 2 million people since its 2009 launch, according to the company.
However, Upstart is not just about providing young people with capital, but to connect them with backers who can act as mentors, Girouard said.
Girouard, who was president of Google's online apps business that competes with Microsoft Corp
For new graduates setting out on their own, the funding can provide a way to make payments on college loans or take care of living expenses for a year.
The maximum amount of future annual income a borrower can be on the hook for is seven percent and a borrower is never responsible for repaying more than 15 percent of the total sum received. No payments need to be made in years when the borrower's annual income is less than $30,000, according to the company.
Upstart, which Girouard started with a team that includes several former Google employees, has received $1.75 million in seed funding from backers, including Kleiner Perkins Caufield & Byers, Dallas Mavericks owner Mark Cuban and Google Ventures.
The service will initially be available to students and recent graduates of five schools - Dartmouth College, Rhode Island School of Design, Arizona State University, University of Michigan and University of Washington - but Girouard hopes to expand to many more in the first year.
And with the U.S. unemployment rate now in its fourth year above 8 percent, Girouard said it is a good time for those entering the workforce to think outside the box.
"In 2011, there was zero net job growth in large companies," said Girouard. "You have this kind of really ugly situation, where tons of kids are standing in line ... and they're standing in line for jobs that essentially don't exist anymore, or are really harder to get."
