Over 44 million Americans currently carry student loan debt, which totals more than $1.5 trillion of looming payments, interest, and anxiety. 

The cost of a college education has ballooned in recent years, far outpacing inflation; students at public four-year schools paid an average of $3,190 per year of tuition in 1987 (adjusted to 2017 dollars), which increased to $9,970 in 2017, a 213% increase. Private schools have also become significantly more expensive, increasing 129% between 1987 and 2017. 

While other forms of financial aid to finance a college education do exist, many students are ineligible. Top private schools offer comprehensive need-based aid programs, but the vast majority of schools do not provide generous grant aid (aid not requiring repayment). Many private schools and most public schools rely on the federal government’s assessment of need in calculating aid, a formula that serves low-income students but leaves a large swath of the middle class ineligible for aid but still not wealthy enough to finance an education out-of-pocket. 

In the United States, student loan debt is now the second most common consumer debt category, ahead of credit cards and auto loans and behind only mortgage debt. Student loans are notoriously inflexible. Some loans force students to begin paying debt off immediately after graduation; even generous loans which allow a several-month grace period before repayment begins charge a fixed monthly payment that is overwhelming for some graduates. The median monthly student loan payment is $222, a price that, when combined with rent, food, and other necessary living expenses, threatens to put some graduates underwater within months or years of leaving school. The average student in the class of 2017 owed $28,650 after graduation, a total that would require more than ten years to pay off given the median monthly payment. 

Student debt is truly a national crisis that demands a modern solution. Alternative methods of funding a college education aren’t meeting the needs of a huge portion of college hopefuls, and lenders are reaping the benefit from inflexible repayment programs that leave educated, striving Americans unable to make ends meet. 

Economist Milton Friedman proposed a novel solution to student debt in the 1950s: a “human capital contract,” a market-based solution to student debt. The premise is that students should pay for a college education not during their degree program, but after they’ve received a steadily-paying job as a result of their degree program and have a base source of income. 

The concept, now termed an “income-share agreement” (ISA) began to grow, and received more attention in the last five years when rapidly-growing startup Lambda School (an online coding education program) adopted the model. Lambda School students pay nothing to gain coding skills, and in return they agree to pay a portion of their income back to Lambda School after receiving a high-paying technical job. Many universities also offer this concept as a financial aid alternative to students, and certain lenders also offer ISA programs. 

Enter Avenify. Avenify seeks to improve on the existing income-share agreement model by building an ISA marketplace, allowing students to pay for their education via funding from private investors. Students apply for funding through the Avenify platform, sharing details about their school, degree, academic performance, and other qualitative testaments to their ability to gain and hold a stable job after graduation. Accredited investors pool money on the other side of the Avenify marketplace, and accepted students (those whose applications reflect a strong chance of post-grad success) receive funding straight to their bank account to pay for tuition, room, board, books, and more. 

Avenify was founded in mid-2018 and launched to students in May 2019. In the last five months, 500 students have applied for funding from schools including Cornell University and the University of Pennsylvania. After launching to investors in late July, Avenify organically gained 100 funders in three weeks. 

Avenify was founded by two recent college graduates, Justin Potts and Timo Sheridan. Justin, the CEO, graduated from the University of Oklahoma and spent time in the startup world at Product Hunt and Republic before launching Avenify. Timo, Avenify’s CTO, also graduated from the University of Oklahoma and has served as a consultant and developer for various software projects through The Ronnie K. Irani Center for the Creation of Economic Wealth (I-CCEW) at Oklahoma.

Avenify’s business model is based on fees from both sides of their ISA marketplace. They receive 2% upfront from each investment, and 1.5% of all student payments. They project $100,000 in revenue in 2020 from upfront investor fees. 

While additional competitors will likely enter the space, Avenify believes it has a first-mover advantage in beginning to collect valuable data before the competition. The ISA model is rooted in data, because predicting which students will ultimately receive well-paying jobs and successfully share income is crucial to execute the business model. By collecting data from student applications and tracking outcomes early, Avenify will have an information advantage over new market entrants. 

Avenify is focused on expanding both sides of their ISA marketplace in the coming months. They are on track to process 2,500 student applications in 2020, and plan to issue at least 250 ISAs each semester, averaging $10,000. To fund those students, Avenify seeks to expand to 1,000 active investors, and receive $5 million in funding from retail and institutional investors. 

Avenify is using this capital raise to expand staff capacity, hiring a VP of Capital Markets to solicit investments, a data scientist, and a marketing manager. 

• Momentum on student debt crisis: The student debt crisis is a frequent topic in the media, perhaps particularly because it has received significant attention from leading Democratic presidential candidates in the leadup to 2020. Avenify has the potential to capitalize on this cultural moment to emerge as the leader in an alternative model of educational funding, developing a strong brand and growing interest on both sides of their marketplace.  
• Two-sided marketplace provides stability and immediate capital: While a traditional ISA program only begins generating revenue when students gain a well-paying job, a contingency that bears some amount of risk, Avenify generates revenue from upfront investor fees. This capital has not only powered Avenify up to this point, but will allow them to continue generating relatively stable income while scaling the student repayments line item.
• Organic growth to date: Avenify has only existed publicly for five months, and has already generated thousands of student applications and, perhaps more impressively, over a hundred accredited investors funding those applications. This initial traction is a strong signal of product-market fit and the potential of an innovative ISA marketplace to serve students’ needs as an alternative to loans and entice investors to seek a return while contributing to the social good.