MBA Program: Harvard Business School
Industry: FinTech / EdTech
Founding Student Name(s): Tess Michaels
Brief Description of Solution: Stride offers affordable, flexible financing via income share agreements (ISAs). With an ISA, students agree to pay a fixed percentage of their income for a specified number of years after graduation. Stride is currently focused on STEM and healthcare students across graduate programs and alternative education programs.
Key ISA benefits include:
- Affordable and flexible payments tied to earnings
- Downside protection (i.e., no payments when making <$40k)
- Shorter duration (<5 years vs. 10+ for traditional loans)
- Career resources (i.e., weekly content, placement partnerships, resume services, peer2peer networks)
Funding Dollars: >$3.75 Million in Venture Capital
What led you to launch this venture? As a first-generation graduate student entering Harvard Business School, I explored different financing options and realized once you add tuition, books, and housing, graduate school is incredibly expensive, so I sought better ways to align the cost and value of education.
With rising tuition costs and increasing unemployment rates (#thanksCovid), students are increasingly cautious about how to pay for school. Additionally, traditional loans are 10+ years in duration, inflexible, accrue interest while in school, and have misaligned incentives.
We sought to offer a short-duration, more flexible and supportive financing product to give students increased confidence about their choice to go back to school. We see the strong demand for ISAs especially in uncertain market environments like we have today. We’ve seen a 4x month-over-month increase in our application volume during Covid.
Education is key to mobility, and ISAs are a much better way to fund it!
What has been your biggest accomplishment so far with venture?
* Impact: We have funded 95% STEM students, 85% women, and 75% under-represented minorities to-date.
* Scale: We’ve gained significant student demand and improved the effectiveness of our marketing channels. We’ve had over 2,000 ISA applications with over $60 million of ISA demand. We’ve successfully funded and on-boarded our first two cohorts of students in top STEM programs at schools like Columbia, NYU, Penn State, Northeastern, Rutgers, Texas Tech, Carnegie Mellon, etc. We are in the process of integrating and launching with a top 3 national STEM provider that serves over 1,000 students per year via ISAs.
* Product: We’ve fully built and launched our in-school ISA product. We offer an end-to-end solution from origination, pricing, underwriting, contracting, funding, and career support. In 2019, we did an asset acquisition of another ISA player (Base Capital), including a proprietary python-based pricing model incorporating millions of resumes increasing our analytics capabilities and competitive moat.
How has your MBA program helped you further this startup venture? HBS offers unparalleled access – access to inspiring professors, dedicated mentors, top investors, and diverse peers. I’ve learned from professors how to scale a tech venture, build a brand, value our business, and learn from entrepreneurial failure. I’ve gained mentors organically, such as Tina Sharkey (founder of Brandless) who was a speaker in my Creating Brand Value course who then became an advisor, operating capital investor, and ISA capital investor.
I vetted and launched Stride during HBS ‘Start Up Bootcamp’. I gained office space and helpful mentors via the Venture Incubation Program and I was able to ideate with peers and advisors who kept us accountable on our timelines and milestones during the HBS Rock Accelerator. We had weekly meetings with Entrepreneurs-In-Residence and a set of peers going through parallel journeys.
Lastly, it was special to be on campus surrounded by students who experience the pain point we’re trying to solve daily. Several of my classmates were a part of the journey – Stride truly is “for students by students.”
What founder or entrepreneur inspired you to start your own entrepreneurial journey? How did he or she prove motivational to you? Peter Thiel was the founder who inspired me to pursue entrepreneurship. While at UPenn, I heard Peter give a talk after he released his book Zero To One. During his talk, he emphasized that being an “entrepreneur” is not a goal, rather pursuing a significant problem you’re passionate about solving and becoming an entrepreneur to do so is what creates meaningful businesses. Thus, when I personally experienced the pain point and saw the need for more flexible educational funding options, I went all in on building Stride. Also, he emphasized the importance of being bold and innovative – not just horizontal, incremental progress of going from 1 to n but vertical, transformational progress of going from zero to 1 – we strive to disrupt the traditional student loan industry!
Which MBA class has been most valuable in building your startup and what was the biggest lesson you gained from it? My favorite class was Tech Sales given sales is such an undervalued yet critical skill regardless of the role we pursue post-graduation. The class was taught by two incredible professors and practioners, Lou Shipley (CEO of Blackduck Software which was bought by Synopsis) and Mark Roberge (SVP of HubSpot). The class was very hands-on with mock sales calls, sales interviews with local sales reps from reputable local firms (e.g., Toast), and guest speakers from relevant backgrounds.
Also, the case method at HBS is such an impactful, unique teaching approach. We learn from fellow peers who have collective experiences that far surpass any individual or any textbook – from the military to Tesla to early stage start-up and big corporations – who are invaluable to the learning experience.
The biggest lesson I learned was around the importance of inquiry vs advocacy: ask the right questions early. I constantly keep “BANT” (Budget, Authority, Need, Timing) as key questions I want answered during early calls to ensure I know the best next steps and key stakeholders to effectively partner.
What professor made a significant contribution to your plans and why? I’m grateful for the number of highly engaged, supportive mentors I’ve gained at HBS. I have been able to meet professors with incredible networks who have given me great guidance and I’ve been able to learn from their careers. Professor Jeff Bussgang most directly influenced by HBS experience and journey growing Stride. He was my IP advisor for two semesters guiding me during Stride’s growth. He has introduced me to many VC investors, potential partners, advisors, and supporters of Stride. He’s been a big advocate for the business, forced me to think differently and bigger, and recently invested in our business. I appreciated his guidance beyond tactical facets of the business to more “soft” areas such as people management, hiring decisions, etc. Being an entrepreneur is a 24/7 job, and it’s great to learn from someone who’s been through that journey and came out stronger and wiser.
How did the pandemic impact your startup plans? During Covid-19, we have expanded our offerings, raised capital sooner, been more thoughtful on cash burn, and integrated virtual “bonding activities” to keep the team strong.
We have expanded our core business from just traditional schools to alternative education providers (e.g., coding boot camps) given the tailwinds in the space. Also, during recessionary periods, more people go back to school, and we help them do that through flexible and affordable Income Share Agreements (ISAs). More than ever, students need an advocate for their success after school; during COVID-19, Stride has been building a network of future employers, partnering with interview prep consultants and connecting students with one another for support.
We also raised more VC capital during Covid to ensure we have enough runway and we temporarily froze hiring to better manage the cash burn.
While we had to onboard interns virtually, we want the team to continue to feel connected, so we’ve integrated weekly bonding activities such as improv, game nights, trivia, etc. It has been a great way to keep everyone together – like a family – optimistic and resilient.
What is your long-term goal with your startup? Stride aims to elevate educational experiences and accelerate economic empowerment through affordable funding of higher education. That goal drove us to think more broadly about outcome-driven financing.
Over the next year, we plan to sign up and onboard over 1,500 students onto Stride’s platform. We’ll have grown the Stride community offering career support, mentorship, placement partnerships, and networking to ensure the best outcomes for students. Over the next five years, we will expand via new markets (e.g., alternative education partnerships, corporate upskilling, international grad students), and new products (e.g., refinance). This is Stride’s first product in the broader vision of making outcome-driven financing the future – we’re wholeheartedly focused on helping students hit their stride!
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