• 01.22.13

Would You Take An Interest-Free Loan In Exchange For A Slice Of Your Future Success?

That’s the model behind Pave, a new service which hopes to eliminate crushing college debt by hooking up investors with students willing to give up a percentage of their future earnings for money today.

Student debt is an ever growing topic of discussion–as we’ve pointed out before, it passed the $1 trillion mark in 2012. Naturally, a host of tech-heavy startups have emerged to tackle the problem. The latest is Pave, a platform that lets people invest in students and young people just getting started in their careers. In exchange, backers get a percentage of their earnings over an agreed-upon period of time. If the young person’s earnings drop below 150% of the poverty line, they don’t need to share their cash.


The idea for Pave first came to co-founder and CEO Sal Lahoud when a friend asked him for a loan. He said no, but suggested doing a revenue share instead, where he might get a little something if his friend succeeded in her ventures, but she would owe nothing if things didn’t go well. The friend said yes, and the seeds of Pave were planted.

That initial idea was the easy part. “Part of the barrier to entry was solving legal and tax hurdles. We spent about a year doing due diligence,” says Oren Bass, co-founder and COO of the company. “We are introducing a new way for someone to effectively access their potential. Our advisors drew a blank. This is completely unregulated and un-legislated. One of the biggest questions was ‘Is this contract legal?'”

Eventually, Pave worked out the kinks and launched a pilot in mid-December with eight prospects–the students and young people getting funding–and 28 backers. In the initial batch of prospects, there is a nanobiotechnology student, an actress, an Aikido champion, a legal intern, a musician, an investment banker, a dancer, an economics student, and an entrepreneur. Their one common thread is that they all have compelling stories, according to Lahoud. Backers also run the gamut, from engineers to art curators. All of the initial eight prospects–vetted with verifiable data like GPA, college major, and portfolios–received the funding they sought ($20,000 on average; Pave’s cut: a 3% fee when prospects get initial funding, and a 1.5% servicing fee on future payments from prospects to backers).

Why not just focus on college students? Surely there are more than enough who could use funding. “The problem with defining who’s eligible or not based on college is that we’re making decisions for backers about who is interesting and who is not,” says Lahoud. “We had one New York litigator, a partner at a law firm, and we thought he’d be analytical and pragmatic. We thought he’d want to back a lawyer, so we said ‘Here are the prospects,’ but he said he wanted to back people in film or social justice.” As it turns out, that just happened to be what the lawyer was passionate about.

Unsurprisingly, Pave has attracted interest from potential platform participants across the U.S. The company’s goal in the second quarter of 2013 is to build up to 100 teams (that’s partnerships between prospects and backers) spanning a variety of interests and sectors. At the moment, Pave puts prospects and backers in touch with each other, but the site will eventually allow users to automatically control how much contact they have–so one person might choose to be a backer from more of a distance, while another can go deep into mentoring.

“We would like to prove the concept that there’s another option to debt,” says Bass. Pave isn’t the only startup aiming to do that. SoFi, a startup founded in 2011, offers inexpensive loans to students from school alumni. Another company called Upstart also lets investors back individual students.

About the author

Ariel Schwartz is a Senior Editor at Co.Exist. She has contributed to SF Weekly, Popular Science, Inhabitat, Greenbiz, NBC Bay Area, GOOD Magazine and more.