The income share agreement (ISA), a financing model where students pay for an education program with a certain percent of their income for several years after graduating, has been one of 2019’s new buzzwords among VCs and entrepreneurs in Silicon Valley. While still a nascent market that faces regulatory uncertainty in the US and abroad, ISAs are a mainstay of learn-to-code bootcamps and are being piloted at dozens of universities. This financing model is receiving attention because it directly aligns education programs with students’ career outcomes — something that could transform parts of higher education.
ISAs will transform the labor market even further though. In the next few years, use of ISAs will likely go beyond formal education programs to create a new category of career accelerators that are more like scaled talent agencies for businesspeople. Across industries and seniority levels, we will see ambitious professionals choose to pay a small percentage of their future income to partner companies that promise to accelerate their career’s rise.
Those companies will provide ongoing hard and soft skills trainings, job scouting, guidance on picking the career track and geographic location with the most promise, prep for compensation negotiations, personal branding guidance, and other tactical support like key people to meet and which conferences or private gatherings are most important to target.
This movement will start with graduates of ISA-financed education programs but will quickly expand to other professionals. As career accelerators prove effective at enhancing participants’ career prospects, peers of those participants will fear that they are less competitive in the job market without having the advantage of a career accelerator helping them as well.
Outsourcing career guidance
The average annual operating budget for career services departments across US colleges is merely $90,000. For universities, there’s almost no support for job placement upon graduation despite the claims of universities in their marketing materials. And there’s definitely no support provided during the years after graduation.
The promise of ISAs is to incentivize higher education programs to design their curriculum with their students’ future financial success in mind. Most of the ISA initiatives active right now are either used as a replacement for private student loans at accredited universities or as the financing solution for non-accredited vocational programs (a.k.a. “bootcamps”) that don’t qualify for federal student aid. Their focus remains on curriculum though — it’s a wholly different activity to focus on guiding graduates in their careers for years afterward.
The long-term financial returns of these ISAs often fall on financing partners that the education programs hand their ISAs off to anyway. Universities and vocational programs need cash to operate so they usually sell the bundled ISAs of their students as a financial asset or raise debt that is backed by the ISAs as collateral.
The two parties here — the education program and the financial partner — are each specialized in a specific job (to teach a program and to conduct financial analysis, respectively) that’s unrelated to the work of helping individuals make decisions to advance in their career on an ongoing basis. Rather than expand into expansive career counseling work, it is more likely they will outsource this function to companies specialized in providing it for specific industries and skill areas.
These career accelerators can increase the overall income of the graduates with ISAs while reducing the risk of them becoming unemployed or underemployed for a long period of time, so any party with a financial stake in the future would be aligned.
A gap in the market
Bootcamps for learning software development or other skills are for people who have decided on the professional track they want to take and the bootcamps often help with securing an entry level job upon graduation. It’s a short-term, intense relationship that centers on the need for specific technical training in order to enter a new field.
There’s a gap in our current education system for ongoing career guidance throughout one’s career however — a partner organization that has a financial stake in your future and whose job is to help you advance in your career by providing counsel and resources.
From helping decide what career change is best in the first place to ongoing support beyond when the first, second, or third job is secured in the new field, a career accelerator will help with a lot of small things over time rather than providing one big sprint of formal training.
Through a combination of scaled resources and hands-on personal interaction, the goal will be to accelerate people’s professional rise and make the insider lessons about how certain fields work accessible to people regardless of whether they grew up in families that provided examples in how to gain access and wealth in business.
An employer may provide professional development training but they won’t guide employees in how to switch to a different career, how to negotiate for higher compensation, when to jump ship to another opportunity, or (in most cases) how to build their personal brand in the industry.
Moreover, a large swath of professionals are freelancers who don’t have free training from an employer and are making frequent decisions about who to work with, how to build valuable relationships, how to negotiate compensation, how to advance their personal brand, etc. Hollywood creatives who have talent agents or talent managers are generally freelancers hopping between projects; the dynamic of paying a small portion of income to a person or firm bringing you new business opportunities and guiding your strategy is just as helpful to many other types of freelance professionals.
Given the breadth of fields and skill sets career accelerators can target, the substance of their support for clients will vary greatly. The key is sharing specific, tactical insights for people already generally informed about a space not sharing the generic advice of self-help books. (These companies will likely have a bigger impactful in non-engineering fields given the importance of soft skills and networking in business roles.)
Navigating one’s career path is a lonely endeavor, especially in an era where job changes are frequent and career trajectories are winding. For many, the decision to exchange a single-digit percent of their income will be worth the feeling of security that comes from having an organization dedicated to ensuring they keep earning more money and bounce back quickly from mistakes.
A fragmented market
Quality here is inherently linked to focus and personal attention. That suggests it will be a fragmented market filled with a landscape of programs across different niches. Professionals may switch between programs multiple times over several years based on the evolving focus of their career and the seniority level of talent that different programs are designed for.
The most elite career development programs likely won’t have the scalability of a VC-backed startup because they will highly curate their community of clients and provide insider access and guidance that inherently becomes less advantageous the more people it’s shared with. Some may charge a higher percent of income for the premium value of services provided, others may just focus on clients who already earn high incomes and are in fields where income can rise considerably in merely a few years.
Career accelerators targeting large populations of professionals with a more scalable, modular offering could grow into much larger businesses by overall revenue, acting as a support structure for tens or hundreds of thousands of professionals. Working with a large client base could provide more data into the many different routes to success within a given field and the most effective compensation negotiation strategy at different companies. Building proprietary technology tools, databases of information, and training content for clients becomes necessary to help them at scale.
Online and offline community building among clients can develop the affinity of a university with its students and alumni, guiding clients to know and help each other, which is a scalable benefit. Shared university affiliation often facilitates networking, mentorship, and preferences in hiring so a career accelerator that succeeds in making its clients feel part of a common tribe can give them an additional large network of professionals to tap into for career advancement.
The challenge will be finding the sweet spot — assuming there is one — between being sufficiently self-guided through scaled resources to serve a massive client base and being sufficiently engaged with and impactful on a client for them to find it worth a substantial investment of future income. If all that’s provided is content and databases of information then it will be better fit for a content subscription business model; personal interaction is critical. Mental health apps that combine a self-driven curriculum and written reflections with 1-on-1 personal coaching provide an interesting parallel here.
Expanded offerings
As career accelerators grow, many will inevitably provide in-house services for their network of clients like hiring recruiters who keep a pulse of certain types of opportunities and make sure clients are on companies’ radar or hiring a team that pitches relevant clients for speaking slots at conferences or to provide quotes to the press. These are talent agency tasks that a career accelerator could do with more scale since it would just be handing off opportunities not managing them, but it’s still manual work that’s tough to automate effectively.
Over time these companies will gain distinct insights (and hard data) into the dynamics of the labor market they target. This could enable them to build a more expansive platform of services for their clients, leveraging a deeper understanding of clients’ careers to, for example, offer personal loans at better terms than banks. A career accelerator will become better at predicting a person’s future income and risk of default than a traditional bank. Plus it would better understand the return on investment of helping a client cover short term costs with professional benefits like flights to speak at a conference, a ticket to participate in a VIP networking retreat, or moving expenses to relocate to a city with better opportunities.
Conclusion
The first wave of career accelerators are likely to launch in 2020 alongside the growing use of ISAs by education programs and the burgeoning interest in use cases for ISAs by many in Silicon Valley and Wall St. The specific terms of a career accelerator’s ISA will vary widely but play a big role here. If the career accelerator is paid based only on the net increase in income over a period of time that will make it particularly enticing since there’s limited downside for clients.
This career accelerator model may seem like a radical concept for professionals who haven’t spent time in the creative industries where talent agents and talent managers are common but social proof from early participants in these programs and their testimonials on the benefits will cause the market to heat up within just a few years, the same way the market for ISAs in education programs has heated up.
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