Thrive, founded by Twitter alumni Deepak Rao and Siddharth Batra, wants to fund student expenses by looking at job offer letters as a way to evaluate loans. Today, it launched its loan platform and is accessible to students on over 400 campuses across 31 states.
The San Francisco company helps underfunded students, a group that isn’t typically accounted for by traditional financial institutions that issue loans based on credit score. According to co-founder Rao, Thrive is for people like “first-generation Americans, people who come from low-income families, or first-generation students.”
Before launching broadly, Thrive secured $10.25 million in funding and $5 million in venture debt. Today, the company also announced that it has picked up a $200 million credit line from Credit Suisse.
“We started the company with the mission to invest in human potential,” Rao said. “We basically built a product that empowers underfunded students and gives them access to funds for whatever things they need in order to transition into their professional lives.”
The cash can be used flexibly for items like new laptops or flights home.
Students can sign up on the platform and upload an offer letter for an upcoming summer internship or full-time college postgraduate offer. Thrive validates the document, then offers a loan to the students.
For an internship, Thrive unlocks 25% of the student’s total internship salary for a loan. For a full-time job, Thrive will offer 25% of an individual’s first three months’ salary.
Thrive charges students between $7 to $15 per every $1,000 they receive per month, and they’re allowed to take as much as they need from the dollar amount that Thrive offers them. If you take $1,000 and your internship starts in three months, and if you want to pay it back in one go, you have to pay between $21 to $45 above the $1,000 when you pay it back.
Once students prove they’re soon going to be employed, they can access the funds within one business day and then start paying back Thrive once they start their new job.
Thrive’s payback structure is similar to the income-sharing format that a company like Lambda School uses. Lambda School says it gives students the option to pay zero dollars for tuition, and then pay 17% of their salary they earn from a job that pays a minimum of $50,000 annually for two years.
So while it’s not new to bet on salary, Thrive is looking at turning the concept of incoming sharing on its head and applying it to loan financing.
When they founded the company in 2017, Rao and Batra were both classmates at Stanford and then co-workers at Twitter. Rao comes from a low-income family, so he personally felt the blow of costs that come with being a grad student in the United States, from flying home to paying for your laptop. Or just even dinner.
Thrive declined to share specific financials or comment on profitability. Rao did say that the company is growing “5 times year over year” and has enough funds to avoid raising venture capital until the end of 2021.
“Our biggest expense is the ability to fund loans, and we are not funding loans through equity money,” Rao said. “At the end of the day, it’s like a software business, our biggest cost is the cost of goods, which is capital, and someone else is funding the capital.”
Not needing more venture capital might be especially helpful as we enter a time of economic uncertainty due to COVID-19. Unlike other fintech companies, which have had to tighten their underwriting standards to prepare for risk due to the uncertain economy, Rao tells TechCrunch that Thrive will not change how willing they are to write loans.
Some tech internships have been canceled due to COVID-19, he noted, and if students have had an offer rescinded, Thrive “updates the payment plan accordingly.”
“As long as your internship is still active, your offer is still issued,” he said. That doesn’t matter whether the intern will be remote or in-person.
Thrive is expanding its business as undergraduate and graduate students are entering a job market with historically high unemployment. We’ll see how a tough job market impacts a company that depends on offer letters for loans, and whether their bet on alternative financing pays off.