To Pave, Matthew Rissler is a prospect.
In a traditional investment deal, the company the 21-year-old Lebanon County resident is developing would be the focus. But for Pave, the point of the investment is Rissler himself.
“A career is a very, very long journey,” said Carlo Salerno, currently head of growth at Pave. He has a Penn State doctorate in higher education, with a concentration in economics, and has years of experience as an education finance consultant. He joined Pave because “there needs to be a better way to help people succeed outside the current system.”
Pave is a relationship-based hybrid largely modeled on investing but also borrowing from the worlds of philanthropy and mentoring. In return for aid, prospects agree to send backers a percentage of their income for a set period — for example, 3 percent for 10 years — that excludes time spent as a full-time student.
“The money that’s raised through Pave is not a loan, and it’s not money to be repaid,” Salerno said. “If I fundraise $50,000 and I agree to share some small fraction of my income, say 3 percent, I’m never obligated to pay my backers back $50,000.”
That means the backers’ return, whether a loss on the investment or a substantial gain, is directly related to the
success of a prospect’s career. It’s a nice alignment of motivation, Salerno said, and provides incentive for backers to open doors, provide mentoring or even offer employment to their prospects.
From the prospect’s side, Rissler said, he recognizes that if his company becomes successful, he could end up paying slightly more for the funds than he would have under a traditional loan program. But, he said, if things don’t go as planned, Pave’s terms would be much safer than the alternative, and he also likes the idea of having influential people on his team.
Rissler also noted that, before he heard about Pave, he was looking into Kickstarter to raise funds for his company. However, he thinks the next step in his career should be a master of professional studies degree in engineering management, probably from Penn State, and Kickstarter is limited to creative projects, specifically excluding “fund my life” uses such as tuition.
Pave doesn’t have a set agreement on amount, percentage and time, instead allowing prospects and backers to reach their own agreements. Pave’s part of the bargain is a 3 percent fee at initial funding and a 1.5 percent servicing fee on payments to backers.
That variability stands in contrast with the set interest rate on federal student loans, Salerno said, and in that he sees the possibility of market pressure influencing education decisions. Backers may be willing to accept lower percentages of income from prospects going into high-demand and high-income occupations but agree only for higher percentages of income from prospects planning to essay into saturated or low-income fields.