Future Finance raises $171M to grow its student loan platform in Europe – TechCrunch
8 months ago Comments Off on Future Finance raises $171M to grow its student loan platform in Europe – TechCrunch
Future Finance — a startup based out of Dublin that provides loans to students using big data algorithms to asses their credit-worthiness — is today announcing a large round of funding of its own to build its business out in Europe. The company has raised £119 million ($171 million) — £19 million in equity and £100 million towards future loans made through the platform.
Future Finance is currently live in the UK and Germany with plans to expand further in the region, according to co-founder and CEO Brian Norton — an American with a background in finance who specifically upped sticks and moved to Dublin to launch Future Finance in this part of the world.
This latest round brings in some notable investors, and also sheds light on some of the others that have been funding the startup up to now. (Future Finance has raised $266 million, or £185 million, since going live in May 2014.)
Future Finance’s equity investors now include QED Investors (a major VC in U.S. fintech), Blackstone Strategic Opportunity Fund, Colchis Capital, Invus Opportunities, KCK, DW Partners, Fenway Summer Ventures, Ridge Road Partners and 1/0 Capital. And the company also has disclosed that Goldman Sachs has also been backing the company, providing funds for the £25 million in loans paid out on on the platform to date.
That figure may sound relatively low but there is a clear sign of more demand: the company says it has had 37,000 applications received to-date and has seen loan growth of over 900% year-on-year.To the average reader in the U.S., the idea of a student taking out loans to finance his or her higher education is very commonplace, and there are a number of startups out there that either help students get loans in the first place and/or help refinance those they already have. SoFi and CommonBond are two specifically targeting students, while other platforms include Lending Club, Prosper and Upstart.
The problem that Future Finance is aiming to solve is one that is still largely nascent in Europe, but is bound to grow over time: While the cost of going to university in Europe is tiny compared to average prices in the U.S., those costs have been on the rise. Traditional banks have yet to fill the funding gap for students after grants, scholarships and government programs, and this is where Future Finance is stepping in.
In its most mature market, the UK, Norton tells me that the average price for a university undergraduate degree is around £60,000. “The average person can borrow £35,000 from the government on terms that are pretty easy, flexible and student friendly,” he said.
Future Finance aims to make up the difference, providing loans of between £2,500 and £40,000 per each academic year, with the funds typically used both for tuition and living expenses.
The loans are specifically aimed at students and their financing needs, both in terms of how students are assessed and in terms of how they are expected to repay them.
On the assessment side, Norton tells me that what Future Finance does “is similar to other online loans but the primary piece is geared to focus on a person’s education.” The company aggregates data on what a person is studying, and where, along with other factors around a particular student’s life, and it then combines this with government data and other “proprietary sources” to make an assessment on whether to provide the loan. It’s partnered with 33 universities across the UK to provide loans, and this is likely another source of data for making assessments.
While this may sound like it might be biased to students studying business at prestigious universities, Norton tells me that this isn’t always the case.
“A nursing student from South Bank University, statistically speaking, is more likely to earn more in his or her first year out of college than a person from Cambridge University,” he said. “We are working at both ends of the spectrum.”
On the repayment side, Future Finance aims to provide terms that are more student-friendly than an ordinary bank loan, with ten-year loan terms, no early repayment charges and payment holidays built in. And that’s before you consider that many students aren’t even eligible for bank loans because of a lack of credit history.
While Future Finance plans to expand further in Germany and elsewhere in Europe, it’s own future finance roadmap does not include the U.S., where Norton (remember, he’s an American ex-pat) says he is a “huge fan” of SoFi but believes the loan terms are much more different and less desirable for his company.
“Europe is structurally very different than the U.S.,” he said. “There is a very high ROI on education here,” with more students likely to earn more than they have invested in their educations, which is not always the case in the U.S., where education costs are so high, regardless of whether you end up as a public school teacher or an investment banker.
More likely, the company will explore more markets in Europe to launch its own retail service, as well as eye up how and if it has a prospect as a white-label provider of student loans. Given that many banks have yet to size up and act on this opportunity, there could be a clear opening for this and other startups to make a move.
Future Finance is not disclosing its valuation in this round. (We’re still trying to find out anyway.)
Future Finance raises $171M to grow its student loan platform in Europe – TechCrunch}