Dave Girouard, co-founder and CEO of Upstart in Wired: “A total $2.7 billion was pledged by individual donors through crowdfunding last year, according to reports by research firm Massolution — up 81% from the year before. This space is only going to heat up further when SEC rules for the JOBS Act are released this year, paving the way for equity crowdfunding….
Crowdfunders and angel investors, while not purely philanthropic, share the common desire to participate and be involved in the creation of something new.Put another way, it’s more about cause than cash (a phrase I picked up from Kiva co-founder Jessica Jackley). And that desire is the disruptive “feature” of crowdfunding….
Predicting success for a newbie startup is notoriously difficult. But investing in people is one of the only ways to get a risk/return/volatility investment profile that actually works. It’s a model that could also appeal to quant (not just cause) investors as well…companies like Upstart (which I founded) and Pave make it easy for people to invest in other people.
Why is investing in people a safer bet? Because there are clear — and measurable — signals reflecting their accomplishments and hinting at their potential. It’s not unlike the logic used by big companies or universities faced with countless candidates, by recruiting firms and talent agents, and others. By using data and algorithms — in this case, a sophisticated regression model that considers variables like school, area of study, standardized test scores, internships, job offers — we can statistically predict a person’s future income.
Such a model allows a person to “borrow” from his or her future self.”
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