Finance for postgraduate and technical qualifications remains outdated and prohibitive. Notably, the best courses are too expensive for a majority of potential students and Government loans do not cover these costs. Outcome-based finance is an effective solution and opens up enormous economic opportunities for people who would otherwise not be able to pursue these courses that unlock significantly higher earning potential. It is claimed that this model could increase cumulative lifetime earnings by as much as £8 billion.
Easing this situation for potential students, London-based StepEx, the only FCA-regulated fintech startup that provides affordable student finance based on future earnings rather than debt. Now, the next-gen fintech startup has secured £1.1 million in pre-seed funding.
The investment round was led by BBVA Anthemis Venture Partnership, Triple Point Ventures, and notable fintech angels including Chris Adelsbach. This follows the £270K funding the company received previously. The funds will be used for the further development of the company’s machine learning model and user platform. Also, StepEx plans to expand its senior team.
Christhi Theiss, Head of BBVA Anthemis Venture Partnership at BBVA, said: “From the beginning of our journey, StepEx and its founder Dan stood out. His passion, know-how and grit impressed me. He effectively co-designed a new regulation over 18 months with the UK government and succeeded to be the first regulated entity in Europe to offer Future Earnings Agreements. Many renowned educational institutions all over Europe are offering StepEx’s solution to their students, which increases diversity and financial inclusion – while also collecting an incredible amount of data to develop StepEx’s proprietary future income predicting tool.”
Daniel Cardenas-Clark, Early-Stage Investor at Triple Point Ventures, said: “We were impressed with the diligence that went into developing the product, which is reflected in StepEx being the only FCA-approved FEA in the market. We are excited to be backing Daniel and the team on their mission to help more people achieve their career goals by obtaining the academic, technical, and professional qualifications needed to do so.”
Farhan Lalji, Principal at Anthemis Group, said: “In addition to my role at Anthemis I lecture at London Business School where I took my MBA, so I see the impact of the financial barrier to entry for students first-hand. Indeed, I was in that uncertain position myself when I applied and had to take on a considerable sum of debt, so am keen to see alternative methods of funding for people in similar circumstances. With its Future Earnings Agreement, StepEx has created a solution that benefits students and educational institutions in equal measure. But it’s also an attractive investment for lenders – combining strong returns with genuine social impact.”
Scaleup plans on cards
Founded in 2017 by Daniel George, StepEx is currently focused on postgraduate university education and technical skills courses. The company intends to expand the range of providers that it works to scale the impact of Future Earnings Agreements to all who need them.
While only two percent of the population can afford to take on the cost of pursuing a top postgraduate qualification, StepEx aims to widen participation among the other 98 percent by providing finance based on projected future earnings. Eventually, it enables them to access courses that they cannot reach otherwise and significantly enhance their economic prospects.
StepEx founder and CEO Daniel George said, “Using outcome-based finance to expand access to postgraduate business degrees and professional or technical qualifications could increase. But that doesn’t account for a whole host of other qualifications that could unlock new, higher-earning opportunities for people in what used to be called ‘blue collar’ occupations. The Future Earnings Agreement model works just as well for an Amazon warehouse worker who wants to earn more money as a truck driver, but can’t afford the training, as it does for a freelance designer wanting to develop coding skills or an entrepreneur currently priced out of an MBA. This is about fighting the curtailment of aspiration and allowing talented people from all walks of life to access the career they want. And by unlocking economic opportunities, we’re not just helping individuals earn more, but also boosting the nation’s productivity and tax receipts.”
World’s first regulated “Future Earnings Agreements”
Being an outcome-based finance service, StepEx’s Future Earnings Agreements require students to pay a percentage of their earnings for a fixed period. It is triggered only upon completion of their course when they cross an agreed salary threshold as predicted by StepEx’s forecast of their expected earnings. It charges course providers an up-front fee per student and takes a small commission on each monthly repayment.
Already, StepEx works with two of the top three business schools in the world – London Business School and INSEAD as well as Cranfield University. Also, it works with several course providers focused on in-demand technical skills such as coding and AI, StepEx has built the largest dataset of graduate earnings. By pairing this with Open Banking data and a machine learning model, StepEx is able to reliably predict and verify an applicant’s future earnings. The company plans to be able to give course providers meaningful, data-driven feedback about pricing and the value courses are delivering.
Stephanie Hussels, Director of the Bettany Centre at Cranfield University, said: “The looming debt that faces students when they complete business school degrees effectively roadblocks people from reaching the career destination their talent promises. For Cranfield, Future Earnings Agreements will widen our student base, opening the opportunity of the very best that postgraduate education offers to people irrespective of income and social background. The benefits will ultimately be felt by organisations chasing talent from a broader spectrum – and by the economy, as more people realise the full potential of their abilities.”