Deal Summary
I made a $100 investment into Avenify as a Crowd SAFE security at a valuation cap of $4M and a 20% discount using the Republic platform. For more information on the deal, check out their deal page. Overall, I think that ISAs have a large market opportunity, which is the primary driver of my investing. This is a scrappy first-time founding team in a highly competitive space, so there are plenty of risks. Founder passion, a good MVP, and a low valuation cap make this an attractive deal.
Company Summary
Avenify is a marketplace lending platform for Income Share Agreements, enabling students to finance their education debt-free, funded by investors looking to invest in student success. Students can apply for up to fifteen thousand dollars ($15,000) per semester and do not make payments until they are employed and earning above $20K annually. Unlike a loan, where borrowers owe principal plus interest, borrowers promise a share of their future income for a fixed amount of time. Students are funded with capital from investors on the platform who are looking to invest in student success. After investing in a fund or individual, the investor can receive dividends once borrowers begin making payments on their ISA. The company earns revenue by taking 2% of the amount invested upfront and 1.5% of all student payments.
Company website: https://avenify.com
Total Addressable Market
The private student loan market is estimated to be +$11B. Education costs have continued to increase over the years, and crippling student loan debt has left an entire generation of individuals with a financial burden. I’m fortunate enough (and grateful every day) not to have student loan debt, but I am consistently reminded about this problem through candid discussions with others. Alternative financing options for education and overall innovation and disruption in this market is not only something I believe is necessary but is also something I believe is venture scalable.
Product
Avenify has an established MVP website that supports their two-sided marketplace. Students can apply for ISA financing, and using several data points and a rigorous evaluation process, the team can choose to approve that student or not. The other side of the marketplace allows investors to place money into a student investment, earning returns on that investment when a student graduates, gets a job and begins payments on the ISA. ISA terms are typically 1-5% of income over a 120 month period.
Team
First-time founders, which can be concerning. They both have experience working for startups (Justin, CEO, even worked for the Republic platform). The biggest draw here is that these two went through the student loan process and are both in a generation of people who constantly see this financial burden’s pain. Mission-oriented founders and this is why I am choosing to back them.
Customers
Avenify’s customers exist on both sides of the ISA financing model. Students receive the funding they need to pursue their college degrees, with flexible, student-friendly terms—investors who can make an impact with their investment, diversify their portfolio, and earn a return. Currently, the company isn’t generating any revenue from customers, but they do have signups in progress. They market their financing options primarily to students pursuing their undergraduate, graduate, or doctoral education. They market the opportunity to invest in ISAs primarily to accredited investors (Generation X and Generation Y).
Traction
Since launching to students in May 2019, Avenify has grown to over 2,000 student signups and processed over 500 applications for funding from schools including Cornell University, the University of Pennsylvania, and Lambda School. They are on track to reach 10,000 students and process 2,500 applications in 2020. Avenify launched to investors in late July and grew organically to over 100 investors in just three weeks. To support the student demand, they are focused on growing their investor base to 1,000 investors, and are in active conversations with institutions focused on backing ISA programs. The company plans on issuing at least 250 ISAs each semester, averaging $10,000 each. They are projecting $100,000 in revenue in 2020 from upfront investor fees.
Other Criteria
The founders are scrappy. They’ve raised $100K from Angel Investors, Dimension VC, and Oyster Ventures. With that cash, they built their MVP, launched their business, and got initial signups. All promising signs. This is a highly competitive space, and they will likely have difficulty differentiating themselves from other ISA providers. The marketplace approach – catering to both students and investors – is likely their biggest differentiator at this point. With that said, a rising tide lifts all boats, and there is plenty of market share to go around. The low $4M valuation cap is attractive.