Millennials now represent more than one-third of the U.S. population. Tech savvy and fiercely motivated, this entrepreneurial bunch represents the largest share of the American workforce—1 out of every 3 employees.
Yet a recent poll reveals that more than half of millennials who dream of launching a start-up are trapped in unrewarding jobs, many outside their major of study, unwilling to take business risks. Why? Although this group is highly educated—61 percent attended college, compared with only 46 percent of baby boomers—nearly half are shouldering student loan debt of five figures or more.
Some young founders are undeterred. They've found ways to work full-time on a business, even with big student loan bills. Loan deferment, access to investors, peer networking and mentorship from top executives are the types of assistance in an entrepreneurship program run by SoFi, the largest online provider of student loan refinancing. So far, SoFi has helped 25 aspiring entrepreneurs get their businesses up and running—and with their newfound success they have now either paid off their student loans or made a big dent in the debt balance.
Here are 7 of the biggest millennials-overcoming-student-debt business success stories.
—By Barbara Booth, CNBC.com
Posted 12 August 2015
After graduating from Loyola University Chicago and receiving a master's degree in international economics from the University of California San Diego, Elena Lucas owed some $120,000 in student loans. To pay it off, she took a job as a business finance analyst at Pacific Electric and Gas, hoping that someday she could focus on renewable energy. After 14 frustrating months, Lucas took a job at a utility-scale wind company, but she was laid off six months later, in August 2014.
"I felt completely crushed by student debt, but I knew the large corporate environment was not for me," she said. Lucas began attending tech start-up events and networking. She soon met Daniel Roesler, a development engineer who had come up with the idea of an enterprise software company that would use data to make it easier and more cost effective for customers to shift to solar. He asked if she would be interested in leading the solar start-up as co-founder and CEO.
In late 2014, UtilityAPI only had genesis funding, from Better Ventures and SfunCube. Lucas raised an angel round in spring 2015—and received two investments from SoFi's network of angel investors. UtilityAPI has now raised more than $1 million in funding, including from the U.S Department of Energy's SunShot Catalyst Program.
After receiving his 96th loan rejection letter when seeking capital for a small gym franchise he helped build, Sam Hodges realized how broken the traditional banking system had become. Along with co-founder Alex Tonelli, he set out to launch Funding Circle—a peer-to-peer lending platform focusing exclusively on small businesses.
Yet with a student debt load of roughly half the cost of his Stanford education, Hodges was hesitant to jump in right away. "Starting your own thing with no income and no certainty of when you're going to get an income when you have a mountain of student debt is a scary thing," he said. "And it definitely kept me up at night. I had a negative net worth for most of my early days."
So in 2011 Hodges connected with a number of investors through SoFi, along with like-minded entrepreneurs who were going through their own struggles. The following year, Funding Circle received a $16 million round of series B funding from Index Ventures. To date, the company has raised around $300 million of equity capital from a number of investors, including Accel Partners, Baillie Gifford, BlackRock, Ribbit Capital and DST Global.
Funding Circle has now funded more than $1 billion in loans to 10,000 small businesses in the U.K. and the U.S.
A graduate of the University of Michigan with a bachelor of science degree in computer engineering, Benny Joseph went on to receive his MBA from the University of Chicago Booth School of Business. By the time he was done, he'd racked up about $120,000 in student loans. His interest rate, he said, was as high as 8.5 percent for some of his loans.
So instead of pursuing his dream of launching GoodApril, a company that makes tax-planning software intended to help users reduce their annual tax bill, he put his aspirations on hold and for three years worked as a product manager for Zecco, an online brokerage firm, to start paying down his loans. In 2013, after being rejected from incubator Y Combinator, Joseph applied to SoFi's newly created Entrepreneurship Program—and was accepted into its inaugural class.
Joseph crafted his pitch and was introduced to mentors and investors through the SoFi program, though it was a famed accelerator that led to the biggest success. GoodApril was acquired by Intuit for an undisclosed amount after he and his co-founders completed the Techstars start-up accelerator program in Boulder.
A Duke University MBA and Harvard undergrad, Andrew Dietrich was the only one of Final's co-founders shouldering a student loan debt. With his $80,000 loan, his monthly payments came to $1,000.
"As founders, you really have to be able to support yourself equally," he said. "You don't want to be a burden to the company. Every day, there are business challenges. Worrying about personal finances at the same time is all the more taxing."
The SoFi Entrepreneurship Program bought him some time, and Final was launched in late 2014 by Dietrich and co-founders Matt Rothstein, Aaron Frank, Ben Apel and Davis Godbout. The company is devoted to combating credit card fraud online and off by offering a card in which consumers have the ability to generate multiple, unique numbers that can be used with individual retailers. The new card numbers are generated or restricted using Final's web app, browser plugin, or mobile application.
The Colorado start-up was an instant hit with the community of accelerator Y Combinator. To date, Final has received $1 million in seed funding from Kima Ventures, Y Combinator, Ludlow Ventures and T5 Capital.
Photo caption: (Left to right) Final co-founders Ben Apel, Matt Rothstein, Davis Godbout, Andrew Dietrich and Aaron Frank.
Five years after receiving his graduate degree from the University of Virginia, James Barrett decided that if he could get his finances in order and reduce some monthly debt, he could finally focus on launching Tenant Turner, a software program that lets landlords find qualified tenants, list open properties on multiple websites and schedule showings for potential customers. At the time, his student loans, which totaled about $50,000, were his third-largest monthly expense, so his first task was to look into refinancing both his mortgage and his loans.
The SoFi program connected Barrett and his co-founders to Andrew Dietrich and the team at Final, who had just graduated from Y Combinator. Barrett was accepted into the Y Combinator start-up accelerator, and Tenant Turner, where Barrett is head of business development, thus far has raised $500,000 from Y Combinator, Lighthouse Labs, and other investors.
After receiving her MBA from Northwestern University's Kellogg School of Management, Jennifer Beall raised some money from friends and family to start CleanBeeBaby, an eco-friendly cleaning service for baby and toddler strollers and car seats—then worked full-time for a year and a half to begin paying down her $50,000 in student loans.
"Even though I'm an MBA and my investors are the kinds of people who invest in tech businesses traditionally, for most of the incubators—if you're looking at the Y Combinators and the Techstars of the world—you have to have a tech background, so I was just not eligible for those programs," she said.
Even SoFi was a little skeptical. "Apparently, they had to fight for me, because I was kind of on the bubble," she said. Nevertheless, Beall forged ahead, wrote up a business plan, and submitted it—and ended up being named SoFi Entrepreneur Program "Startup of the Year," receiving $150,000 in financing.
So far, Beall has raised $500,000 for her company, now called Tot Squad. It currently works with retailers in California and New York and began franchising this year.
In 2012, Ian Shakil and his co-founder, Pelu Tran, launched Augmedix, a service for physicians that aids them in electronic health reporting, freeing them to focus more on patient care.
For two years the former Stanford classmates worked on building the company, but by 2014, Shakil applied to the SoFi program to get some relief from his $100K student loan debt.
At that time, Augmedix was at the seed stage: Shakil and Tran had sourced less than $1 million. "We were just beginning to talk to institutional investors," said Shakil. A year later, Augmedix has now raised $30 million—$16 million from one round of Series A venture funding co-led by the company's seed investors Emergence Capital and DCM Ventures.
Augmedix currently has commercial operations in 10 states, with five national health systems in the U.S. using the Augmedix service.