You may wonder how the numbers in this sample funding card at the right are determined.
A three-step process results in the offer you see:
When a person applies to raise money on Upstart, we gather information such as schools she attended, major areas of study, SAT or ACT scores, work experience, outstanding job offers and other signals of accomplishment or potential.
We use this information to feed a statistical model we've developed that compares the applicant to others with similar backgrounds or achievements. Our model - what we call our "pricing engine" - is based on several public and private datasets and statistics, as well as proprietary qualitative measures.
The model attempts to predict the applicant's personal income over the expected life of an upstart contract. From this, we determine a funding rate - the amount of money the upstart can raise for each 1% of income shared. In the above example, Jane’s funding rate was $12,000 for each 1% of income shared.
Once we determine the funding rate, and communicate this rate to the applicant, she can decide how much money to raise. In the example above, Jane chose to share 3% of her income for 10 years. Given her funding rate of $12,000 per 1% of income shared, she was able to raise $36,000 for 3%. Upstarts are allowed to share no more than 7% of their income.
NOTE: Any estimate of returns is highly speculative, subject to a high degree of variability, and not based on historical experience. The pricing engine is novel and untested and relies on broad-based statistical data that may not be representative of any individual’s actual future income.
In the unlikely event that the upstart's income perfectly matches our statistical model and he or she reliably pays the income share due, backers could earn approximately 8% annualized return.