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From Pinecone
to Equify:
Our LLP Journey
Play Video Here
Our Mission: Reduce the burden of student debt
to unlock the full potential of U.S. grads
Equify
Student financing via flexible
and customizable loans
Pinecone ISA
Student financing via income share
agreements
3
Mike Saltzman Amir Damerdji Sam Abernethy Iryna Kryvda Leeor Mushin
Picker
MBA & BS Engineering
Hustler
MSx & MS Engineering
Hacker
PhD Applied Physics &
MS Mathematical Modelling
Hacker
MS Management Science and
Engineering
Designer
MBA & BBA/BA
100+ Interviews
How it All Started
5
We had to assemble the right team...
First Main Learnings
Who are our customers and
what do they actually want?
7
Test 001:
Which Customer and What Value Prop?
CUSTOMER
SEGMENTS
VALUE
PROPS
PROCEDURE
Undergraduate
s
Law Students
Med Students
Career Insurance
Payment Flexibility
Freedom of Career
Choice
1. Create different ad language for each target
group and value prop, target small batch of
FB ads to each group
X
3 3
Week 2
1. Undergrads & Career Insurance
2. Med Students & Payment Flexibility
HIGHEST
INTEREST
Jane
- Med School Grad
- Her debt = $250k
- Wants to pursue career as
family medicine Doc
- Pain point: cannot afford
debt payments early in her
career, so pushed into high
interest income-based loans
John
- Undergrad
- His debt = $35k
- Wants to pursue career in
entrepreneurship
- Pain point: a feast-or-
famine career makes
paying for debt uncertain
After 30+ Student Interviews
We Found 2 Representative Customers
8
Main Want: Career Insurance Main Want: Payment Flexibility
*Names changed / identities masked due to privacy concerns
Investors balked at the Income
Share Agreement
What happens when insurance pools
attract lopsided participants??
9
3-5%Earnings %
Students
Interest
Investor Interest
7-10% 15-20%
“You guys are selling two products as
one. Which do people really want? Can
you get investors onboard with that
one? Is my pocket square peeking out
the right amount?”
10
According to the CFOracle,
sometimes 1+1 = 0
Week 3
We had to face the music: a
financial product without investor
support would go nowhere
11
How can we ditch
the method but
stick to the
mission?
What if we were a
non-profit? Do we
want to be a non-
profit?
What is our real
mission,
anyway?
We pivoted our product while
keeping our core value props
A Loan with
Flexible
Payments
True to our mission
AND
investors should be able to
get behind it
12
Week 4
Out of
the
building!!
13
Med
Students
Biz
Students
Law
Students
Undergrad
Students
Avg. Debt $200k $80k $115k $30k
Income
Predictability
(1-10)
8 5 6 3
Early Career
$$ Stress (1-
10)
9
Stress?
Lol
5 5
Financial
Illiteracy (1-10)
8 2 5 5
13
In the
building
Week 5
The new product would benefit indebted Med
School grads
Business Model Canvas
Medical Students
(test market) - Often
have huge debt loads
and want flexibility
with repayment and
help optimizing their
finances
Educate students and
universities on impacts of
fixed vs. variable payments
Secure long-term capital
partners
Fund diversified group of
medical students
Institutional
Investors
Marketplace loan
purchasers to fund our
book of loans
Medical Schools /
thought leaders to serve
as a potential evangelists
Fees: Take an up front % of all funding issued to
students + Loan Servicing Fee
Capital: A capital base
with long time horizons
Cooperation: we’ll align our
incentives with theirs
Simplicity: we’ll demystify
tricky topics
Transparency: we’ll be up
front about how and when we
make money
Capital Cost: What will investors demand?
Customer Acquisition Cost: How much to attract and sign
up a student?
Servicing Cost: How much to service the agreements over
time?
Trusted Intermediaries:
Partner with financial aid
offices to reach students
Targeted Online Funnels:
Media spend combined with
fast online intake process
Subject Matter Experts:
Associate with online student
financial planning sources,
earn trust through expertise
Delay Payments until you
are more able to handle
them
Smart Repayment that
optimizes across your
circumstances and goals
Transparency and
convenience in monitoring
and controlling payments
Accountability for
individuals who know what
is best for them logically
but who don’t always
execute
Our product: student loans with flexible payments,
tailored to borrowers’ income and needs
15
Week 6
Our product: student loans with flexible payments,
tailored to borrowers’ income and needs
16
Week 6
Our product: student loans with flexible payments,
tailored to borrowers’ income and needs
17
Week 6
Our product: student loans with flexible payments,
tailored to borrowers’ income and needs
18
Week 6
Our product: student loans with flexible payments,
tailored to borrowers’ income and needs
19
Week 6
Our product: student loans with flexible payments,
tailored to borrowers’ income and needs
20
Week 6
Our product: student loans with flexible payments,
tailored to borrowers’ income and needs
21
Week 6
Not that simple: Borrowers like Jane value
transparency and accountability
22
Week 6
Over 30 Med
Students /
Residents /
Doctors
interviewed
How can we help? Think of Betterment, but for loans
23
Jane the Doctor
MVP 2.0: Visualizing our loan optimization
24
Week 7
Business Model Canvas
Medical Students
(test market) - Often
have huge debt loads
and want flexibility
with repayment and
help optimizing their
finances
Educate students and
universities on impacts of
fixed vs. variable payments
Secure long-term capital
partners
Fund diversified group of
medical students
Institutional
Investors
Marketplace loan
purchasers to fund our
book of loans
Medical Schools /
thought leaders to serve
as a potential evangelists
Fees: Take an up front % of all funding issued to
students + Loan Servicing Fee
Capital: A capital base
with long time horizons
Cooperation: we’ll align our
incentives with theirs
Simplicity: we’ll demystify
tricky topics
Transparency: we’ll be up
front about how and when we
make money
Capital Cost: What will investors demand?
Customer Acquisition Cost: How much to attract and sign
up a student?
Servicing Cost: How much to service the agreements over
time?
Trusted Intermediaries:
Partner with financial aid
offices to reach students
Targeted Online Funnels:
Media spend combined with
fast online intake process
Subject Matter Experts:
Associate with online student
financial planning sources,
earn trust through expertise
Delay Payments until you
are more able to handle
them
Smart Repayment that
optimizes across your
circumstances and goals
Transparency and
convenience in monitoring
and controlling payments
Accountability for
individuals who know what
is best for them logically
but who don’t always
execute
26
Borrower Feedback
“If I could get private
bank rates WITH
income-based
repayment, I would
sign up in a heartbeat”
Irina (MD)
“I love that the loan is
personalized for me.
That’s huge”
Thomas (Undergrad)
“Terrific. I love the
simple online portal-
currently I need 4
logins to download all
my loan data.”
Chris (MBA)
Potential Product-
Market Fit with
Borrowers Conditional
on Similar Rates to
Existing Players
27
Loan Investor Feedback
“Variable liquidity is a
tradeoff between
borrower and lender.
They won’t like it.”
Matt Reeder, Theorem
“You need to figure out
exactly what 1000 loans
like this look like. When do
people delay? When do
they prepay? What asset is
this?”
Derek Weiss, FFL
Partners
“Once you prove out the
first 100 loans, buyers
will take you seriously.
But until then you’ll be
funding loans out of
equity.”
Jeremy Solomon,
Affirm
Product Market Meh,
but promising..
We Reduced the Balance Sheet by Making Bridge
Loans
28
Week 8
Reduction of Balance
Sheet Exposure by
83%!
We’re moving ahead, with challenges in sight
1. Demand from
potential borrowers
1. Understanding what
investors need
1. Big institutional buy in
1. Working with a smaller
balance sheet
1. Vulnerability to copy-
cating by the big guys
1. Competing with
aritificially cheap loans
1. Efficient, succinct
product messaging
29
Our Strengths Our Remaining Challenges
Next Steps:
✗ Majority of team continuing
✗ Secure funding for first round
of loans
✗ Full analysis of “Bridge Loan”
✗ Continue to optimize
customer acquisition model
✗ Build an online personal
finance portal
✗ Find and build partnership with
loan servicer
30
31
Thanks!
Especially to the teaching
team, Mike Dorsey, the TAs,
and our classmates!
Appendix
32
Freedom: Make the best
career choices for your
future, not for next month’s
debt payment.
Cost Reduction: The price
of education should be
relative to the financial
rewards it provides
Risk Reduction: Never get
squeezed by your fixed
student debt payment, no
matter what happens
Delay Payments until you
are more able to handle
them
Original Business Model Canvas
Mid-tier college
students Typically
have the highest
unsubsidized debt
loads upon graduation
Grad Students (Law,
Med) Often have
highest absolute debt
loads and may want
flexibility with
repayment
Educate students and
universities on impacts of
fixed vs. variable payments
Secure long-term capital
partners
Fund diversified group of
students
Institutional
Investors willing to be
among the first
holders of this (for
now) illiquid asset
Universities willing to
include our ISAs when
they present financing
options to students
Collection Agencies
to outsource the
ongoing servicing
work
Fees: Take an up front % of all funding issued to
students
Performance: Receive an ongoing share of the
repayments from students
Capital: A capital base
with long time horizons
and comfort with
illiquidity
Data: Need the
information to build
advanced prediction
models
Cooperation: we’ll align our
incentives with theirs
Simplicity: we’ll demystify
tricky topics
Transparency: we’ll be up
front about how and when we
make money
Capital Cost: What will investors demand?
Customer Acquisition Cost: How much to attract and sign
up a student?
Servicing Cost: How much to service the agreements over
time?
Infrastructure: how much to develop the prediction model?
Trusted Intermediaries:
Partner with financial aid
offices to reach students
Targeted Online Funnels:
Media spend combined with
fast online intake process
Subject Matter Experts:
Associate with online student
financial planning sources,
earn trust through expertise
Highlight VP and customers

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Equify engr 245 lean launchpad stanford 2019

  • 3. Our Mission: Reduce the burden of student debt to unlock the full potential of U.S. grads Equify Student financing via flexible and customizable loans Pinecone ISA Student financing via income share agreements 3 Mike Saltzman Amir Damerdji Sam Abernethy Iryna Kryvda Leeor Mushin Picker MBA & BS Engineering Hustler MSx & MS Engineering Hacker PhD Applied Physics & MS Mathematical Modelling Hacker MS Management Science and Engineering Designer MBA & BBA/BA 100+ Interviews
  • 4. How it All Started
  • 5. 5 We had to assemble the right team...
  • 6. First Main Learnings Who are our customers and what do they actually want?
  • 7. 7 Test 001: Which Customer and What Value Prop? CUSTOMER SEGMENTS VALUE PROPS PROCEDURE Undergraduate s Law Students Med Students Career Insurance Payment Flexibility Freedom of Career Choice 1. Create different ad language for each target group and value prop, target small batch of FB ads to each group X 3 3 Week 2 1. Undergrads & Career Insurance 2. Med Students & Payment Flexibility HIGHEST INTEREST
  • 8. Jane - Med School Grad - Her debt = $250k - Wants to pursue career as family medicine Doc - Pain point: cannot afford debt payments early in her career, so pushed into high interest income-based loans John - Undergrad - His debt = $35k - Wants to pursue career in entrepreneurship - Pain point: a feast-or- famine career makes paying for debt uncertain After 30+ Student Interviews We Found 2 Representative Customers 8 Main Want: Career Insurance Main Want: Payment Flexibility *Names changed / identities masked due to privacy concerns
  • 9. Investors balked at the Income Share Agreement What happens when insurance pools attract lopsided participants?? 9 3-5%Earnings % Students Interest Investor Interest 7-10% 15-20%
  • 10. “You guys are selling two products as one. Which do people really want? Can you get investors onboard with that one? Is my pocket square peeking out the right amount?” 10 According to the CFOracle, sometimes 1+1 = 0 Week 3
  • 11. We had to face the music: a financial product without investor support would go nowhere 11 How can we ditch the method but stick to the mission? What if we were a non-profit? Do we want to be a non- profit? What is our real mission, anyway?
  • 12. We pivoted our product while keeping our core value props A Loan with Flexible Payments True to our mission AND investors should be able to get behind it 12 Week 4
  • 13. Out of the building!! 13 Med Students Biz Students Law Students Undergrad Students Avg. Debt $200k $80k $115k $30k Income Predictability (1-10) 8 5 6 3 Early Career $$ Stress (1- 10) 9 Stress? Lol 5 5 Financial Illiteracy (1-10) 8 2 5 5 13 In the building Week 5 The new product would benefit indebted Med School grads
  • 14. Business Model Canvas Medical Students (test market) - Often have huge debt loads and want flexibility with repayment and help optimizing their finances Educate students and universities on impacts of fixed vs. variable payments Secure long-term capital partners Fund diversified group of medical students Institutional Investors Marketplace loan purchasers to fund our book of loans Medical Schools / thought leaders to serve as a potential evangelists Fees: Take an up front % of all funding issued to students + Loan Servicing Fee Capital: A capital base with long time horizons Cooperation: we’ll align our incentives with theirs Simplicity: we’ll demystify tricky topics Transparency: we’ll be up front about how and when we make money Capital Cost: What will investors demand? Customer Acquisition Cost: How much to attract and sign up a student? Servicing Cost: How much to service the agreements over time? Trusted Intermediaries: Partner with financial aid offices to reach students Targeted Online Funnels: Media spend combined with fast online intake process Subject Matter Experts: Associate with online student financial planning sources, earn trust through expertise Delay Payments until you are more able to handle them Smart Repayment that optimizes across your circumstances and goals Transparency and convenience in monitoring and controlling payments Accountability for individuals who know what is best for them logically but who don’t always execute
  • 15. Our product: student loans with flexible payments, tailored to borrowers’ income and needs 15 Week 6
  • 16. Our product: student loans with flexible payments, tailored to borrowers’ income and needs 16 Week 6
  • 17. Our product: student loans with flexible payments, tailored to borrowers’ income and needs 17 Week 6
  • 18. Our product: student loans with flexible payments, tailored to borrowers’ income and needs 18 Week 6
  • 19. Our product: student loans with flexible payments, tailored to borrowers’ income and needs 19 Week 6
  • 20. Our product: student loans with flexible payments, tailored to borrowers’ income and needs 20 Week 6
  • 21. Our product: student loans with flexible payments, tailored to borrowers’ income and needs 21 Week 6
  • 22. Not that simple: Borrowers like Jane value transparency and accountability 22 Week 6 Over 30 Med Students / Residents / Doctors interviewed
  • 23. How can we help? Think of Betterment, but for loans 23 Jane the Doctor
  • 24. MVP 2.0: Visualizing our loan optimization 24 Week 7
  • 25. Business Model Canvas Medical Students (test market) - Often have huge debt loads and want flexibility with repayment and help optimizing their finances Educate students and universities on impacts of fixed vs. variable payments Secure long-term capital partners Fund diversified group of medical students Institutional Investors Marketplace loan purchasers to fund our book of loans Medical Schools / thought leaders to serve as a potential evangelists Fees: Take an up front % of all funding issued to students + Loan Servicing Fee Capital: A capital base with long time horizons Cooperation: we’ll align our incentives with theirs Simplicity: we’ll demystify tricky topics Transparency: we’ll be up front about how and when we make money Capital Cost: What will investors demand? Customer Acquisition Cost: How much to attract and sign up a student? Servicing Cost: How much to service the agreements over time? Trusted Intermediaries: Partner with financial aid offices to reach students Targeted Online Funnels: Media spend combined with fast online intake process Subject Matter Experts: Associate with online student financial planning sources, earn trust through expertise Delay Payments until you are more able to handle them Smart Repayment that optimizes across your circumstances and goals Transparency and convenience in monitoring and controlling payments Accountability for individuals who know what is best for them logically but who don’t always execute
  • 26. 26 Borrower Feedback “If I could get private bank rates WITH income-based repayment, I would sign up in a heartbeat” Irina (MD) “I love that the loan is personalized for me. That’s huge” Thomas (Undergrad) “Terrific. I love the simple online portal- currently I need 4 logins to download all my loan data.” Chris (MBA) Potential Product- Market Fit with Borrowers Conditional on Similar Rates to Existing Players
  • 27. 27 Loan Investor Feedback “Variable liquidity is a tradeoff between borrower and lender. They won’t like it.” Matt Reeder, Theorem “You need to figure out exactly what 1000 loans like this look like. When do people delay? When do they prepay? What asset is this?” Derek Weiss, FFL Partners “Once you prove out the first 100 loans, buyers will take you seriously. But until then you’ll be funding loans out of equity.” Jeremy Solomon, Affirm Product Market Meh, but promising..
  • 28. We Reduced the Balance Sheet by Making Bridge Loans 28 Week 8 Reduction of Balance Sheet Exposure by 83%!
  • 29. We’re moving ahead, with challenges in sight 1. Demand from potential borrowers 1. Understanding what investors need 1. Big institutional buy in 1. Working with a smaller balance sheet 1. Vulnerability to copy- cating by the big guys 1. Competing with aritificially cheap loans 1. Efficient, succinct product messaging 29 Our Strengths Our Remaining Challenges
  • 30. Next Steps: ✗ Majority of team continuing ✗ Secure funding for first round of loans ✗ Full analysis of “Bridge Loan” ✗ Continue to optimize customer acquisition model ✗ Build an online personal finance portal ✗ Find and build partnership with loan servicer 30
  • 31. 31 Thanks! Especially to the teaching team, Mike Dorsey, the TAs, and our classmates!
  • 33. Freedom: Make the best career choices for your future, not for next month’s debt payment. Cost Reduction: The price of education should be relative to the financial rewards it provides Risk Reduction: Never get squeezed by your fixed student debt payment, no matter what happens Delay Payments until you are more able to handle them Original Business Model Canvas Mid-tier college students Typically have the highest unsubsidized debt loads upon graduation Grad Students (Law, Med) Often have highest absolute debt loads and may want flexibility with repayment Educate students and universities on impacts of fixed vs. variable payments Secure long-term capital partners Fund diversified group of students Institutional Investors willing to be among the first holders of this (for now) illiquid asset Universities willing to include our ISAs when they present financing options to students Collection Agencies to outsource the ongoing servicing work Fees: Take an up front % of all funding issued to students Performance: Receive an ongoing share of the repayments from students Capital: A capital base with long time horizons and comfort with illiquidity Data: Need the information to build advanced prediction models Cooperation: we’ll align our incentives with theirs Simplicity: we’ll demystify tricky topics Transparency: we’ll be up front about how and when we make money Capital Cost: What will investors demand? Customer Acquisition Cost: How much to attract and sign up a student? Servicing Cost: How much to service the agreements over time? Infrastructure: how much to develop the prediction model? Trusted Intermediaries: Partner with financial aid offices to reach students Targeted Online Funnels: Media spend combined with fast online intake process Subject Matter Experts: Associate with online student financial planning sources, earn trust through expertise Highlight VP and customers

Editor's Notes

  1. Our mission has always been to reduce the burden of student debt and allow graduates to flourish. That said, we’ve evolved our approach to that mission significantly over the course of this class.
  2. To show you how we got there, let’s take a step back.
  3. For about 12 months before GSB, I was a macro credit investor at Bridgewater and was studying consumer debt. I had the idea of solving student debt with new-fangled Income Share Agreements, and selling those to investors hungry for that type of return profile. Income share agreements would allow students to finance their tuition in exchange for a small percentage of their income for a set number of years after graduation. After pitching the concept at some of the LLP pitch nights, I connected with Amir, who was extremely financially savvy and passionate about the problem. The two of us recruiting great data scientists, Sam and Iryna, and a consumer guru, Leeor.
  4. To drive learnings, we did a facebook test, isolating different value propositions of our income share agreements
  5. These learnings solidified as we interviewed more than 30 students. 2 archetypes emerged: the undergrad entrepreneur and the medical doctor.
  6. The problem with the income shares were that we couldn’t find a sweetspot of pricing that would appeal to investors and borrowers alike. The lower the income share, the less investors liked it. The higher the share, the fewer top tier students wanted to participate, leaving lower earning students, and furthering they cycle.
  7. We continued to speak to individuals like Jane, and by Week 6, we had spoken to over 30 students. They all voiced 2 pain points: 1. They’re not financially savvy (they just don’t have a clue how much they owe and they’re just concerned about how much they have to pay) and 2. They don’t have time to manage their loans → Value transparency and accountability ⇒ How can we help them?!
  8. We looked at robo optimizers that exist, a model like the one of Betterment stuck out → Loan payment optimizer that proactively manages loan payments based on income earned, expenses and goals. And provides complete information live
  9. Sam - This bold font will be tough to read I think
  10. Sam - This bold font will be tough to read I think
  11. The majority of our team is continuing with the Lean method of hypothesis testing. We’re now focused on delivering innovation via term flexibility and are continuing to work on building our initial product that combines a flexible loan, a low rate, and an online personal finance optimization portal
  12. Our first MVP was a pricing tool to give ball-park quotes to our interviewees to gauge their reaction.
  13. We developed two main realizations, centering on the pains and gains of our potential solution. Doctors had more predictable careers, so they didn’t need the ‘career insurance’ concept, but they wanted to delay their payments until their income rose. Undergrads were different- high potential earners didn’t want to give away upside, whereas low earners wanted to game the system.