Crazy Idea: Pre-seed funding with Student Loans
Jason Belich stashed this in funding
Like many of us here in the valley, I have an idea.
(Doesn't matter what it is, but for the record a secure-by-design IoT/Cloud platform. Anyway...)..
I'm a developer. I know what I want to build. There are a few aspects I don't know as well as I'll need to, so I need to learn those things. This is even more true for the business/start-up aspects, but it all boils down to time. I need to be able to survive while I take the time to build this idea into something workable... In other words, I need what we call in the valley "pre-seed" funding.
Also, let's say, for the sake of argument, that I need more build-time than a typical angel, seed investor, or incubator would allow due to the financial risk involved: namely, the threat of bankruptcy over time.
Let's further say, for the sake of argument, that the start-up process is, at it's core, an educational process. In my case, I need to learn about cryptographic math, kernel internals, and probably assembly language.. and that's just to build the platform. I'll also need to learn how to build and run a business, conduct sales, support customers and the like. Educational.... as in.. I'm a student, in very self-directed study.
So why not treat pre-seed funding like a student loan?
Particularly, the inability to discharge student debt in bankruptcy (Note: This is how student debt works in the US, your kilometerage may vary ;-) ).
I do not know about the specific legalities of what is or is not a student loan, technically, but some sort of custom package could be built, perhaps in partnership with a university.
Is anyone doing this?!? I really really really want to know!
I'm thinking about going to my credit union with this idea, since they often do custom loans. I know I could get $100k or more from an investor or few, as collateral or surety, for an equivalent personal loan with "student" terms. I just don't know if anybody's even thought of this, or if current laws permit it.
I read this the other day. Don't know if it fits with what you want/need, but it does offer a good premise:
Program Links Loans to Future Earnings
yeah I looked at all of those... they've _all_ pivoted towards a more traditional lending model since that article
what i'm suggesting is more similar to an incubator coupled with the inability to discharge the debt in bankruptcy court.
okay i've found, and am digging through, the relevant laws here... it seems it requires one to be enrolled at least half time in an institution that satisfies the criteria of section 487 of the Higher Education Act of 1965 (which points to section 485, which itself describes a bunch of bureaucratic crap that colleges are required to do)
hrm... it's looking like the only way to finagle such an idea is through a college or university... so an incubator + education = incucation
I haven't ever heard of anyone doing this, probably for the reasons you describe.
Yeah :-\. It looks like it's possible, but requires jumping thru quite a few bureaucratic hoops. Could be an interesting business concept for someone with the wherewithal.
Or that someone could just apply her/his brain to something more worthwhile. :)