Upstart announces a new way to invest — yes, actually invest — in a recent college grad

By Scott Kirsner, Globe Columnist

A new Silicon Valley company called Upstart launches today, with plans to make it possible for individuals to invest in the future success of a recent college grad — and potentially earn a return as their career takes off.

Upstart's founder is a Massachusetts native, former Google executive Dave Girouard, right, and one of his founding board members is Cambridge entrepreneur and angel investor Andy Palmer. The company's initial funding — $1.75 million — comes from Google Ventures, New Enterprise Associates, and Kleiner Perkins.

Here's how it will work: anyone wrapping up their undergraduate or graduate studies this spring at Upstart's five launch schools can create a profile on the site. (People who graduated in 2010 or later are also eligible.) They might be looking to raise money so that they can work on a startup, make an independent film, travel with an eye toward starting a non-profit, or begin a career as an artist. Similar to Kickstarter, other individuals can decide to put money toward their fundraising goal. But unlike that site, the recent grads who take the money must repay their backers a share of their income — no more than 7 percent, and over no more than 15 years of working. In years when they earn less than $30,000, they pay nothing. And the profit upside tops out at a 14.99 percent annual return to backers. (To fund its operations, Upstart will keep a 3 percent slice of the money invested in recent grads, and a 1.5 percent slice of the money returned to investors.)

Upstart is working with just five schools to start with, to "make sure the agreements are right, and that we have sufficient backers, and that the right processes are in place," Girouard says. The group includes Dartmouth College and the Rhode Island School of Design. And among the first group of students is Nathan Sharp, a 2012 graduate of Dartmouth's Tuck School of Business; he's working to launch the online shopping start-up PayOrPass. Sharp will be using the money he raises from Upstart to pay off the debt he racked up while earning his MBA, so that he can focus on the new venture.