Current Dreamit accelerator company MPOWER Financing announced a $6M round of funding. DCInno covered their funding news:
Higher education is expensive in the U.S., especially for international students who don't have access to federal student loans. It's a problem that inspired Manu Smadja and Mike Davis, to found Washington, D.C.-based MPOWER Financing. The two-year-old startup connects students to loans from investors without the need for a co-signer, attracting Indian venture capital firm Zephyr Peacock to lead a $6 million funding round. Previous investors also joined the round, including area-firms 1776 Ventures and VilCap Investments.
"The more Zephyr took a look at us, the more interested they were in leading the round," Davis told DC Inno in an interview. "Zephyr is deeply involved in social impact and alternative finances and they have a deep understanding of what we are doing."
MPOWER specifically targets students who are performing well in school but lack the finances to finish, something that causes as much as 15 percent of students to drop out. Chosen applicants are offered a $25,000 loan, without needing a co-signer, to help them reach graduation. It also helps build credit histories and programs to improve financial literacy for successful applicants. Since it launched, MPOWER has received more than 4,500 applications and more than $100 million in loan volume according to Davis.
"It's already hard to pay for college, even before figuring out loans based on country of origin," Davis said. "There's still no financial institution addressing this need. MPOWER addresses it."
For MPOWER and the investors who provide the loan money, the payoff comes from the loan interest, which can range from about 8 percent to about 14 percent, depending. Unsubsidized by the government, those rates are higher than the federal loans available to American citizens. The students that receive loans are selected by an algorithm with an eye toward those who likely to be able to pay back the loans, including the one-time 5 percent fee tacked onto the loan at the start. Payments are set to be minimal until graduation however, growing after the graduate.
"We make sure to know and follow the [financial] regulations. We keep a close eye on regulatory changes," Davis said. "That way, regulatory changes are expected rather than anomalies that hit us by surprise."
The new funding will go toward adding to the company's overall reach. Along with new staff in the D.C. headquarters and New York City office, MPOWER is going to build a new office in Bangalore, where Zephyr is based.
"We're uniquely set up to capture international demand," Davis said. "India is by far the largest source of applicants, but the need is global."