A 23 Year Old Backed By Mark Cuban, Eric Schmidt, and Peter Thiel Leads Upstart to Take on Lending Club and Prosper

At 23 years old, Paul Gu has attended Yale, been awarded a $100,000 grant as a Thiel fellow, co-founded Upstart, attracted millions in venture capital money, and is earning a 6-figure salary as Head of Product. Wow – what were you doing at 23?

Surprisingly, Paul found it nearly impossible to get a good rate for a loan. The banks wouldn’t lend, Prosper rejected him, and Lending Club offered him a loan with an interest rate in the high 20s. What gives? Using traditional credit scoring metrics, Paul has less than 3 years of credit history and is deemed high-risk.

Paul and his team at Upstart came to the realization that he is not alone and that there is an entire category of select “thin file” borrowers who have been overlooked by the system. These are recent graduates who have entered into the workforce with very promising career trajectories.

“We’re identifying prime borrowers before anybody else sees them,” said Dave Girouard, co-founder and CEO of Upstart.

In addition to credit and salary data, Upstart uses education-related variables to predict a borrower’s earning potential, employability and their propensity to repay the loan.

“We want to support those who just finished their education and are starting a job,” said Girouard, “In addition to looking at [your credit] and your income, we look at where you went to college, what your area of study was, how you performed academically.”

Since early 2013 Upstart has originated $3.5 million worth of income-sharing agreements to 309 people backed by 2,192 lenders. Upstart has used their intelligence in the income sharing business to formulate their new product that is launching today.

Introducing the Upstart Marketplace

Starting today, Upstart has launched a marketplace much like Lending Club and Prosper to offer three-year standard term loans available in all 50 states. Borrowers can request loans of $5,000 up to $25,000, and interest rates can range from 6.5% up to 20% APR.

Upstart’s new product crosses the boundaries of consumer and student loans, which means borrowers can use the funds for pretty much anything: to pay off credit cards, retire student loans, or pay tuition for a course.

Upstart’s investor marketplace will be available to accredited investors only and will offer fractional ownership in $100 increments. As you can see in the screen shot below, Upstart loans are given a letter grade and interest rate along with a progress chart to monitor funding levels. Investors can view details of each loan, but will not be able to see the identity of the borrowers.


Upstart also levels the field among individual and institutional investors by making all loans available on equal terms. In contrast to Lending Club and Prosper, Girouard said, all investors have access to every published loan since there is only a single pool of loans. Upstart’s platform offers lenders the ability to create filters for loans in which they’re interested. The investor, then, can automatically make a bid for those types of loans as they become available.

“Investors can set up as many rules as they want,” such as setting the maximum amount, risk grade of the loan, or even how the loan is (claimed to be) used, according to Girouard.

Borrower Acquisition Strategy

“We’ll have a steady flow of borrowers,” he continued. Upstart already has partnered with 13 coding bootcamps, which normally aren’t eligible for education loans, in the United States.

Borrowers, once verified and approved, can receive funds within 7 days, and can opt to defer their first payment for 3 or 6 months.

Aside from being able to discover early prime investments, Upstart has also structured itself to bolster loan repayment by not imposing fees for early repayment, and by educating borrowers on their finances and on how to improve their credit.

This education push has already paid off for Upstart’s investments, where they’ve “seen 3,056 unique repayments to backers in 14 months without a single default.”

“We understand that our borrowers are recent graduates, so we’re adding an educational component,” said Girouard.

Upstart is Well Positioned for A Borrower’s Life Cycle

Upstart is using educational data in a new way to bring something unique to market. They are able to expand the prime borrower market by uncovering a large overlooked pocket of borrowers. They are also in a great position to establish themselves early with borrowers who will need credit for many of life’s major purchases like a new car or a new home. While nothing has been announced, we can see how Upstart may be in a position to expand their offerings to other lending categories over time.

Paul Gu will be speaking at LendIt on May 6, and his panel will be available by webcast. We hope that he posts his loan request on Upstart. We will be the first in line to fund him!

Correction: The above post misidentified Paul Gu’s title. He is the Head of Product at Upstart. Also, Paul attended Yale University and has not graduated.

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Rich Wan
Apr. 23, 2014 6:40 pm

Awesome idea, good luck

Apr. 23, 2014 8:48 pm


What about the “income share” approach?


Are those loans up to $25k as well, or higher?

Nick Loper
Apr. 23, 2014 9:49 pm

Wow not a single default yet? That’s pretty impressive… even Prosper’s A and B grade notes default. I guess it’s early but curious to see where Upstart goes and if they open up to non-accredited investors.

Apr. 25, 2014 6:41 am
Reply to  Nick Loper

I would be skeptical of that, given the platform allows deferrals of various types. Default rate may not tell us much given the age of the platform and the ability to defer.

Andrew N
Andrew N
Apr. 24, 2014 7:34 am

I am considering going to one of those coding bootcamps. I’d certainly prefer to get a loan from my parents, or no loan at all, but I’ll consider using Upstart for a loan if the time comes.

Anil @ PeerCube
Apr. 26, 2014 12:18 am
Reply to  Andrew N

I don’t know why you want to go to bootcamp. But I will suggest that you do some research to see if bootcamp will help you achieve whatever you desire. There was recent discussion on Hacker News and opinions about bootcamp don’t seem to be glowing.


Apr. 24, 2014 9:46 am

Do listings detail current debt, including student loans?

Apr. 25, 2014 6:32 am

Interesting. I’m a little skeptical on how they’ll find people who manage credit wisely (a lot of graduates I know go a little crazy when they get a good job). The loan performance will be interesting to watch

Apr. 25, 2014 6:38 am

BTW I applied for a loan to see how my rate would compare to LC (I qualified A1 last time on LC I checked). I noticed a possible glitch you may want to relay to the site developer. In the “Select your plan” option, you can edit your amount of loan. When you edit it, everything updates but the monthly payment doesn’t update.

Apr. 25, 2014 6:53 am
Reply to  RawRaw

I figured it out — you have to press save. So it gives the appearance of updating, but its really not updating but just checking of the loan products exist for that loan type. It is kind of confusing why they just wouldn’t make it do both at once.

Anil @ PeerCube
Apr. 26, 2014 12:28 am

Another startup trying to find a niche to get a toehold in lucrative peer to peer lending marketplace!

I browsed the site but didn’t find any historical data on past loans listed. One of the reason Prosper and Lending Club succeeded because they provided historical data to build trust. How can someone verify this startup’s claim of no default in past 14 months? What assurance does this startup provide that any claims they make are legit and independently verifiable?

Without such data, there is just too much information asymmetry between borrower, platform operator and lenders for potential abuse and misinformation by platform operator. Any p2p startups that want lenders to take them seriously, they need to start publishing such data.

Apr. 27, 2014 10:28 am

LC started out with all this personal information out there. I thought there were privacy concerns and that’s why we can’t see borrower’s colleges?

Apr. 28, 2014 2:45 pm

I think their “income share” product is brilliant and quite innovative as it appears to take the venture equity approach and apply it to venture debt model instead. My only complaint about the page (https://www.upstart.com/incomeshare) is that it doesn’t give much granularity on the type of loans that would qualify? For example, what is the limit of such a loan of this type?

Mark Williams
Mark Williams
Dec. 24, 2014 12:43 pm

Subsequently Upstart.com has experienced substantial first payment default rates, suggesting borrowers are fraudulently obtaining loans with no intention of making repayment.

Upstart hasn’t explained whether these are borrowers who are choosing to default without making a single payment or fraudsters who are obtaining loans in someone else’s name.

In any case, their track record of 0 defaults is either no longer true or more likely a creative use of the word “default”.