Stepex £1.1M Funding

A company providing alternative student finance for postgraduate and technical education has raised £1.1m in pre-seed funding.

StepEx, the only fintech start-up to be regulated by the Financial Conduct Authority (FCA), provides student finance based on future earnings rather than debt.

Backed by BBVA Anthemis Venture Partnership, Triple Point Ventures and prominent angel investors, StepEx has secured £1.1m to fund further development of its machine learning model and user platform, as well as some senior appointments.

At present, only 2% of the population can afford to pay for a top postgraduate qualification.

Through its Future Earnings Agreements, StepEx aims to widen access to otherwise out-of-reach courses by providing finance based on projected future earnings.

Explaining the need for a new approach, StepEx Founder and CEO Daniel George said: “Finance for postgraduate and technical qualifications is outdated and prohibitive.

“The best courses are too expensive for the vast majority of potential students, and the costs are not covered by government loans.

“The Student Loans Company loses 80p for every £1 it lends - a public finance model simply isn’t viable when half of Masters graduates go on to earn less than the UK average so would never repay the loan.

“Debt is a poor solution to this problem, with lending terms based on past income, which restricts opportunity for younger and less wealthy individuals and limits upward social mobility.

“Outcome-based finance fixes this and opens up enormous economic opportunities for people who would otherwise be priced out of the kind of courses that unlock significantly higher earning potential.”

Under Future Earnings Agreements, students pay a percentage of their earnings for a fixed period, with repayment only triggered upon completion of their course and when they cross an agreed salary threshold based on StepEx’s forecast of their earnings.

StepEx charges course providers an upfront fee per student and takes a small commission on each monthly repayment.

Stephanie Hussels, Director of the Bettany Centre at Cranfield University, said: The looming debt that faces students when they complete business school degrees effectively roadblocks people from reaching the career destination their talent promises.

“For Cranfield, Future Earnings Agreements will widen our student base, opening the opportunity of the very best that postgraduate education offers to people irrespective of income and social background.”

Christhi Theiss, Head of BBVA Anthemis Venture Partnership at BBVA, added: “From the beginning of our journey, StepEx and its founder Dan stood out.

“His passion, know-how and grit impressed me. He effectively co-designed a new regulation over 18 months with the UK Government and succeeded to be the first regulated entity in Europe to offer Future Earnings Agreements.

“Many renowned educational institutions all over Europe are offering StepEx’s solution to their students, which increases diversity and financial inclusion – while also collecting an incredible amount of data to develop StepEx’s proprietary future income predicting tool.”

 Key takeaways:

  • Student loan debt is wiped off 30 years after graduation, with the Student Loans Company losing 80p for every £1 it lends
  • StepEx has designed a new regulation, Future Earnings Agreements, to provide student finance based on projected future earnings
  • For more examples of business funding success, head over to the UMi platform: https://www.weareumi.co.uk/webapp/finding-money/managing-money/.
Richard Dawson
Article by Richard Dawson
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