Portuguese-Spanish startup StudentFinance may have found the key to unlock Europe's talent pool to solve the acute shortage of tech professionals faced by industries. With over 900,000 tech vacancies waiting to be filled in Europe, the fintech-edtech company has developed a smart screening process to match the right candidates to the right training courses to get the right jobs.
Based at its Madrid HQ, StudentFinance wants to make education career-driven and more accessible to all by adopting a model that leads to secure, decent employment without students needing to worry about the cost of paying for their studies, CEO and co-founder Mariano Kostelec said in a telephone interview.
This means targeting those who want to achieve high-impact careers or retrain themselves via educational programs adapted to the marketplace of the new digital economy. "Most of our students are close to 30 years old and want a change of career, so they are more experienced than 18-year old students," he said.
Under the Income Share Agreement (ISA), students pay nothing upfront. They only start to pay back the loans by instalments as a percentage of their salaries, once they start earning above an agreed threshold for a certain period of time. There's no obligation to pay off the loans if they are unable to secure a job, or can't get a job meeting the threshold salary requirements. The ISAs are essentially worry-free student loans to motivate more people to take up employment-focused training courses to acquire the skills urgently needed by potential employers.
This way, students have a more affordable and sustainable way to get the right skills for the right jobs. The ISA financing model is “a great model and it’s an amazing education for people for free,” said Geoff Ralston, President of Y Combinator.
High youth unemployment
Over 5m youth in Europe are not in education, employment or training known as NEETS, according to a report by the European Commission. Young people face specific challenges in the transition from school to work. Being new to the labor market, they are less likely to find a job without the right qualifications or work skills. The average youth unemployment rate across the EU was 14.2% in August 2019. Spain’s youth unemployment rate at over 32% was amongst the highest, alongside Greece and Italy.
Many jobseekers are being encouraged to retrain or upskill to get the right qualifications and work experience. But many are unable to get financial support, or are reluctant to become overburdened with huge debts while studying for professional qualifications or industry-specific courses.
In countries like Spain, university education is generally inexpensive, for EU nationals. But intensive courses for jobs in Industry 4.0 sectors, such as blockchain or UX/UI design, can cost as much as €5,000–€10,000. With 100,000 tech vacancies waiting to be filled in Spain alone, StudentFinance is offering ISAs for IT courses lasting less than one year.
StudentFinance is a pioneer in bringing ISAs to parts of Europe where there's no local competition, Kostelec told media. Its industry-focused tech programs do not include traditional university degrees. The company will also assist the students to find suitable roles and prepare them for job interviews. About 90% of the tech roles can be filled by the graduating students within three to six months,
The participating educational institutions and StudentFinance will share the cost for each student’s course. Partners like Ironhack, with campuses in Madrid and Barcelona, offer acceleration courses. The students only start paying 8–12% of their salaries for two years when they earn over €18,000 per annum, Kostelec told CompassList.
Smart screening optimizes success rates
The first of its kind in the Iberian Peninsula, StudentFinance has embedded proprietary AI-based predictive modelling into its ISA model. The company was originally founded in Lisbon in October 2018 by Kostelec and Miguel Amaro, who together also co-founded the popular student accommodation platform Uniplaces in 2012.
The startup soon moved to set up its head office in Madrid. Two more co-founders, Marta Palmeiro (CFO) and Sérgio Pereira (CTO), joined StudentFinance in 2019, the year the product was launched. Palmeiro is a partner at Pier Partners in Lisbon and Pereira is a tech consultant and an independent expert advisor to the European Commission.
With such a strong founding team, the new fintech venture quickly attracted the attention of well-known VCs and angel investors, raising €1.15m in seed funding in December 2019. The round was led by social impact firm Mustard Seed and investor-accelerator Seedcamp. Angel investors backing StudentFinance are some of the top names in the Portuguese startup scene: José Neves, founder of Portuguese unicorn Farfetch; Nuno Sebastião, co-founder of Portuguese financial fraud and risk management analytics startup Feedzai; and Carlos Oliveira, former Secretary of State for Entrepreneurship, Competitiveness and Innovation in Portugal.
The prime objective of StudentFinance's smart-screening platform is to boost employment and plug the skills gaps in high-demand tech sectors. Partner employers are matched to the best candidates to fill their job vacancies at a lower cost and faster rate than conventional recruitment processes.
StudentFinance analyzes real-time market data to identify in-demand skills and high growth areas in various tech sectors. The relevant IT programs offered by partner colleges are short-listed based on the quality of the curricula and the successful course completion rates leading on to full-time employment at desired salary thresholds.
Students are scored, not on their past employment or salary, but on their employability and potential future earnings before being accepted by the company to join its ISA program. The smart assessments help to ensure that the students selected are the right fit for the partner colleges and future employers. The StudentFinance chatbot can answer queries and provide application details to students, colleges and employers. Students can apply directly to the colleges for the courses recommended based on their assessment results. Partner colleges should also see lower dropout rates and increased enrolment through the automated selection process.
Win-win for all
Kostelec believes that the ISA model is more sustainable by optimizing skills training success rates and employability, the main areas where traditional models often fail.
“Traditional models, where schools are paid upfront, do not motivate the school to share in the student's development. Traditional student loans are used to subsidize any type of course, even if there’s no career prospects afterwards,” he explained.
StudentFinance will use the funding to expand its tech and sales teams, build a dedicated platform for partner colleges and recruit 500 new students in 2020. The company will also work with more employers to map out their HR plans and job fulfilment quotas. Ambitious plans are underway to scale across Europe, starting with the UK's lucrative education market and in the Netherlands.
“By the end of next year, we will be pan-European,” Kostelec said.
Its investors are equally enthusiastic. Mustard Seed said that the “pay-per-success” model ensures that there’s focus on employment outcomes, while removing the financial barriers from accessing quality education. StudentFinance has the right team to build the European category leader in the ISA space, Seedcamp said.