This past summer CommonBond, the student loan startup founded by a trio of Wharton MBA students, did what no company has probably ever done: It employed more MBA interns than it had full-time employees. The startup had nine summer interns from top business schools while its full-time staff numbered just seven people.
“People thought we were crazy to have nine interns, but it worked,” laughs David Klein, the hyper-intense co-founder and CEO of CommonBond. “That [MBA loans] is the space we’re in, so it made sense, and we thought they were best prepared to drop in and immediately go to work.”
Chosen from more than 150 applicants, the interns–from Harvard, Wharton, Chicago, Columbia, New York University, Duke, UNC, Michigan, and Yale–were assigned to five functional areas, including customer engagement, operations, marketing, and investor relations. “More than half came from traditional backgrounds and wanted startup experience,” notes Klein. “There were a few who would be great consultants.”
It was one of the unexpected benefits of doing a business school startup. Klein and his co-founders, Michael Taormina and Jessup Sheen, began the company as MBA students at Wharton in 2011. Baffled at the cost of their loans, the team looked to create a crowd funding model for student lending based around tight-knit business school alumni networks. After a stint in Wharton’s Venture Initiation Program, an educational incubator, the team raised $3.5 million in seed capital and lending funds from Wharton alumni before launching in November 2012.
The really big break occurred 10 months later in September 2013 when CommonBond raised more than $100 million in financing from Tribeca Venture Partners in New York, Social+Capital Partnership in Silicon Valley, and several marquee investors, including former Citigroup CEO Vikran Pandit, former Thomson Reuters CEO Thomas Glocer, and ex-Barclays Vice Chairman Tom Kalaris. The vast majority of the funding, of course, will go to underwrite student loans.
The startup is going after students and graduates from the top 20 business schools by offering lower-cost loans than those from private lenders or the government. But Klein says he expects to raise an additional $500 million in 2014, and $1 billion the following year. With that additional funding, the company plans to offer loans and re-financings to law, medical, and engineering students next year.
To raise the $100-plus million, Klein says he connected with as many as 50 venture capitalists by phone and in person to nail down the financing. “VCs are not as bad as they are made out to be,” he notes. “They’re much more helpful than they get credit for.”
The difference between Silicon Valley and New York venture capitalists? “Every San Francisco VC will wear a fleece sweater vest and no one in New York will,” quips Klein. “And Silicon Valley VCs want to get excited by the idea. New York VCs want to get excited by the potential revenue. Bottom line: They have plusses and minuses but together they are the most powerful source of money to make good things happen.”