PIGLT turns to the crowd to help fill higher education piggybanks
There has been a lot of innovation in recent years in the way education is delivered. But technology has done little to change the way that higher education, specifically, is paid for. Students still lobby for grants and scholarships. Families still save for years only to still require massive loans in most cases. As the rising cost of education far outpaces inflation, this problem continues to grow.Los Angeles-based PIGLT (pronounced "pig-let") is attempting to solve this problem by tapping into another major trend: crowdfunding. That’s right, PIGLT wants to crowdfund higher education. And while it may seem radical and unlikely at first pass, there’s some merit to the idea.
PIGLT’s version of higher education crowdfunding piggybacks (pun intended) on several other familiar concepts related to colleges and universities: alumni donations, internships, and job placement. The startup believes that it can pull on the heart strings of alumni to reroute their donation dollars away from impersonal “general use” projects like new parking lots and fitness centers toward specific recipients to whom they can attach a name and a face. Think of it like World Vision’s Sponsor a Child programs, but for ambitious young students.
Those seeking funding on the platform, known as “Dreamers,” can request that “Believers” pay contribute to either current education expenses or existing debt from past education. In either case, the funds raised are remitted by PIGLT directly to the school or lender so that the backers know the funds are being used as advertised. The company also protects Believers by verifying a Dreamer’s enrollment status and loan details prior to approving each campaign.
In the case of current students, the full amount requested must be raised before funds are released. This is because if a semester course costs $3,000, sending just $1,000 to the university won’t guarantee enrollment. Therefore it is recommended that campaigns be listed in small, achievable increments, rather than seeking $100,000 at a time to pay for a four year degree. In the case of campaigns tied to existing debt, funds are released immediately.
In exchange for financial contributions, Dreamers offer Believers their skills or products created. For a law student, this might mean free legal consulting, while for a graphic design student it might be logo or website design work. In all cases, promises of future earnings are expressly forbidden. Further, there is no legal contract obligating Dreamers to fulfill their obligations. Instead the site plans to rely – precariously in my opinion – on social pressure and the honor system to ensure follow through.
The ultimate goal is that the short term exchange of services under PIGLT will lead to long term employment or ongoing business relationships between Dreamers and Believers. Believers can even proactively create PIGLT Funds in search of a qualified Dreamer. In that sense, the arrangement becomes a lot like a paid internship.
PIGLT is has been in private beta for approximately one month, allowing Dreamers to setup campaigns and Believers to list funds, but has not yet turned on funding. When campaigns go live in June, the company expects to have between 30 to 50 Believer funds committed with likely 100 to 150 Dreamers. The company is targeting a 70 to 30 Dreamer to Believer ratio over the long term.
PIGLT will collect a fee of between 5 and 8 percent of a successful funding depending on whether it is for current or past education debt and whether the campaign goal is met or not. All payments are facilitated through PayPal. While the founders considered BrainTree and Swipe, they say they found PayPal’s API to be more dynamic, and found it to be in better regulatory standing across all states than any other platform. The company recommends that Dreamers include the cost of platform commissions and PayPal fees in their campaign funding goals.
Interestingly, PIGLT does not facilitate one-to-one private conversations between Dreamers and Believers. Rather, everything happens within the site’s public forums, unless the two parties make connect on their own through other channels. The reason for this is to reduce the chance of impropriety through negotiation or bartering of services.
PIGLT was co-founded by its CEO Casey Wallace and CTO Vidya Chokkalingam. Wallace is a graduate of the US Air Force academy meaning that he completed his undergraduate education debt free. It was only after marrying a lawyer that he realized the burden that educational debt was wreaking on families.
The pair are currently participating in the business school incubator program at Loyola Marymount University which offers mentorship and business development, but makes no investment and takes no equity. PIGLT raised $50,000 in September from a single angel investor but has been otherwise bootstrapped since its formation in May. The company has just three full time employees, including its founders, and relies on a part time outsourced team in India to supplement its technical needs.
PIGLT is hoping to host as many as 3,000 campaigns in its first 12 months. By reference, Kickstarter has hosted more than 90,000 campaigns and seen more than 40,000 meet their funding goals over four years. The challenge for PIGLT won’t be attracting Dreamers – there are no shortage of people burdened by education debt, after all. The major hurdle will be attracting enough Believers interested in putting their money to work in this unusual manner. As such, if the company can achieve a 25 percent successful funding ratio, meaning 750 campaigns funded in year one, that would be a monumental accomplishment.
The company is not alone in the industry. Upstart, Funding4Learning, FundAGeek, Rally, and others have all taken on the issue, most with an indenture or philanthropy model. PIGLT is unique in its desire to create longer term relationships between financiers and those seeking backing. If anything, the model seems to be the most scalable and attractive from a societal good point of view.
The story of education crowdfunding is just beginning to be written. Often the best ideas are ones that are dismissed or misunderstood initially. My hunch is that a dominant model will emerge from PIGLT and the multitude competing platforms, and that one day soon it will be commonplace to leverage the power of the crowd to pay for education.