Manu Smadja of MPOWER Financing
An exclusive Tech Tribune Q&A with Manu Smadja (co-founder and CEO) of MPOWER Financing, which was honored in our:
Tell us the origin story of MPOWER – what problem were you trying to solve and why?
My experience mirrors that of our students. I moved to the U.S. as an international student from France to study engineering at the University of Virginia. During my time there, I struggled to pay for my education, but eventually earned enough money by tutoring in math, physics, computer science, French, and refereeing indoor soccer. However, it always bugged me that it was difficult for international students to finance their education abroad.
I later completed an MBA from INSEAD and worked at the consulting firm McKinsey & Company, where I focused on global financial inclusion.
That’s when a student from the University of Virginia reached out for support. He was from Mexico and only had a few semesters left, and he was going to drop out because of a small amount of money. After speaking with him, I sent him the funds, but realized I had to solve this problem for real. That’s what motivated me to co-found MPOWER Financing.
After what I personally experienced and what I saw firsthand, I realized international students have an extremely hard time securing the financing needed for their education. From that point, I knew I wanted to make a difference for other international students.
Fast forward to today, there are still limited financing options available for international students. The straw that broke the camel’s back for me was when I learned a student at my alma mater was about to drop out of school for financial reasons, a situation that could have been avoided with better access to financing options! That’s what inspired my co-founder and I to actively help and reinvent the loan industry for underserved students.
Almost nine years later, we are on a great trajectory and have helped secure financing for thousands of hardworking international and DACA students.
What was the biggest hurdle you encountered in your journey?
While we had prior experience in financial services, our idea of leveling the services for international students in educational lending was nascent. Funding for international students was not really available in the marketplace at the time. In the beginning, we received feedback from industry peers to quit.
“No one has cracked the international student lending space – you should focus on another problem,” we were told.
While this was frustrating at the time, for us, this affirmed the problematic gap that existed in lending. After all, new ideas in business often stem from being dissatisfied with the status quo. Based on our own experiences, we knew we needed to find a way to introduce new educational funding options for international students.
While nobody else had cracked the problem at that point, we identified the key was finding out how to lend to international students without requiring a co-signer or collateral. Instead of focusing on the past, we needed to convince investors that investing in students’ futures was a value-driven business model.
After all, a forward-looking lending model was not conventional in the space and there was no clear-cut mechanism to prove the ROI on this concept. But this mindset cultivated MPOWER’s proprietary algorithm, which determines eligibility through a number of factors, including future earning potential.
What does the future hold for MPOWER?
Our mission does not end with a loan. We want to be sure that we create a pathway to success for our students. In the immediate future, we have a couple of partnerships dedicated to helping international students not just fund their education, but also increase their employment outcomes after graduating.
Moreover, MPOWER will also be focusing on social impact, specifically in diversity, inclusion, and accessibility.
We’re excited about what the future holds, and are honored by the support of our students, partners, and investors. Last summer, we raised US$100 million from a consortium of investors and plan to continue growing exponentially.
This means that we’ll be able to continue to fuel the educational dreams of bright students from around the world. In the future, we may offer more products and services for students, or support their educational pursuits in other countries. But we’ll always stay true to our core values and mission of providing access to education for promising students worldwide.
We’re also actively looking to partner with admissions counselors, test prep centers, and other organizations who share our mission of providing a high-quality global education to bright students.
What are your thoughts on the local tech startup scene in Washington, D.C.?
Washington, D.C. offers a vibrant startup ecosystem that is diverse and supportive, having been ranked among the best in the U.S. by the Startup Genome. At the same time, there are still so many opportunities for new startups to enhance the region’s most prevalent industries such as professional services, education, legal, financial services, and government enterprise.
What’s your best advice for aspiring entrepreneurs?
I would advise aspiring entrepreneurs to pay attention to pain points out there in the world. Problems represent opportunities for solutions, innovation, and a better world.
I would also emphasize to aspiring entrepreneurs the importance of capital raising. This process entails courage, perseverance, and momentum to overcome obstacles. We’ve learned so many important lessons in this area. In funding rounds, we optimize for good, mission-aligned investors.
Despite the lure of short-term gains, we do not optimize for valuation. Instead, our dedicated, mission-aligned investors support the team to build the company and deliver on its vision. As a result, they engage other investors in future rounds, and reup themselves.
If we had focused on valuation, the company would have lost on these great partners and compromised long-term, sustainable gains.
On the other hand, building a successful company takes more than just money. It takes dedication, hard work, and a willingness to make sacrifices. In fact, companies take on average seven years before they’re acquired. An IPO takes 10 years.
So even if you have access to private capital or other sources of funding, it’s important to remember that this is not going to be an easy journey. If you’re thinking about starting your own company, make sure you’re willing to make the long-term commitment needed for success and you have motivations other than money.
To me, having a clear social purpose was paramount to sustaining my interest in building MPOWER and growing personally with the company.
Awesome story! Very interesting innovation, MPOWER Financing.