Tuesday, September 23, 2014

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Company Lends Support For Young Prospects Seeking Financial Backing

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Pave, a recently launched online community, creates opportunities for young entrepreneurs by matching prospects with financial backers. NY1's Tara Lynn Wagner filed the following "Money Matters" Report.

Looking to invest in something on the ground floor? How about investing in someone instead?

This is the goal of Pave, a recently launched online community that matches young prospects, even college students, with financial backers.

"The average graduate has $25,000 to $30,000 in debt, and it forces them to think short term and take the first job that comes along," says Justin Mitchell, a co-founder of Pave. "But what if instead, you give someone the ability to think about themselves in a long-term scenario, really choosing the job or industry that they care about?"

For Clara Aranovich, a Pave prospect, that industry would be filmmaking.

"The immediate goal is to make something hopefully in the next two or three years," says Aranovich.

Through Pave, Aranovich was able to raise $50,000 from multiple backers.

The money isn't tied to any one specific film. Instead, the money is tied to Aranovich herself, and it's not a loan, it's an investment. Rather than pay back $50,000, she must send her backers a percentage of her income for the next 10 years – any income, regardless of whether it is tied to the original goal or not.

"The idea that I should pay people back over a period of time, these people being the ones who were the first to invest in me and my work, just makes a lot of sense, and it's a much more personal alternative to trying to get a loan from a bank, which, by the way, would probably be impossible for a starving artist," says Aranovich.

On average, prospects are bound to pay 4 to 6 percent of their earnings and never more than 10 percent, though there are exceptions.

Payments are halted if the individual earns below a certain level or returns to school more than half of their time.

Should the prospect strike gold, however, there is a way to pay their way out of their agreement.

"Someone can buy their way out of the agreement for five times the original amount they received," says Oren Bass, also a Co-Founder of Pave.

Pave's co-founders stress that the agreement is not just about capital. It is a social-financial contract, with an emphasis on the social aspect. The hope is that many backers will pave the way for their prospects with mentorship as well as money.

"Because the payments under the agreement are linked to a percentage of the prospect's income, it means the backer has this incentive to help the prospect do well," says Bass.

"If someone doesn't do well, you will share in that failure, and if someone does very well, you'll share in that success," says Sal Lahoud, a Pave co-founder.

For more information, visit pave.com.

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