Tech school offers students option of paying for tuition after they get a job
By Marc Vartabedian
This piece was originally published by The Wall Street Journal (Nov. 04, 2019).
Education startup Kenzie Academy, one of the several new ventures that provide financing for students in exchange for a proportion of future earnings after they graduate, has raised $100 million in debt financing.
Kenzie said the debt line from Community Investment Management will be used to finance students in technology training.
As students continue to struggle to pay for higher education, startups are pursuing alternatives, such as income-share agreements, to student loans. Founded in 2017 in Indianapolis, Kenzie offers one-year online and in-person technology training in fields such as computer science. Students in Indianapolis or elsewhere online pay a $100 deposit to enroll at Kenzie and pay no tuition until they land a job that pays at least $40,000 a year.
Once a graduate gets a job that reaches that threshold, they pay Kenzie 13% of their monthly income for 48 months, or until they reach a payment cap of $42,000. If they don’t find a job that pays the minimum amount eight years after graduation, they don’t have to pay back the $42,000.
Kenzie previously had raised $7.8 million through a Series A equity round in September led by Rethink Ed. Rise of the Rest, a seed fund that targets startups outside tech major tech hubs, participated in that deal.
The new debt funding will pay for new students, said Jacob Haar, co-founder and managing partner at San Francisco-based CIM, an institutional impact investor.
Kenzie has enrolled roughly 400 students, two-thirds of whom were making less than $30,000 before attending the training school, said Kenzie Co-founder and Chief Executive Chok Ooi.
Kenzie’s offerings serve as an alternative to short-term coding boot camps and expensive traditional colleges and universities that take longer to complete, Mr. Haar said.
Kenzie also partners with businesses, particularly in the Midwest, to find jobs for its graduates, Mr. Ooi said.
As an impact investor focused on social good, CIM was attracted to Kenzie’s focus on growing tech skills in the Midwest, where related educational offerings haven’t kept pace with the region’s demand for tech workers, Mr. Haar said.
Kenzie has one office and learning center in Indianapolis but has expanded its online learning offerings across the country.
Venture investing in U.S. education tech startups rose to $1.45 billion in 2018, eclipsing the $1.2 billion raised in 2017, according to research firm Edsurge Inc. Through the first half of 2019, the sector raised $962 million.
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