The predominant ISA opportunities currently available are passive financial investments. An important aspect of this is that the school shares in the risk of outcomes by participating in the investment. This is certainly a viable argument, and one that we believe. Based on long years of experience by the co-founders of MentorWorks in the higher education environment, however, we believe that there are limits to this effect. Educational institutions want to provide the best possible outcomes for their students. Their financial limitations and inter-departmental coordination frictions make achieving this goal harder.
As it turns out, however, ISAs do provide the right incentives for an active investment model. An appropriate analogy is VC or angel investing. Active investment in these models involves supporting the startup with advice, connections, and potential sales opportunities. In a similar vein, the MentorWorks active model provides a network of connections and employers for funded students to obtain advice and employment opportunities.
As of the time of this writing, MentorWorks is the only ISA provider program that also supports student outcomes as far as we know. Our ‘Fund and support’ model rests on the thesis that helping students achieve better career outcomes is good for the students, investors, and schools.
Students: As students do well, their net cost of financing goes down because they are able to secure higher quality employment sooner due to the active support model.
Investors: Investors share in part of the upside as the student income prospects increase due to the active model. The active model also creates immediate and large social impact.
Schools: MentorWorks works with schools to establish alumni-based networking program for students using our proprietary software platform. This platform provides a scalable tool for schools to engage their students and alumni through a networking program. A greater density of students allows to also bring more employers in our platform, further increasing the value proposition for students and schools.
Q: Does the active model substitute for school career efforts?
No. There is never “enough” support to help students find better paying jobs. In our experience, the active support model works best when it is done in conjunction with school career efforts.
School alumni make the most committed advisors due to their natural affinity to support their alma mater.
Sometimes students need help with the interview process for interviews they have secured, and seek out advice from the MW network. In other cases, students have obtained interview opportunities through our employer partners, but they have used skills and support they obtain from the school’s career program to do well in their interview process.
Q: How does this model work?
We have had successful placement of students who have engaged in our network. Many of our ISA funded students want more support, both before and after graduation, as many of them come from families that do not have the kind of connections that can typically lead to internships and jobs. The two value additions we provide are:
Advice and connections:
Our model relies on a scalable software platform to allow students to network with alumni as well as graduated students. Graduated students who receive ISA funding return as mentors and get ISA payment discounts for doing so. The alumni approach allows us to immediately provide a pool of network for students to leverage, and the ISA student discount allow us to scale the community of professionals students can access.
We have licensed our software to universities, and they have found this system effective in their alumni engagement and student enrichment efforts. In one pilot, students found jobs and internships through their alumni connections, so we have evidence of such support leading to actual employment outcomes.
Our software platform also has a jobs feature, which allows companies to access talent from the pool of students we fund. We are actively adding companies to our platform. Since there is no cost to employers, this makes participation easy for employers seeking diverse talent. In turn, students hired by these employers reduce default likelihood and improve returns for ISA investors.
Q: Is this model scalable?
To continue the VC analogy, investors in startups support these companies along multiple dimensions, including making introductions, providing business advice, helping hiring team members, etc. In contrast, supporting funded students requires two main ingredients to be effective – advice and employer access.
We have been able to standardize this approach through more than two years of experience in this space. Students utilize our software platform to seek access to networks, advice, and employment. This software based support approach allows us to scale this model. Currently, we have over 400 users on the platform. Our past year engagement rate of students (proportion of registered students using the platform to connect to alumni advisors) at a university software client was over 85%.
Q: Do schools view the active support as a value add?
Absolutely. The active support model is a great value proposition for schools, and, in some cases, we have entered ISA discussions with schools after we have worked with them on the career networking side.
Schools have limited budgets and connections with employers. They need efficiency improvement tools like our networking software as well as more corporate development. Having these tools in a single package makes us a very attractive support option for schools.
Q: Can you translate the active support model into student outcomes and ISA returns?
Empirical evidence from the Gallup Purdue index data on graduated students suggests that a having a supporting structure like a mentor can help increase job salary and placement likelihood by 4%. In our models, this translates into an estimated 100 to 200 basis point expected increase in ISA returns.
This is likely an underestimate because we do not incorporate the effect of such support on default rates, as well as the fact that certain forms of support like networking support that lead to jobs are harder to translate into statistics.