London-based StepEx, a fintech that provides the means for education providers to offer qualifications in exchange for a share of students’ future earnings, has agreed a deal for a financial institution to buy the receivable assets.

Anthemis will invest an initial £500,000 into regulated Future Earnings Agreements (FEA) assets via a special purpose vehicle, with the right to extend the investment to £10 million.

StepEx said this is the first of a number of such deals it plans to agree with asset managers.

Under the scheme students pay a percentage of their earnings for a fixed period based on StepEx’s forecast of their expected earnings, starting once they cross an agreed salary threshold upon completion of their course.

StepEx charges course providers an up-front fee per student and takes a commission on each monthly repayment. The company has built a large dataset of graduate earnings, which it combines with open banking data and a machine learning model to predict and verify an applicant’s future earnings.

The deal with Anthemis will primarily focus on IT boot camps and StepEx said it is working with around 80% of IT boot camp providers in Europe, including international coding schools Le Wagon and Ironhack, as well as Makers Academy, Capslock, and Manchester-based North Coders. It also has agreements in place with London Business School and INSEAD.

StepEx founder and chief executive Daniel George said: “Aside from being the first of its kind, this deal signifies the ability for training providers to cash in these receivables. This means that rather than being locked into receiving payment for courses over a longer period, they can free up cash flow to invest in expansion – all of which will help to solve the skills crisis by giving more people who are less wealthy an opportunity to change their earning potential.

“At a macro level there is a huge need to find solutions to IT skills shortages, both in the UK and across Europe. As part of the autumn budget in October 2021, the UK government announced its ambition to quadruple the number of people trained in technical fields such as artificial intelligence and cybersecurity, with an emphasis on boot camps. To grow that training capacity almost overnight requires significant capital firepower. We are the only ones in the world to hold these regulated assets, and know that institutions want innovative products unaffected by traditional market fluctuations.”

Farhan Lalji, managing director at Anthemis, commented: “Broadening access to technical skills education is critical to ensuring as many people as possible are included in the economy of the future. The potential social impact of future earnings agreements is enormous – that, combined with their reliability as an asset, makes them an attractive investment. We’re excited to be the first institutional investor to back this financing model, and to have the opportunity to take our initial commitment as far as £10 million.”

Capslock co-founder Jon Slater added: “Future earnings agreements have helped Capslock remove one of the biggest barriers to career-changing education, which is large up-front tuition fees. Offering FEAs can come with cash flow limitations, though, and our ability to scale to meet demand is stunted because of this. By collaborating with StepEx to receive up-front fees, we can now provide this opportunity to as many people as possible without such limitations.”

Date published: 7 April 2022

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