This Week in Startups - E1144: How Income Share Agreements (ISAs) are solving education financing & aligning incentives in a broken system with Meratas CEO Darius Goldman | Rising Stars of SaaS 7

Episode Date: November 25, 2020

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So be careful what you wish for. But if you do work for me, you take 10 years out of your, and you survive, you take 10 years out of your career path and you'll do really well in life. And yeah, so a lot of people work from me, go on to become founders and I invest in their companies too. So there's that. But we do need help with the community management because there are just too many people in the this week in startups.com slash slack.

This week in startups.com slash slack. We have the Slack community. Slack is not perfect for this. There's 30,000 people in there. So we might move to Discord or another solution if you have ideas around. on that let me know, but just managing thousands of people in a Slack without the paid version is kind of hard. So I asked my friends that Slack to give us a free version.

I haven't gone back to me. I think they would give me a free version, but I haven't heard back. So, Stuart, hey, shout out to your boy. Can you put us on the pro for the this week in startups community before we got to move this thing to Discord? Okay, so millennials got screwed on their college education. We all know this. This is why so many of you millennials want to vote for people. Bernie Sanders and Elizabeth Warren because they want to cancel all your student debt. And you know what? I understand it. I understand why you got that little socialist inkling because they lied to you.

You got lied to. They told you that you could go to college, spend any amount of money, take all these loans when you were 17, 18, 19 years old, when you really don't have that much judgment, let's be honest, your prefrontal cortexes are still developing at that age. And you make these long-term commitments. You get 100K, 200K in debt. And there you are. Now you're in trouble. And then you hate capitalism. You think the system's rigged and you're pissed off. And I get it. I would be too.

And the reason this all happened is because there were so many people pushing you into those loans. And because three areas of our economy over the last two or three decades have gone bonkers in terms of inflation. Real estate, right? It's hard to find a place to live. That's affordable. Healthcare. Ridiculously expensive in education. It also happened to have big incumbents and regulation in them.

Maybe they're not free markets or they don't act like free markets. And that's something to think about as well. But the fact is the rest of the economy had deflation. You can buy a computer today that's more powerful than anyone 10 or 20 years ago for $300. You can buy a Chromebook, right? You can buy jeans for $10, 15 bucks. You can buy a baseball cap for $2 or $3.

And all of those things used to cost more when I was growing up in the 80s. So we have deflation in most of the economy. things costing the same. And then these three areas, education, just absolutely getting demolished. Well, there has to be a better way, right? There has to be a better way. And going $200,000 in debt, we know that doesn't work. But there's a lot of trade schools and there's a lot of schools that will teach you a skill that will get you a job, as opposed to a four-year really expensive vacation. When you think about school, it's like a four-year vacation for $250,000. That's a, that's like a really amazing vacation. But there is also a new financial instrument that has

been taking the world by storm. They're called Ices. Income sharing agreements. What it basically means is the school that teaches you gets a percentage of your future income. Now, before you claim indentured servitude and this is the new slavery, check yourself for a moment, and that's offensive to even make that kind of claim. Really insensitive, I'll be totally honest, and I'm not saying that from some woke perspective, just from common sense.

But it's an incredible, incredible incentive. The school must get you a high-paying job if they want to get paid. This is called alignment. And lo and behold, schools like Lambda or on Delta, which we are investors in are crushing it because they take on the burden of the learning and the outcome, the outcome being a job of what they provide.

Now, in talking to Lambda on Delta and other folks, I said, I think there should be like an AWS, a platform for these ices. And of course, I'm an idiot. There are a couple of them. And I asked my people like Lambda and other people who they were using, and a lot of people had great things to say about our guest today and Maritas. So for today on our rising stars of SaaS, this is our seventh of 10 episodes in the series, Darius Goldman, who's actually a fan of the show, joins us today to talk about Meritas,

which is, I would say, a SaaS product that empowers people to issue ISIS. Income sharing agreements. Welcome to the pod, Darius. Thank you. Before we even begin, I want to thank you for having me and say, not only am I fan of the show, but your show is a combination of educational and therapeutic for me, hearing the struggles that other founders have and learning the bits of wisdom that you throw up me when I listen in the morning on my walks. You're doing a great service. Oh, thank you. Tell me more about the struggles, Darius. I think that's a different episode. I'm sorry, it's not a therapy session. I'm sorry. We'll do that later. We'll do that later. Relax. And what do they call that?

Pacing when the therapist gets in pace with you. Well, thanks for saying that. That's very kind of you. The show is the great joy of my life because I get to meet really interesting people and hang out with people who are world positive. But you've got this platform. Tell us, how did you come up with the idea for the platform? And when did you first hear the term,

Isa, income sharing agreement? Sure. So I had a bit of a cheat. I started, I'm a retired lawyer, I'd like to say. When I was in high school, my parents, my mother's an immigrant from Iran, came to this country at 16 years old, didn't speak a lick of English, put herself through school, learned the language, became a social worker. She's a tenured social work at her school, which means you can't fire. It's a great job. My father is a psychiatrist, so this is a family that valued education. And when I was 18, my father said to me, I don't have a business to give you, so I'll give you an education. And what you do with that is on you. Now, I'm a dumb 18-year-old at the time. I don't know. I don't know the impact of those words what he said to me. But I went to college. I was fortunate. My parents helped me with that. And then I went to law school because when you don't know what you want to do, you go to law school. And I graduated from law school in the 2000s, while the world is still growing before it exploded. And I said, started a law firm. I end up in this group called the hedge fund group. What's a hedge fund? Learned very quickly, start doing derivative trades, and then Lehman happens. After Lehman, I'm the attorney that's helping unwind these trades. That experience got me into what became known as the distressed debt and trades claimings group. In that group, we would trade the esoterics,

things that don't trade on standard exchanges. That's why I first found out about income share agreements, Because it is, although it has the power to do good, it's a alternative asset class. So I first became aware of it through my legal experience. A decade later, when I was ready to retire from law, I wanted to do something that I felt passionate about. And out of the several assets that had legal experience in, ISA stood out for being very different. I always loved how with an ISA the student is admitted to a program at no upfront cost. And then if the program, the educational program, is able to train them and place them in a job where they become a gainful earner, then they pay it back by sharing a portion of their earnings.

So I left law and started a direct to consumer ISA funding company focusing on future lawyers because that was the one. It makes them all the sense, yeah. Was there a category that this emerged early in? Was it law? Like before this became popular in the tech scene and they were this alternative asset class, who was taking out ISIS and who was experimenting with it? Were these like pop up, I don't want to mention any names, but some of these like paper mill, like, you know, dark educational predatory schools?

or because it wouldn't make sense. The complete opposite, right? Because it wouldn't make sense. They want the money up front. So who are the originators of this? And when did they originate? Yes. So the original idea is credited to Milton Friedman, who in the 1950s in 195,

wrote an essay. And the essay, without getting into it, said, how do we remove the government from educational funding? And the idea was, invest in human capital. Let people invest in other people as you want a corporation, invest in their future. that's who's credited with the idea. But then fast forward to 1970, Yale University of All.

So not a mill, not a predatory school. Yeah, an Ivy League. Ivy League created the first ISA cohort, but there was a flaw in how they did it. They did it on a group-wide basis. So the entire class was responsible. It was an entire class pool. Ah, so we would be cross-booked. Yes.

So if you were a freaky artist, who decided to check out a society, I'd be on the hook for your ISA and you would get to free load off of me, also known as being a citizen of a country in a meta sense. When we get back from this quick break, I want to understand how Yale actually figured out how not to do it as a group, but to do it as individuals, or what happened to these ISAs.

Give us the complete education on the history of these, and then we'll get into what you're doing with Maritas. Let me get back on this weekend startups. Listen, I have invested in over 200 startups. I bust my beep in order to find great companies. And I give them money, I help mentor them, and I need them to take the small amount of money that I give them as a seed investor. I need them to stretch that out. I need them to make it work for a long period of time so they can get traction.

And one of the places people are burning a lot of cycles, money and time, is with their software products. how much energy goes into integrating all these different products? Way too much. Well, O-D-O-O-O-O-O is here to change that. O-D-O-O-O-O is offering right now $1,000 in credits on your first implementation pack. Not a joke, $1,000, go to O-D-O-O-O-O-D-O-O-D-com slash twist and Odu will change this crazy integration problem in all this wasted time.

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fully integrated and you'll save time, you'll save money, and things will run better. It's simple, it's modular, you use and you pay for only what you need and all their apps are integrated perfectly with each other. So O-D-O-O-O-O-O-O-O-C-C-T-A-S-T-A-S-com and get a thousand right now. Thanks, O-D-D-U, let's get back to this great episode. All right, Darius-O-R-A-S-E-R-A-S. You can look at their website, at M-E-R-A-T-A-S dot com. And they are bootstrapped with over 3,000 Isis already. Congratulations on that. Thank you.

I know that Lambda has been or is a partner. They are one of our schools using our platform. Fantastic. And I am a tiny investor in Austin's great company. And he's doing great work. He's been on the pod. So tell us what, after Yale had that experience and they made that critical mistake of socializing it as opposed to individual accountability.

They created a group accountability. And that group accountability obviously didn't work because you could have a bunch of screw-ups who went to Ivy League, who then checked out a society. Everybody's on the hook for their bills. And that makes it no difference than what we're doing in public education because you remove individual responsibility, right? Well, so that was the failure of the Yale experiment. And everyone says, everyone acknowledges it was a failed experiment.

but the clause that actually made it fail other than being a group cohort was they let the high earners buy out from the ISA for a denominal price. So all the high earning students bought out of the contract and it left nothing but the lower owners, freeloaders. I'll say it. Freeloaders. Right. We have those, right? So it was a failure of an experiment. That was the second incarnation of ISAs.

The recent ISA experiences within the past five years, and it's on an individual basis, and the way it should be. It's linked to your individual performance. Schools are using at Purdue University is the most well-known school using it. It's also been adopted by trade schools, skill-based learning, upskilling, reskilling, and coding boot camps. the reason that ISAs works so well with skills-based training is that I think it's fair to say if you go to Yale or Harvard, you know you're going to get a job. The diploma is worth, maybe it's not worth the price of admission, but you know you're going to get a job offer. Chances. I think everybody would agree that that is directionally almost perfectly correct.

Yes. There could be some weird folks who got in who are just not employable. And that's like the general rule is if you walk in, if you walk out of that school, the diploma, you're going to get a job. So we don't have to worry about them. But the big fat tail, I guess, is what we have to worry about in this sort of distribution, which is, I don't know, Pace or Fordham or, you know, City College or SUNY, those are the students who maybe got a liberal arts degree or a history degree or an English degree. And they still went into debt for 200K or 100K. It can't work for them because there is a mismatch from skills to what the degree.

degree taught them. They got this liberal arts education, which is wonderful if you can afford it. But, I mean, it is completely does not, there's no line between some liberal arts or English degree and a job. Exactly. College is great for enrichment, and enrichment is a luxury. If you go to Pace in your example and you don't graduate in the top of your class, I would say chances are statistically, it's going to be harder to find a job. The reason is, most colleges don't train for the skills that you need to get a job. Enter boot camps. I use boot camp as a term for skills training, upskilling, reskilling,

schools and institutions that teach a discernible trait to get a discernible job. Being a developer, being a growth marketer, being what else? On our platform, we have diesel mechanics, we have pipe welders, we have nurses, we have SDRs. These are the front end sales. Self-development reps. I love it. I love the SDRs.

And we have coding bootcamps. So we have everything from blue collar to white collar and everything from technical to sales. Oh, my Lord. Just shout out to Pace University. They now have tuition, which includes room and board and fairness is 46K a year. So it's not cheap. And Pace was known as like the night school and the affordable school in New York. And then you kind of, if you did a little bit of.

better like I did, you went to Fordham, and if you did it a lot better, you went to NYU, and if you did a lot better, you went to Columbia. But that was sort of the pecking water. I wanted to go to Baruch, but that was like the real one. But would these, will we ever see a place like Pace embrace these? And if they did, or is anybody in that sort of realm saying, hey, we are going to offer these for these degrees. So if you take computer science at pace or fordum or anywhere in between, we'll let you do it on an is set.

But if you take English or political science or intersectionality studies, ethnic culture studies, whatever social sciences, the science in quotes, stuff that doesn't get you a job, we're not going to do it. It depends his funding, the I say. Got it. So we are seeing traditional four-year universities adopting the ISA model. I always say I don't think ISA will replace loans just because of the nature of our society, but I think it's a great complement and a great alternative depending on your aspirations and your field of study. What's interesting is Purdue offers an ISA for English and engineering.

And I'll tell you right now, their ISA for engineering is drastically cheaper than their ISA for English. Cheaper how so. a lower percentage of your future earnings to pay for the same amount of money. Because what Purdue University is saying, candidly, is that if you take our engineering courses and become an engineer, statistically, you are going to do better than someone who becomes an English lit major. At the end of the day, what we're talking about here is reality and accountability being applied

to education after. two or three decades of there being a run-up in costs, inefficiencies, and no accountability. That's basically what an objective person would see here, correct? Correct. So what we love about what we're doing, right now as a bootstrapped early company, we see most first adopters being the boot camps, the coding schools, the welding schools, the diesel mechanic schools, mainly because they can make decisions faster.

A school likes to talk and talk and talk. but with the boot camps, they came more about placement and outcomes and they're willing to put essentially their money on the line by saying, okay, don't pay us until we get a job. The biggest differentiation that we see is with boot camps like Lambda School, they're training and they're placing. And that's what four-year education never did. When I went to college, no one helped me get a job afterwards and no one even helped me get into law school afterwards.

It was all on me. The boot camps are trained. training you and they're placing you. And that is the difference. What percentage do you think of a Lambda or other folks is on placement versus education? If you had to put a percentage on a ballpark, just for that category, you don't have to say specifically Lambda or others. But when you observe them as their platform, put it on a percentage for me. Is it 50-50, 70-30? It's 50-50. And I know this because of the schools on our platform. So we have, we have all the data on the schools on our platform and the schools that are successful care just amount, just as much

about placement as they do about origination. You can't just bring students in the funnel. You have to get them jobs afterwards. If you don't get them a job afterward, it doesn't matter how many you bring in because your program's bound to fail. In fact, it works against you because if we brought in 10 people and we had, let's say we had two teachers, we bring in 10 people, now we got a student ratio of five to one. We took the top 10% in terms of their aptitude or attitude or whatever they're accepting people based on. That means each one is getting 20% of a teacher's time. And that means the placement group is going to have an easier time.

If you had 100 people and two teachers, now each one's getting 2% of a teacher's time and you have the opposite or something right. I think I have my math correct. Each teacher would have 50 students. Yes, 2% each. So then the placement group has a harder time because they might not have gotten as good of an education. So you have to think holistically about acceptance, education, and placement. And you have to then allocate resources and have those groups talk to each other.

When you and I went to school, I think in the 90, late 80s, early 90s, I think we're kind of a similar age, bracket, you look a little younger. I think there was like a career. Rear Center, which had two people working in it, and they just had a cork board and then binders with jobs in it. And they'd say, what do you want to do? And you'd say, I don't know. And they'd say, here, take a look at these binders. And then you would read the binders. That was it. What for a college, what do you think on a dollar basis, if it's 50-50 at these schools that are doing ISIS, what do you think a traditional for your colleges?

I don't think they're paying attention to it. It's- placement. They're not. Less than 1%. Less than 1%. Because they're letting you in, and they get paid up front, and then you're on your own. I can tell you using Lambda, since you rose them, they have a great program. It's called the Fellows Program. The Fellows Program at Lambda actually places newly graduated Lambda students. Why do I know this? Because we just hired one. That's how great they are. Yeah.

The other school, the sales training boot camp, which is prehired.io, they also have a recruiting division where they'll bring you in, but they'll only bring you in if they think they could place you afterwards. The good schools focus on placement because it's the difference between education for enrichment, which is wonderful if you could afford that luxury versus education for skills training to go out and get a job and use those discernible skills. All right. when we get back from this quick break, people have said things like indentured servitude

and other offensive ways of describing these Isis. And I get the sense that maybe teachers' unions or four-year education is feeling a little bit nervous about this. And they see it not as an opportunity, but as a threat. I want you to comment on all the negative things people are saying about Isis and how you counteract or respond to those, that negativity when we get back on this week's sternums. SaaS companies with reoccurring revenue. I love these companies. I've got so many of them.

And I love them. Oh, calm, most easy fitbot. I love getting your monthly updates and watching SaaS revenue up, up, up and to the right. That makes me filled with delight. But when these companies want to grow, they have to sell shares. And that means they dilute us,

my holdings, the founder's holdings. or they take on debt. And that makes me scared because those debt collectors, not saying that they're Tony Soprano-like, but I'm not saying they're not. Now there is a new third way. You knew a third way was coming, and this one doesn't require debt or dilution.

It's called Pipe.Pype.com. They got an incredible domain name. It's a two-sided marketplace. You have institutional investors over here, and then you have yearly SaaS contracts. So let's say your customers are paying you for your SaaS product monthly or quarterly. What if you could get the whole year,

right now and deploy that capital to hire a new iOS engineer or a growth marketer or maybe you can just pump it into more ads and those ads would get you more customers. I know this works because one of my startups came to me and said, hey, JCal, we got six figures from pipe.com. We sold it on the platform to an institutional investor and we don't need to do fundraising this year. It's literally a conversation I had. I said, how'd you find it up a pipe? They're like, oh yeah, we heard about them on the podcast. There you go, huh? They, they're. They, love this pod and the customers and the listeners of this pod and this community so much, they are going to give you zero fees for the first year.

That's how you do it. That's how you do a good offer. pipe.com slash twist. All right, Darius Goldman is with us. He is the founder of Maritas, which is bootstrapped, no outside funding. Maybe by the end of this, I'll get to put a little money in. You guys know why I run this podcast. J-Cown needs to get a slice.

I always need to save a slice for J-Cown. maybe two slices. I stopped doing three. That's how I got that extra 20 pounds on. I always recommend to my friends to stop it, two slices, if you can, one slice and a meatball or some salad. I try. I try, but take the boy out of Bay Ridge. Can't take the Bay Ridge out of the boy. So there's been, I guess, some nasty things set against Isis. I would say the most offensive one is, you know, and listen, this is people on Twitter and, you know, other like, woke, you know, woke in the bad way, not in the original way, but like, woke social justice warrior nonsense, where they like, ISIS are the new slavery, indentured servitude, how do you

respond to that hysterical framing of an ISA? It's a, candidly, it's a partisan attack, and I'll tell you why. I have a friend who the Army paid for him to go to school, and I salute service. I think it's tremendous. Amazing. After he graduated, he had a serf. Arguably, is that indentured servitude? Pay for school.

Tell you what you have to do afterwards. With an ISA, pay for school. If you don't want to work, you don't pay it back. Wow. Incredible framing. Incredible framing. Now, I wouldn't say that the GI Bill is indentured servitude. I'd say it's an opportunity where you're making a commitment,

but you could certainly, if you were to put them on a spectrum, which you just did. And this is why framing things is so important. And you're saying, well, let's put these on a spectrum. You sign, and then in addition you could put on the spectrum, you sign $200,000 in debt, and you take a degree and they have no responsibility for you, but you have 100% responsibility for those loans. And even in the case of declaring bankruptcy, your student loans are not wiped out, correct?

Correct. So we've literally carved out bankruptcy. and now it literally, that sounds more like indentured servitude to me. Like, there is no way out of that. Then you put somewhere in the middle the GI Bill. Hey, you want to go to college? Go to college and then do two years of service, three years of service, whatever. And we'll spread out, you know, the cost of your education there.

That seems like quid pro quo to me. And you decided to do it. Nobody put a gun to your head. And then you have ICEs where 100% of the risk is on the individual. Now, the next piece of criticism, oh, my God, these Isses are being bundled together and being sold to institutional investors. So now they are trading on people's indentured servitude.

So we've already reframed this, like, if we're going to use that term indentured servitude, this would be the least of all possibilities because it's literally only if you get paid. But there's, I believe, a cap on these. And why are people saying rolling up a group of a thousand of these and selling them and using it to fund the institution that does the Isis is bad? I don't understand this argument, but you certainly have heard this one or this reaction. Oh, my God, you sold them to somebody. So we've heard this.

And to be clear, so Maritas, we're a platform. We don't invest. We're neutral. We're agnostic. We serve school, skill training, investors, workforce development codes. So we are the mechanism for all the participants in the industry. So when I say this, you're the SaaS solution. You're the SaaS solution.

Yeah, got you. But schools, when you think about the ISA, it's essentially the way I describe it to a layman is drive a car for six months. if you like the car after six months, then start paying us. That's really what it is. And the school who's giving the education up front, they have hard costs. They bought the car. They bought the car that they handed out the car to the consumer.

Someone needs to fund those operational costs. So what the school will do, and Maritas, we're not an investor, we're neutral, but the school will look for a financing party. And there's great companies that have mission, There's one called Edley.co, and they finance ISAs where companies like Edley will give the school the upfront costs to sponsor these programs. Otherwise, who's paying for it? The government's not paying for these. And the school, they will go out of business if you said to any school, whether it's accredited or boot camp, don't collect for six months. But keep the lights on,

keep the salary, keep the staff. Yeah, it just won't work. It won't work. What is the expectation of those investors in terms of two things. One, what is their return? What do they expect in terms of return? And two, how do they look at bad debt? In other words, people mooching on their ices.

Because that seemed to be, I think, the fear. And a lot of times people who are at hysterical are doing so out of fear or maybe some historical fear or trauma. And so here, people are saying, well, what if they change the agreement? What if this person buys a thousand of these ices? And then they say, you know what? We're going to start calling in demand money and change the terms. You must have heard this, these two things. So answer those two questions, the return and, oh, the changing of the deal. And we're going to, you know, be calling you like the predatory loan companies do. You know, it's hard to do that because the terms are designed up front. And maybe that's a good segue

to give the listeners a basic terminology of what an I say is you're getting the tuition upfront at no upfront cost and you pledge a percentage of your gross earnings. So let's say it's 10% of your gross earnings, but you only pay that 10% when you're earning more than what we call an income floor. You have to earn more than the salary floor. And you'll only only pay that 10% when you're earning more than the salary floor, and you'll only pay up to the max cap, or what I call the ceiling. So when you're earning less than the floor, you don't pay. And if you are gainfully employed, you pay up until you hit the ceiling, and then you stop pay. Give us an example in numbers, like real world numbers.

Okay, so a $15,000 ISA with a 2x cap, which is objectionable, but a 2x cap means you'll pay back $30,000 at most, but you may pay that back over five years. And you'll only start paying it, if it's a 10% of your gross earnings, you'll only start paying that when you're earning more than $45,000 a year. $40,000 is $3,333 a month, gross, pre-tax. So 10% of that goes to the school. Maritas, what we do, we verify the income, we manage the portfolio, we're the program manager. We collect the money, we give it to the school.

But here's where because of the tax. and ISAs, we came up with our own unique perspectives. So I do think it's fundamentally unfair. Purdue University has an ISA with a 2.5X cap. So if you borrow 10 grand, you will give back 25 grand in success. Over what period? Because that is, I guess, the key to me. Because if it was over, like, if you have a, they came up with these 30, 40,

50 year mortgages to spread it out. And so, okay, you have inflation of whatever percent a year. you know, it does have to keep up with inflation. So 2.5 over 5 or 10-year period, because that does matter, right, the payback period. It does matter. And I don't want to cast them as a bad actor there. They're a great role model of what you could do with the ISAs. It depends on the period.

And their programs have different terms of whether it's engineering or English. Okay, but that would be on the high end, right? Because from what I understand, having had Lambda on the school and other folks, it's typically something like you could pay $20,000 for this 99 month coding school, which is, you know, half the, would probably be below average tuition in the United States for a four-year college. And then you pay back like 30. So it's usually a 1.5 or 1.7.

Exactly. Typically what you see in the market. Anywhere from 1-3 to 1-7 is what you see in the market. I was trying to give it the extreme case. Yeah. What we came up with at Maritas is our software allows for incremental pay. payment caps. So if you get a great job, you come out of Lambda and you're earning 180 in your first year, which we actually do see happen. You could pay it back at an incremental payment

cap. So now, I don't want to talk about a Lambda term. But in general, what our software allows is for in the first year, you can pay it back at a 1.1 cap. In the second year, 1.2, 30, 1.4, et cetera. The school gets to design it. Again, we're just the software. The school will use the tools how they want. But we try to think about it as what are all the detractors saying about ISAs and how can we cure that? Where are the consumer benefits that we could build in? And that's what we've built into our programs. So literally, you're listening to the market and in real time creating a platform to service all people who want to give ISAs, which is the exact opposite of what higher education in the United States has done for 30 years. They literally

have created more and more, you know, wacky degree titles and have become more and more disconnected from placing people in jobs and they expect things to change. And of course, it's not going to. And then they keep increasing the size of the administration and the offering to students and the number of teachers. And so, you know, where do they expect this to break up? I love this, you know, to end up. I love this idea that you could create a dial and say, hey, listen, maybe you

could pay back quicker because the school might say, you know what, I'll take back 1.1 if you pay it back in the first year. I'll take 1.2 if you pay it back over two years. I'll take 1.3 over 3 years. I'll take 1.5 over 5 years. And they can actually get their incentive to get the cash flow in now so that they can get to redeploy that either into having a profitable company or doing more students. And when you look at these businesses, I've looked under the hood of them, they become these incredible businesses, even if 20% of the students never get a job and never pay it back. They could have 20% bad debt. And if those 80% do pay it back, every year, their book of business increases because they have people paying off one fifth of their tuition every

year, or if it was 50 months, you know, 2% of their tuition is getting paid back. So they build up this base of reoccurring revenue, correct? So these things could become absolute juggernauts and just roll over higher education if they work. And people, could not only go to one of these, people could go to one of these every five to 10 years of their lives and get upskilled over and over again. So what I want you to do as we go to commercial break here is think about in 10 years, if you go from 3,000 prices and a couple dozen people as customers deploying them and you have hundreds of people as customers and 3 million of these contracts out there, what would the world look like if this? This is a, you know, if this

This movement actually reaches its potential 10 years from now. What does the ISA-driven United States look like in 2030 when we get back with Darius Goldman of Maritas? Black Friday, it's only a couple days away. And Dell has their deals ready to go and you're going to love them. Dell is the one-stop shop for all your tech needs this holiday season. They have best in-class deals on TVs from Samsung to Vizio. I have the Samsung. Ooh, I love those headsets from Bose.

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Not for everybody. I'll leave it at that. Pretty weird. How old are you, Darius? I'm 42. I'm 49. And it's pretty interesting when we were growing up, winning and being successful and working hard and putting in 50, 60 hours a week to change the world, was considered a good thing.

You heard my little pre-year. gamble, my rant at the beginning of the pod about millennials who got screwed over and now are believing in socialism, your parents, at least one of them came as an immigrant. They're both immigrants? My mother's an immigrant. My father is a Brooklyn Jew, which is its own demographic. I'm from Bay Ridge, trust me, I know. Crown Heights. Where is he from? Crown Heights. Okay, great. I know a good barbecue. My rabbi, Mordecai will take us. It's just around the block from the Chabad. And so we all got along in Brooklyn.

It's, you know, the Catholics, the Jews, we all got along, right? Yeah. It's beautiful. We thought that hard work, higher education, and just grinding it out. It was like a good thing with this. Millennials, they got screwed so bad. And they've been here for a couple of generations. They actually think socialism is great.

I think asking your mom, which she thinks of socialism, she might have a slightly different perspective. Yeah. Or authoritarianism, which socialism and. communism, like it's kind of the road to it. I asked you before we went to break to think about, because you're going to invest the next 10 years of your life in this with Meritas, where do you think this will wind up?

What could the world look like if people like on Delta, which were investors in, Lambda, or these other schools? And by the way, just since you're a fan of the pod, if there were any of these other schools that are doing well, like teaching welding and stuff like that. You think they could become like a startup? Like, hey, intro, way. Because I think this is the future.

If there's a, I would invest in a welding school as a venture investment if they were like all in on IISAs because they're going to just become juggernauts, right? I mean, there's a problem with shortage of plumbers in this country. The average age of a plumber in this country is, I think, over 50 because nobody wants to be a plumber. And it turns out plumbers make like well into the six figures. And nobody wants to do that. job. I want to study English or social studies. I don't know. Anyway, what's the world going to look

like in 10 years? You're obviously building, you know, for when you're 52 and this company becomes a unicorn. What do you think the possibility is here? It's unlimited. So we're developing what we call the merit score because the credit score for students is broken. Thin profiles. The underwriting that you need for a student is all based on past and not forward-looking. Students have no profiles. They have no credit history to judge them on. So we came up with a seven-factor test, which is the data we're already collecting students on our platform, school, employment, work, military, bank data, credit data, and spending patterns. We want to come up with our own score, the merit score that will allow schools to judge a student on their future success.

So that's the first step in polling the students. And we have to, have the ability to do this because, again, we're neutral in this. We're just the platform in polling students on what they want. When we have students that finish their ISA payments and polling them, we've decided to give them the option, where we say, for the past four years, we've been taking 10% of your income, paying back the school. Now let us take a percentage of your income and invest in yourself. So we would love to partner with the Robin Hood where it's forced savings, keep taking the distributions from the student, but put it into an investment for the student's behalf.

Because in talking with millennials, they don't have the financial background that maybe our parents instilled in us. Yeah, they don't have that education, right? They got a little disconnected from reality, just like the universities who screwed them. I'm not saying the universities did this on purpose. universities probably were diluting themselves into thinking that their $200,000 in debt degrees would be worth getting. But even attorneys, you know, you were early on the attorney thing, but the generation

that came after you and became attorneys, a lot of those folks got underwater too, right? When the markets crashed in 2008, every attorney that was graduating from law school had their jobs revoked. And since every year you have a new crop of attorneys graduating with jobs, 2008 was the year that time forgot. If you had the misfortune of graduating loss on 2008, you lost your job and you couldn't get a new job because behind you was someone else. Wow.

So you basically had this like supply demand then get whipsawed. But you see a, actually sounds like a good plan for Wealthfront too, which we're an investor in Wealthfront and Watt Robin Hood at our little investment firm here. And that is really a great way to close the loop is to think about, hey, I'm investing in my future. And it would be amazing for people who actually wanted to do good in the world to be able to invest in ISIS. So is there going to be a publicly traded, you have 3,000 of these ISIS. If I did the math, and they were $10,000 each, just picking a number here, that's $30 million in ISIS. And that's just in our first year. So we're on track to more than double

within our second year of operations. And where we see this going and what we are building is a crown funding platform. So individuals can invest in other individual success. That's where I was going with this. So you're going to create the ISA ETF or just what's that other platform that let you invest and like you could find somebody in the emerging world, aka formerly known as the third world. that's offensive, but you've got to say Emerging World now.

Emerging World, you could literally, somebody could put a loan, I want a sewing machine. What was the name of that site? It was like fundable on a global basis. You could give these little, they called them microloans back in the day 20 years ago. God, look it up, Nick, microloans platform. Anyway, you could literally say I'm going to invest in like buying goats or cows for people in villages, rural places and get them started here. So you're going to do the investor side of this as well.

I could go put Kiva. Thank you, Nick. Kiva was the microloan site. So I could come in and say, listen, I want to make 4% of my money, 6% on my money, 8% of my money, and you could give me options. Hey, here's the high risk category for 9%. Here's the low risk for 4%. And I could say, okay, yeah, put 500K in each.

And then I could feel good about where I'm putting the money. I could take it out of like my Philip Morris stock or my, you know, my shell or oil stock if I was some person who actually cared about these issues. I am, by the way. But I'm saying, like, if you were some money managers, you know what, I really feel bad about putting money into oil and carbon companies. I want to put money into this. You can literally have a place to put a million dollars to work

and then make a certain percentage return. And we could connect you in the demographic, in the industry, in the geographic region that you want. Oh, so put up or shut up. up. If you care about Brooklyn, you say, I'm doing this in Brooklyn. Beds die do or die. Falk Green, Red Hook, whatever. I mean, I think those plays will have been gentrified now. But anyway, the point is, if you really believed in Nashville or you really wanted to do the right thing for El Paso or East Palo Alto, you could say, I'm going to originate only for people who are

citizens of East Palo Alto, because I want to see a difference in my backyard. We're already doing that. We've partnered with a workforce development company. I can't say the name because of confidentiality, but their ISA terms gives a incentive to people who get trained and then stay in state. If you stay in state, you get better terms than if you get trained and then leave state. That's how it works, I think, also for some, when countries recruit people or give them visas, like, hey, you can come here and go to school here, but we just want you to spend five years here and pay taxes here. So you're going to become an alternative asset platform and the asset is going to be making the world better through education that results in high-skilled labor.

Exactly. Come to Maritas to find and fund your future. It's unbelievable, Darius. What a vision. And you've raised $0. You funded this company yourself? Is that correct? We're bootstrapped.

And at this point, the revenue that we bring in is going back into operations. I'm just going to throw something out here. Throw something out here. You're a fan of the pot, a rip. you know the power of the pod. Kind of great to have a first investor. You know, I was like the third or fourth and Uber. Sounds like this would be a match made in heaven if I was her first investor.

You're thinking about raising money and how would it be, would it be good if I was like the first person to invest? I'll do it with the safe. You do it on a safe. I'm in. I'll do it on a safe. I love it. I mean, I am so in love with your vision, Darius.

I think, you know, as on a business. business level, I'm in love with it. Thank you. On a fixing a wrong, fixing something broken in society, which entrepreneurs are uniquely, uniquely qualified to do because they can operate with, you know, very little headwinds in this country, at least, thank God, you know, we didn't have a socialist win, but I think that's why a socialist didn't win in this election. We're acquiring this in 2020.

you're not going to have a lot of headwinds for this business. I think you're going to have tailwinds on this business. I think people are ready and they're so frustrated that I think you're going to see a great reckoning after this pandemic. There have been so many schools that were so poorly managed that I think one of the legacies of the great pause, the great pandemic pause, I think people are calling it the Great Reset.

I just call it a pause. I think now people are realizing when they took their classes remote, wait a second. Remote, this is totally not worth it. Is this worth it in person? Yeah, it's probably not even worth it in person. What am I doing here? There must be a better way. What impact has the pandemic had on your business?

What do you think the legacy of our lost year, like the 2008 one you live through, so now you got the scar tissue, what do you think this one will do specifically to education and society? Sure. So we're seeing a shift. And first, during COVID, the hands-on training courses, the pipe welding, the diesel mechanics, obviously those had a shutdown during the height of COVID. But the remote-based courses thrive because now you have people sitting at home with nothing to do, but better themselves.

We've noticed a difference between the poorer performing schools on our platform and the ones who are doing well, that a remote course, even if it's a live course, I use this term, you cannot Netflix education. You can't just sit down and watch something and absorb it through osmosis. It has to be interactive. You have to put in the time watching a video, whether it's live or on your laptop, you're not going to absorb hours' worth of education just by watching. It has to be interactive. I think you can go five hours, maybe. There's some limit. Like, you get to the 20th hour.

You're like, okay, now I'm watching the 20th hour of the History Channel. I want to talk to somebody about what I just learned. I want a quiz. I want a workshop. I want to write a paper. I want to do something with what I just learned for five hours. Exactly. So the better programs out there, the lambdas of the world, combine remote with interactive. And, and That's the future. So remote training is great so long as you couple it with interactive, immersive experiences. That's where I see this going. See, that is such a tremendous observation because if we again contrast, and if you're,

I know I got a lot of people in higher education who listen to the pod and who are potential LPs in my next fund, unless they heard this episode. But to the giant endowments who might anchor my fourth fund, I'm not trying to beat up on you here, but, you know, the interactivity of a lot of coursework is questionable. And now you see that because of the pandemic, as Darius is pointing out, you know, people realize they're just sitting there passively for some, for a larger percentage of time than they should. And this is another thing. And competition makes the world better. And that's what we're seeing here is this competition is going to force the universities that survive the pandemic. And some number will not.

I mean, there are some schools that are for sale. And I'm actually been talking to some folks like, let's find a school that goes bankrupt and buy it at a bankruptcy and then make it an ISA-based school and just look at the degrees and look at the actual. And if somebody wants to do this and they have some insight, I'm down to be an anchor investor or to talk to you about it. But if there was a school that went out of business, had a campus, and they had 30 degrees and seven of those degrees really did correlate with outcomes. Well, screw it. Let's do the seven degrees and let's just make that school an ISA-driven school, right? Oh, it could be a beautiful world we see here. What do you think the reaction to universities, which, you know, they're kind of, you know, they move slow, but at some point they're going to have to realize this. Just like they started doing, you know, I got hit up with Stanford ads for their like Stanford,

MBA program has been hitting me up for their like executive programs, right? And I know people who teach in those executive programs who ask me to do like, you know, like a guest lecture kind of thing. They kind of figured out that that night school was like highly profitable and there were people who would pay for it. So, you know, these places are filled with smart people. And they're going to be faced with reality. Are they going to embrace this full, full on?

do you think? Slowly. And not as a replacement, but as an additional option. So we have on our platform, Northeastern's online accelerated nursing program. Fantastic. Which candidly is funded by Edley, the I say investors. So the schools are adopting it. It's just a slower process, which makes sense, given their organizational nature.

Right. So they know which programs have. great outcomes. And so they can actually make those programs more efficient, more profitable, more fluid, increase their market share, increase the number of people going to it. So what we might see in the world, and this is my prediction for 10 years from now, is that when a young person is making a decision and their parents are, you know, fretting over that decision, they're getting agita, right? They can say, hmm, these FACACCA, degrees over here, not for you. Let's get focused on a, look, here's the menu. The school you want

to go to said, these three are ISAs, these three have half ISAs, and these three, no dice on the ISA. We can't afford to send you to go study, you know, some social science that has no ISA. So if you want to do that, you're going to need to go to the half or full ISA school first and be a nurse, be a plumber, or face reality and have a job. And then you can then take the money from your job after you pair of your ISA and then do something completely, you know, fantastical like get a degree in some social science. I'm beating on the social sciences here, but those are the ones that I think are the most disconnected. And you want to get your political science degree. By all means, you can do that when you're 25 years old and you've paid off your ISA. Actually, the beauty of the ISA is you could get the ISA education.

And then you could go back and get the general enrichment because we don't have grace periods. With a loan, you start paying it back three months after you graduate. But then I say you pay it back when you're able to pay it back. Oh, my God, I didn't think of that. Yeah, which is what all the detractors always forget. There's no grace period. I'm a proponent. So wait, wait, walk me through this very simply.

I get my, I sign up for my trade school and I'm going to be, let's just take something, like I'm literally going to be a welder. Okay. Which we have. I do two years of welding. I've paid back 40% of my ISA and I saved a little money. And you want to go back to school. Your ISA payment stop because you're no longer in the workforce.

You get your policy side degree. And then you come out of the workforce. and so long as you're still within what we call the payment window, which is the long end stop of the contract itself, your payments will begin again. Which is what, 10 years, 20 years? How long are these? They usually rule of thumb.

If you require four years of payments, the payment window will be eight years. So you double the required amount of monthly payments. And if it doesn't work out, the people who originated the ISO on the hook, plain and second. Yes. No downside for anybody.

And I think one of the things that's, I'm about to do my all-in podcast with my besties, and we talk about common sense solutions, and it's just amazing to me how little common sense there is in education and how anti-capitalistic and anti-entrepreneurial movement in the United States, which is small. It's probably 10% of the country. But it's vocal. And that same group in this group on the left that's hysterical, they don't want to try anything new. I was literally in an argument with a New York elite in Brooklyn who was saying that experimentation would only hurt the poor. This could not be further from the truth.

It's the opposite. It's the opposite. If we experiment and we try new things and they work, it creates competition for the things that are not working and failing. us. So those people get their shit together. Sorry to speak so candidly and bluntly, but we've got, you know, two sons of Brooklyn here, like, just straight up. If you cannot compete, then get off the court, you know, and that's all there is to it. Give people some choice, experiment, and let's try to solve the problem. And people are so defeatist about education. They're so defeat us. I mean, they just think it can't be solved, don't they? Yeah. It's the old way of thinking.

And it's being solved. It's actually being solved. And people are out there right now, if you're listening to me, and you have friends, and you get, they get an argument with me about how broken education is. I want you to just take this pod and email it to them. Listen, Darius, it's a pleasure to have you on the pod. Great to meet a fan of the pod who's doing something innovative in the world. And it is my absolute pleasure for us to confirm that I will be. First investor in Mariton's. Look at that. What a plot.

Can you imagine if you had to compete with me as an investor? And I have the elite entrepreneurs building the coolest shit in the world. And they listen to my podcast. And then I just get them on the pod and offer them to invest on the pod. That's how I did thecom.com investment. I literally harangued Alex on the podcast to invest. All right. Listen, Darius, thank you for doing what you're doing.

My pleasure. And for putting up the fight, your parents are obviously extremely proud of you and they should be. And man, God bless entrepreneurs. Seriously. Mazel tov. This is coming up with all the Yiddish words and say, no. But it's a mitzvah. I honestly think it is.

It's a serious mitzvah what you're doing. And you could be, obviously, you're smart. You could be working at Goldman or these places. And you're taking the hard way, bootstrapping a company with ISIS. and yeah, the great thing you get for this is people throwing darts at your back while you're trying to save the world. So ignore the haters and then embrace the people who have hope and who are bold because this is a bold vision for the world and it's going to work. I can see it so clearly. And if you have an ISA-based company or you have an idea for one, I'm all in.

I love the space. I've got two investments. This will be my third and I'm looking for fourth and fifth. Let's fix education. All right, Darius. Have a good one. Stay safe. And we'll see you all next time on this week in startups.