OKRs and Projects: How we set goals at Upstart

One challenge every company faces is how to set goals and measure success.  We recently had a debate here at Upstart about how we should go about that process, and I thought our experiences might be helpful to others that are struggling with how to manage their own goal setting process.

We have borrowed the concept of OKRs from Google (if you’re interested in how OKRs work at Google, check out this Google Ventures Startup Lab talk by partner Rick Klau ).  However, as Hunter Walk has pointed out, there are some issues with traditional OKRs at startups where things tend to move quickly.  Many members of our team voiced two key issues with the OKR process

1. Quarterly targets seemed too far out for a fast-paced startup
2. Aiming for 70% as success isn’t really holding ourselves accountable for delivering on our commitments.

We discussed moving to monthly OKRs, but that seems to remove the concept of stretch goals and targets entirely because it focuses you only on what you’re already planning to do.  In the end, we felt like there were really two separate things we were trying to track, so we actually broke them out.

Quarterly OKRs

We are sticking with quarterly OKRs.  The Objectives are our top 3-5 general focus areas as a company and tend to be fairly consistent quarter to quarter.  Each Objective has 3-5 Key Results associated with it.  These are measurable business outcomes that would indicate success for the Objective.  A few key points about the Key Results:

• They must be measurable and should be only growth focused.  Our targets are all about the increases/improvements for the quarter - not a total metric for YTD.
• They must be results-oriented and not simply a list of activities.  Launching a feature or a new marketing campaign is not a Key Result - that’s a project (see below).  We need to define what we are planning to achieve through that (eg increased conversion rate on the website).
• They are always stretch goals.  We generally try to have target of 70% overall success.  It’s harder to aim for that in a startup with less history to look at - but it is good to do.

Monthly Projects

For each Key Result, we list out projects we are working on for the month. Each project should have a clear outcome to define completion so there is no ambiguity about completion and a definite owner responsible for it.  Our goal is to have 100% completion of the projects we list out.

Breaking our goals out this way has been really helpful in developing a useful cadence for the team.  Each quarter we can set out goals that we should be hitting in terms of improving our business through the OKRs.  This keeps us focused on driving real business results and not just increasing the level of activity.  Monthly projects allow us to hold ourselves accountable for our internal commitments and have a tight timeline for product development or marketing and business development activities.

We review the monthly projects at our team meeting each week and make sure we’re on track.  At the beginning of each month, we can check in on our status towards the OKRs and prioritize the list of potential projects based on what we think will have the most impact on our key business metrics.  This keeps us focused on the projects that really matter and honest about the impact they are having on the business.  If we are completing all of our projects but not hitting our OKRs, we know we have a strategic problem we need to address.

This plan is still new to us, but so far it’s been working well.  Our team meetings are now more productive and focused on our key projects and activities and keeping everyone on the same page.  And having OKRs that are results-oriented stretch goals helps us focus in on the projects that are most important for driving the business overall forward.  I hope this post helps others out there thinking about this issue - and if you have any feedback or suggestions we’d love to hear them!

Posted by Jeff Keltner, Head of Business Development

Forecasting Your Future Income

Part of our work at Upstart is to predict individuals’ future incomes. When someone applies to become an upstart, we use proprietary models to calculate the dollar amount that he or she can raise for 1% of his or her future income. Over the past few months, we’ve heard from countless users that they’d love to see some of our analytics in action. So today, Upstart is launching a calculator to give you a prediction of your annual income for the first 10 years of your career. We’ve kept the calculator simple - all you need to do is enter your school and field of study. It doesn’t include many of the academic or professional variables we consider in our pricing process. These variables, in addition to difficult-to-quantify ones like ambition or grit, obviously play a large role in determining your actual income. We know that, and so instead of trying to pinpoint every person’s exact income, our tool is designed to give you a sense of the median and range of incomes for your graduating class.

How to use the tool:

• Compare the value of different colleges and degrees. If you’re thinking about where to go to college, what major to select, or whether to get a professional degree, our calculator can help you understand the impact of your decision on your income potential.
• See how you compare to your classmates. If you’ve already graduated, you can see how you’ve done compared to our prediction, and what percentile of your graduating class you would fall into.
• Get an estimate of how much money you could raise on Upstart for 3% of your income. If you meet our graduation year requirements, you can apply to become an upstart.
• Get a prediction of your future income for fun. This is like going to a fortune-teller, except one built on hard data and statistics.

A few notes about the data:

• We use data provided by the US government, private institutions, and universities. 
• Our predictions account for the expected impact of wage inflation, but do not include the impact of people who permanently elect to leave the labor force.
• We make our predictions using models based on school or degree characteristics rather than school-by-school data. That means our ability to distinguish between very similar schools or majors is limited.

Examples of calculator output:

• A Harvard MBA graduating today can expect to earn $220,000 per year in 2022 if they earn more than just ½ of their graduating class, but $550,000 per year if they are in the top 10% of earners.
• First year incomes for Arizona State marketing graduates vary from $29,000 per year to $84,000 per year, with a median of $43,000.
• A University of Michigan computer science graduate from 2015 earning at the median will see his or her income grow from $71,000 per year to $120,000 over the course of 10 years.

Check out the calculator at upstart.com/calculator!

On Freedom and Upstart Funding

Most people agree that better access to capital on fair terms is a societal good, but some think that Upstart funding is . . . unusual. Or worse, some equate it to modern-day indentured servitude. We don’t think so, which is why Upstart exists.

For many people, fixed-rate loans serve a useful purpose. As a borrower, they make sense when the interest rate is reasonable and your income is predictable and clearly sufficient to make your loan payments. Unsurprisingly, the most common reason consumers default on loans is because their income is inad­equate to make their payments.

Twenty or thirty years ago, employment and income tended to be more stable and predictable. Today, more people are freelancers, consultants, or entrepreneurs, where income is less stable. To survive and thrive in the 21st century economy, all of us will need to invest in ourselves, take some risk, and prepare ourselves for a very unpredictable world. As Tom Friedman, Reid Hoffman, and many others suggest, this is our collective future.

Income-based Repayment, take 1

In recent years, income-based repayment (IBR) has become increasingly popular, particularly for student loans. In “first generation” IBR, the repayment obligation is defined as a fixed interest rate, but monthly payments are capped at a certain fraction of the borrower’s income.

Because IBR caps monthly payments as a fixed fraction of income, it’s designed to sidestep non-affordability, at least for short periods of time. The UK and Australia governments have used IBR as a means of paying back student loans for many years. And even the US Government has begun offering forms of IBR to students, to better manage loan affordability for college grads. In fact, there’s currently a bill in congress that promotes IBR as our student loan standard, including a means for automatically withholding repayments from paychecks (as it works in the UK).

The problem with most forms of IBR is that they kick the can down the street. While the borrower may be relieved today from making unaffordable loan payments, interest continues to accrue like a snowball rolling downhill. As long as IBR is an income-defined cap on the monthly payment associated with a fixed rate loan, it’s a temporary fix at best.

IBR, take 2

At Upstart, we’ve applied a bit of math and statistics in order to make IBR more useful. Your Upstart repayment is purely indexed to your income. We’re able to do this by statistically modeling what each upstart is likely to earn over the next decade. Investors (whom we call backers) can receive less if you earn less, and more if you earn more.

Relative to other flavors of IBR, our approach has the advantage of not accruing interest in times where you are paying back little or nothing. You are relieved of payments when you earn little, in exchange for sharing in the upside in times when you earn more.

Why is the Upstart flavor of IBR useful? There are a few reasons:

Enables access to capital to those who wouldn’t otherwise have it - Other than asset-backed loans (eg car loans and home mortgages), consumer access to capital has been largely defined by the credit card. Services such as Lending Club have recently provided capital at friendlier interest rates, but still rely on traditional underwriting criteria (credit score and current income). Upstart unlocks much broader access to capital by focusing on future earning potential, rather than existing assets or income. This is the central innovation that makes Upstart so fundamentally useful and disruptive.

Aligns interests of both parties - Traditional loans have little alignment between borrowers and lenders. With fixed interest rate loans, the risk is entirely borne by the borrower, until he or she defaults, at which time it’s transferred 100 percent to the lender. Upstart funding results in closely aligned interests, where both risk and upside are shared reasonably and consistently. When an upstart does well, his or her backers benefit.

It’s liberating! - The notion of “servitude” suggests that you are working for somebody else, and that you have no choice in that. We enable just the opposite - rather than feel compelled to take a particular job to reliably pay back a loan, you can actually choose to do whatever you want. Yes, you can actually do what you were meant to do. Your backers have zero say in that. And smart upstarts are using the funds to invest in themselves - learning to code, taking an unpaid internship, or other activities that will pay dividends over their entire career.

“It’s just math” - There’s no such thing as a free lunch when it comes to raising capital. Having more options available, designed to fit the needs of the world as it exists in 2013 and beyond, makes sense. The application of math and statistics to allocate capital based on potential rather than assets is a notion with broad and fundamentally liberating implications. Is it weird? To quote, Trina Spear, one of our rockstar funded upstarts, “It’s just math”. And sometimes, math can be your friend.

Upstart turns 1!

In celebration of our first birthday as a company, we created this birthday card to show you what we’ve been up to. Today we’re happy to announce:

• We’ve closed a $5.9M Series A funding round (in addition to $1.75M raised in April 2012)
• New Upstart investors include Founder’s Fund, Khosla Ventures, Collaborative Fund, Eric Schmidt, Marc Benioff, and Scott Banister
• Since launching in November, more than $1M in funding offers have been made to upstarts. 
• We’ve published more than 80 upstart and 135 backer profiles to our site. 555 unique funding offers have been made to date.

We’re also excited to announce two new advisors who are joining Upstart:

• Bob Kerrey, Former Governor of Nebraska, US Senator, President of The New School, US Navy Seal, and Executive Chairman of the Minerva Institute
• Jessica Jackley, co-founder of Kiva.org and founder & CEO of ProFounder

We’re just getting started, but we’d like to thank all those who have helped us come this far!

Our ONLY asset is our people!

We love helping people launch their own endeavors - but we are also learning a lot about starting a business as we are doing it ourselves.  One mantra we are trying to live by is "own nothing".  We literally have no assets, except for our team!  This idea began with our individual technology needs.  Instead of giving employees a laptop or other tech, each employee can expense up to $2000 to purchase any computer or mobile equipment they need and are given $100 per month to cover mobile phone/data costs.  All of the computers, phones, and plans are owned by the individuals!

As much as people loved this model, applying this concept to our production systems has been even more powerful.  We own no servers or networking equipment - we live entirely in the cloud!  Not only has this helped us lower our fixed costs to starting the business, it's also given us a lot of flexibility to try out new and useful tools to help our business.  So, what are we using?

• Heroku. Great platform for running a scalable web service.
• Google Apps.  Best email and collaboration platform out there (according to a slightly biased team ;)
• Zoho CRM and Campaigns). Simple CRM with a nice API and an integrated email marketing tool.
• Expensify. Simple expenses.
• Docusign. Very helpful for managing signed legal documents.
• GitHub. Simple, effective code repository.

And we recently implemented to new tools that have been a great help in connecting with our customers.

• Olark is a real-time chat tool for your website.  It took maybe 5 minutes to have it set up and running on our site - could not have been simpler.  Half of that time was customizing the colors and text to match our site.  We love being able to answer customer questions in real-time, right inside our favorite IM clients.  And when we're not online, we get an email to respond to.  We have a seen a large increase in communication with our users from this tool alone.
• Helpjuice is a very simple tool for creating a Help Center.  We wanted to allow our operations and bizdev team to manage our FAQs without needing help from the product/eng team - something we couldn't do while they were a static HTML page on the site.  We tried using some broader tools but they were more complex than we were looking for.  Helpjuice does exactly what we're looking for - and we love their philosophy of simple software.  Check out our new help center!

We are loving moving quickly, trying out new tools, and sticking to the mentality of owning nothing and just paying for what we use.  If you have suggestions for other great tools we should be trying - let us know!

Posted by Jeff Keltner, Head of Business Development (and occasional IT guy...)

The startup is you. Why Upstart is for everyone, not just people starting a business.

We are constantly asked if our product is mainly for entrepreneurs.  Only if you mean "entrepreneur" in the broadest possible sense of the word.  Given how dynamic our economy is now, we believe everyone should think of themselves as an entrepreneur.  Whether you are starting your own company, pursuing an artistic endeavor, or building a career in finance or medicine - you need to think like an entrepreneur building a business.  Why?

The days of working for the same company for 40 years before retiring blissfully are a distant memory from an earlier generation.  Today, companies can experience a meteoric rise and correspondingly dizzying fall in a few short years (ex. Groupon, Zynga). Entire industries are being reinvented (music, publishing, television, film, ad infinitum) seemingly overnight and software is eating the world.  Some people find this new pace scary, but we think it is a great opportunity.

To succeed in this “new economy” you need to build your career the way an entrepreneur builds a startup: by constantly investing in yourself, adapting to changing conditions and being open to taking risks and willing to seize opportunities when they appear.  Reid Hoffman and Ben Casnocha made these points very powerfully in their recent book "The Startup of You". It's a great read for anyone, but it's especially helpful for young people just starting out in their careers. You can find a great, visual cliff notes version in this presentation.

Here are a few of our favorite pearls of wisdom from the book:

●      Think of yourself as being in permanent beta: you are a work in progress. Invest in yourself every single day.

●      Prioritize learning. Just as start-ups in the early days prioritize learning over profitability...so you should prioritize learning over cash salary for the majority of your career. In the long run, you’ll likely lead a more meaningful life, as well as make more money.

●      Learn by doing - actions, not plans will generate the lessons that help you adapt to the next phase of your journey.

Of course, Upstart is here to help you along the way with funding and mentorship to maximize your long-term career potential. We want you to be able to invest in yourself whether it’s through gaining new skills from an internship or a class, gaining perspective from volunteer work or travel, or gaining experience by pursuing that product or business idea you’ve always dreamed of doing. We believe an investment in yourself, in the "startup of you" - can dramatically improve both your earning potential and impact you can have on the world around you.  Which is why we think Upstart is for anyone who wants to invest in themselves.

Posted by Anna Mongayt, Co-Founder & Head of Operations

Does it pay to become an entrepreneur?

This article is cross-posted from Forbes.

January inevitably brings reflection and consideration for what’s next in life. For many of us, as we begin 2013, that means dreams of throwing caution to the wind (as well as reliable paychecks) to make a go of it as entrepreneurs. But dreaming isn’t doing ― and the reality is that most people aren’t willing to take on the risk associated with entrepreneurship.

Since leaving Google nine months ago to found Upstart, I’ve spent a lot of time visiting college campuses, talking to aspiring entrepreneurs across the spectrum of engineers, MBAs, artists, and writers. Thinking back on these visits, I’m struck by the fact that the focal point of entrepreneurial activity on campuses tends to be among freshmen and sophomores. The e-ship clubs and classes are dominated by underclassmen, who are busy starting companies in their dorm rooms, sometimes one right after the other.

But by junior and senior year, most students tend to fall in line with that decades-old tradition: the on-campus job search. Interestingly, the more elite the university, the more prominent this trend seems to be. (I make an exception for Stanford and MIT, where it seems almost shameful to accept an on-campus job interview!)

Given all the buzz and glamour about “doing your own thing,” why do most people forego their dreams and step so willingly onto the corporate treadmill ― which was invented more than half a century ago? It’s not hard to guess. Consider the case of a soon-to-be minted MBA from a top program in the US, where graduates’ starting salaries are approaching $200,000. With a bit of hustle and well-practiced job interview skills, the next step up the success ladder is there, just waiting for you. And why? Because two and a half years ago, you were accepted into that top MBA program.

Who in his right mind would forsake a well-earned and almost guaranteed path to success and comfort, to take on a mission where “they” don’t care how impressive your performance reviews at your last job were, where you went to school, or how you just missed a perfect SAT score? In fact, there is no “they” ― there’s just you, trying to create something from nothing.

Last Spring, I met with the Dean of a Top 10 MBA program who told me all this noise about entrepreneurship was just that: noise. When push came to shove, the vast majority of MBAs couldn’t resist taking that approaching-$200K job offer. What’s worse, this Dean actually suggested this was a good thing.

All this leads to a really interesting question: Does it pay to be an entrepreneur? The common wisdom seems to be that while things worked out peachy for Bill Gates and Mark Zuckerberg, the majority would do better to stick with that Wall Street or McKinsey job. Put another way, an offer letter in hand is worth two prototypes and a Google Apps slide deck in the bush.

Fortunately, it’s not true.

A study published in 2009 by IZA, the international Institute for the Study of Labor, suggests just the opposite. In short, the study found that the mean, median, and standard deviation of incomes for entrepreneurs ― controlled for education, general ability (as measured by standardized test scores), and demographics (including age and parental income) ― tended to be higher than those for good old-fashioned employees.

And the difference is by no means small: mean income for entrepreneurs is almost 50% greater than for “employees.” And what’s more, this effect is not explained by “professional” entrepreneurial pursuits such as opening a medical or law practice.

Why is this? The study theorizes that entrepreneurs can control their environments in order to play more to their strengths. While employees suffer from the “guard rails” and “iron cages” of corporate America, entrepreneurs are able to create environments over time that maximize the value of their education and skills. That makes intuitive sense: create an environment that plays to your strengths, and you’ll be happier and more productive.

The fallacy of our thinking is that employment in established corporations is the model for income stability and dependable professional development. In reality, stability comes from the development of real-world skills, honed through hard work in highly ambiguous scenarios every day ― the classic description of the entrepreneur’s world. And despite the signature examples of Gates and Zuckerberg, completing your degree actually pays back for entrepreneurs.

The study also suggests that highly educated adults tend to irrationally shy away from becoming entrepreneurs. This is unsurprising given the shared sentiment of key influencers. How often have your parents applauded your decision to turn down a lucrative job offer? There are also rational reasons that people bypass the entrepreneurial path – such as overwhelming burden of student debt.

The study concludes that entrepreneurs do more good in the world ― innovating, creating market efficiencies, and (as we all know) promoting job growth. Perhaps that MBA dean and others like him should actively encourage more graduates to take the road less traveled. We will all benefit.

Posted by Dave Girouard, Founder and CEO