College Loans to Finance Entrepreneurship

Earlier this week I was talking to an entrepreneur at the TiE VISTA conference and he made a statement that made me pause. He was telling me about his company and I asked one of the most telling questions: are you working full-time on the business? That’s a real litmus test to see how serious and committed the entrepreneur is to the startup. Quickly, he replied that he was working on it full-time but that he was in grad school. Grad school? How much harder is it to build a startup and be in grad school at the same time? Creating a startup is hard enough without extra work on top of it.

After the full-time question I asked how he was financing the business. He told me of a shady angel investor in Florida that had offered $200k for 70% of the business, which they declined, but only after serious consideration and an attempt to increase the valuation (tech startups in the Southeast that raise more than $100k in financing typically have a $500k – $1M post money valuation). He then offered up that he was using college loans to finance his company. Not directly, of course, but rather he was getting a second master’s degree, with classes only at night, and his low-cost taxpayer subsidized loans were also covering his living expenses (grad school type living expenses without a mortgage, etc). Now, large college loans for degrees that don’t have the requisite earning potential might not make sense but this is an intriguing idea for a tiny percent of the population — something to think about.

What else? What are you thoughts on college loans to finance entrepreneurship?