PeerTransfer, Inspired by Raw Deals for International Students, Rolls Out Online Tuition Payment Service
You might call it the perfect up-and-coming Boston tech startup. A mix of higher education, financial services, and a global market. The brainchild of an MIT student entrepreneur. A company with the support of a young, well-connected Boston venture capitalist and many notable angel investors.
I’m talking about Cambridge, MA-based peerTransfer, which has 17 employees split about half-and-half between Dogpatch Labs in Kendall Square and an office in Valencia, Spain. Founder and CEO Iker Marcaide, 28, started the company in part to address some personal pain he experienced as an international student. It all started when he had to pay his MIT tuition from a European bank, and got stuck with high transaction fees and a bad exchange rate that cost him thousands of dollars.
Inspired by that experience, his startup has zeroed in on its target market—helping international students make online payments to U.S. colleges through peerTransfer’s website. The company’s software plug-in is now being used by schools such as Suffolk University, Wellesley College, Reed College, Bryn Mawr College, and the College of Wooster. (PeerTransfer is demoing its technology at the Finovate conference in San Francisco this week.)
The first time I spoke with Marcaide was last June, almost a year ago. He was only a few hours removed from a late-night beach party in Barcelona, where peerTransfer had just won a 20,000-Euro prize at the HIT Global Entrepreneurship Competition. Marcaide, a native of Spain and the son of an astrophysicist, is an engineer by schooling who worked as a management consultant before getting his MBA at MIT’s Sloan School of Management.
Last fall, peerTransfer raised a $1.1 million seed financing round from Spark Capital, Project 11 Ventures, and angel investors including John Landry, Ken Morse, Roy Rodenstein, and Dave McClure. Spark Capital’s Alex Finkelstein, a general partner, led his firm’s investment in the startup. He recently told me about the first time he met Marcaide.
It was at a warm-up event for the MIT $100K Business Plan Contest, last spring. Finkelstein was there for a series of short meetings with entrepreneurs, and Marcaide wasn’t even on his schedule. But the young Spaniard (who comes across as quite friendly without being pushy) came in and started talking to the VC about his startup. The two hit it off, and Marcaide followed up with a phone call a few months later, after peerTransfer had hit some more milestones.
“We met on a Thursday and had a signed term sheet on Tuesday,” Finkelstein recalls.
What stands out to Finkelstein is that peerTransfer is trying to solve a problem that is “painful for the student and painful for the school,” he says. Marcaide says his service can save students on the order of $1,000 a year or more, and saves schools the time and hassle of dealing with unidentified wire payments and manual posting into student accounts. PeerTransfer says it saves students money by collecting their home currency, bundling purchases of U.S. dollars in the market, and then spreading most of the savings generated from these wholesale exchanges back to the students. For schools, the company says it sets up its software for free in a matter of hours.
Of course, what gets the company and its investors really excited is the size of the addressable education market. In a recent academic year (2009-2010), nearly 700,000 international students sent more than $20 billion in tuition and living expenses to the U.S. from foreign banks, according to the Institute of International Education.
Although he originally envisioned helping small businesses as well as students, Marcaide says peerTransfer is now firmly “focused on education,” and more specifically, tuition payments. “We’ll build our reputation around that,” he says.
It’s still very early, of course, so the key will be whether the company can ramp up its sales model and get enough endorsements from schools around the U.S. Marcaide says the best fits are small schools that care about their students saving money and have fewer levels of decision-making than big state schools, for example. Typically, peerTransfer works with schools’ student financial services and admissions departments.
Incidentally, peerTransfer isn’t the first startup idea Marcaide has had. Back in 2006, he dabbled in the notion of providing capital for companies to get space to install solar panels. And around 2009, he briefly pursued an idea for a corporate video website, like an enterprise version of YouTube. Neither of those panned out, but now Marcaide and his investors think he’s on the right track.
Perhaps the most telling aspects of Marcaide’s leadership have to do with setting his company’s culture. He says one of his top priorities is “hiring employees who grow and become what they want to.” When asked what his guiding philosophy is for conceiving and running a startup, he says, “What kind of company would make me proud?”
If all goes well, peerTransfer certainly has a chance to do that.