A Tampa-based serial entrepreneur has launched what he says is a win-win-win for banks, investors and students riddled with debt.
"Everyone is familiar with lending, interest rates and so on, but this is a completely different way of looking at financing," CEO and founder Farrukh Siddiqui said.
Defynance — which is a mashup of "defy student loans" and "refinance" — began as an idea for Siddiqui in 2019. It ties student loan repayment into how much the student is making in their post-college career, and pauses payments entirely should the student become unemployed or come across a tough financial time.
"One of the key differentiators is when you're not able to make a payment or going through hardship, lenders are chasing after you and making the problem go from bad to worse," Siddiqui said. "But we do the opposite. We pause the payment, we work with our customers to get them back on their feet."
The company also ties in a career resource portal, where users can work with recruiters to find employment or sharpen their career readiness skills. That center is open to the public, regardless of whether their loans are being refinanced through Defynance.
The third prong of the startup is an investor fund, which is used to refinance student loans while giving investors quarterly passive income. Because it's pegged to income growth, Siddiqui said it creates a high-growth, low-volatility result. Beyond the immediate financial gain, it can reap less measurable returns by investing in the future workforce, he said.
"It's not like there's no other competition — there are other lenders, so we have to be competitive on all sides and designed it so all the stakeholders can be successful," Siddiqui said.
The investor fund is still in beta mode, with the hopes to expand to non-accredited investors in the coming year. This is not Siddiqui's first foray into the fintech world — he previously worked in the finance and insurance industries. He completed a stint at Techstars Boulder in 2021 and just wrapped his time at Canadian accelerator TELUS CSW, powered by AlchemistX.
The company is located partially in Atlanta and partially in Tampa, serving as a member of Tampa-based Embarc Collective. It has nine employees and has begun to raise a roughly $1.5 million seed round.
"I really feel like the American dream," Siddiqui, who was raised in Pakistan before moving to the U.S. when he was 10 years old, said. "But to a great degree, I feel like it's lost. And we have to rediscover it."
