How to leverage an HBS education: The story of LeverEdge [Show Summary]
Do you want to save money on your student loans? Interested in earning an MBA with entrepreneurship as your goal? Considering Harvard Business School as the place to earn that degree? Pull up a chair, or at least plug in your ear buds. Learn how two current Harvard Business School MBA students got into HBS and founded a company that can save you money on your student loans.
HBS students talk about business school and their exciting new company, LeverEdge [Show Notes]
We have two guests today and a lot of ground to cover. So I’m going to give them very brief intros and leave more time for the interview. My guests today are Chris Abkarians and Nikhil Agarwal, both members of the Harvard Business School Class of 2020 and co-founders of LeverEdge, which can help you reduce your student borrowing costs. And that’s true whether you are applying to law, medical, or business schools.
Nikhil earned his Bachelors of Science in Aerospace Engineering from University of Illinois at Urbana-Champaign in 2012 and worked for Boeing for six years before making the move to Boston in 2018. Chris earned his BA in Political Science and Public Policy from Duke in 2012 and then started his career at L.E.K. Consulting, where he worked for approximately three years before joining Netflix. He then worked for Netflix in Content Strategy & Analysis for another three years. Then he too made the move to Boston to begin his studies at HBS.
Can you tell us a little about your background? Where you grew up? [2:55]
Chris: I was born and raised in Los Angeles in a large family. I am the biggest Lakers fan you could meet. I followed my love of basketball to Duke where there was no chance I could ever play for the team, but whenever I am not working I am always trying to catch a game or play if I have the chance.
Nikhil: I grew up and lived in India for my first 18 years. Then I moved to Urbana-Champaign where I was expecting skyscrapers but instead found cornfields. After graduation I went to work at Boeing in product development (and am particularly excited about the 777X coming out next year that I worked on), and then made my way to HBS.
What was hardest part for you in the MBA application process? How did you handle that element? [4:43]
Nikhil: For me it was wondering if I was even good enough to apply to HBS or the kind of person that could get in. It took a number of discussions with friends telling me that I was living in this bubble where I was surrounded by people like me doing cool things. The reality is there are very few people in the world who get to make airplanes, which gave me some confidence to get the ball rolling.
Chris: Figuring out how to weave a narrative that made sense, through all sections of the application. I went to Duke, I worked on political campaigns, then did consulting, then had a media career at Netflix. Sometimes you sit back and realize how difficult it can be to explain why you did what you did, and why the MBA is the next logical step in the process. When you get it, there is a level of personal clarity which is amazing.
What do you like most about Harvard? [7:39]
Chris: It’s hard to put a value on the incredible people you are surrounded by on a daily basis. I thought I had that as a consultant and also at a growing media tech company, but here you meet people with backgrounds you didn’t even know existed, and you end up being interested in things you didn’t even know you could be interested in. Hearing the perspectives of others is amazing. One piece of advice is to take advantage of everything you can outside of class to get to know people better.
Nikhil: I used to think of myself as very rational, and I would take all available input and make a sensible decision. I realized either I was dealing with the simplest problems in the world, or I was really bad at what I thought I was good at. I also second what Chris said – it’s all about the people. The best part has been helping me pop out of the bubble I was in.
What would you like to see improved? [10:29]
Nikhil: I don’t think the time allocation has been appropriate in some of the subjects. The case method is great, but some topics we could learn without cases more efficiently and with less amount of our time, to free up more time either socially or for our start up.
Chris: I agree. For finance and accounting it would have been great to have technical reviews to get a baseline level of understanding before diving into cases, as it is more challenging to do cases in subjects like that. A little more flexibility for one’s own time in the first year would be nice as well. You can get overwhelmed with calendar invites and trying to figure out what is and isn’t required.
How did you meet each other? [13:14]
Nikhil: We were put in this group chat of all admitted students organized by the school. In the chat people were discussing loans, and I pitched the basic business model of LeverEdge. Subsequently Chris and I spent many hours on the phone, on google chat, and got to know each other quite well before seeing each other in person.
Did you arrive at HBS knowing you wanted to start a business? [14:28]
Chris: It was one of the reasons I wanted to come to business school. I wanted to do my own thing, but thought that if I didn’t step out from my existing career and do it, I wouldn’t do it. The great thing at HBS is you can take up to five years off after your first year to try something and then come back and finish. That is the ultimate insurance policy if you try something risky. If you fail, you can come back.
Nikhil: I was looking for the next thing, but wasn’t set on anything and was just exploring, but one month in I knew this is what I wanted to do.
Tell me about LeverEdge? What is it? [16:07]
Chris: LeverEdge is an attempt to use group buying power to reduce student loan rates. We collected interest from several hundred MBA students who needed student loans just like us. We pooled them together and then pitched the portfolio of loans to banks with the idea to guide the entire group to the “winner” offering that bids the lowest rate for the group overall and that the winner will make up in volume what they lose in margin.
Nikhil: We started with 70 classmates. Most banks were not interested in talking to us. The few that were said 70 is too small. If you have 500, we can think about it. We went to all our friends at the other b-schools and within 10 days we had 700 people signed up, and then the lenders got quite excited and actually negotiating substantial discounts. The deal we closed was pretty awesome, and we’ve gotten strong positive feedback. Going to the other schools was the critical thing.
The median rate before we got involved was 6.3% and then ultimately 90% of students landed at 5.25%. The average student saved about $8,000 each per year.
Chris: Bringing simplicity to the process is another benefit. It is hard to compare everything that is out there, so we spent a few days putting together a model of all the deals.
How did you think of this idea? [19:36]
Nikhil: We were inspired by 30 students in Israel. All 30 went to a bank and said they would take the loan if you give us the best interest rate. We learned about it on the first group chat where we met. We thought let’s try it here, and we wanted this benefit to be available to every generation of students who come after.
Neither of you have a formal finance or financial services background. Has that been a problem? [21:07]
Chris: It really hasn’t, and in some ways it’s been an advantage. We had to understand all the terms, and we are both highly analytical, so one of the great things to come out of this is we have been questioning every assumption, and every term that exists. Sometimes lenders have to go back and check things for us since even they don’t know.
How does LeverEdge make money? [22:34]
Nikhil: We have thought hard about this, and our whole philosophy in everything is student first. We structure it so that students can join, but have no obligation to take the loan we negotiate. If there is a better deal they can get, we encourage them to go there. Banks are the ones paying us – we discuss our fee upfront, which is a fee per loan that is non-negotiable.
You are now helping students with refinancing as well as originating their loans and have also branched out from MBAs and added JD and MD students. How much is LeverEdge saving its clients? [24:15]
Chris: For med it is quite a bit larger because of the length of the program. The average savings per year in the program is about $8,000 so it does scale up.
How have the Harvard Incubator Lab and HBS’ other entrepreneurial resources played a role in the founding and success of LeverEdge? Getting funding? [24:49]
Chris: The innovation lab I didn’t anticipate being as helpful as it actually is. It is so great to have other people around working on things and not doing the formal recruitment process, which is a bit of a challenge to avoid. There is a lot of pull to go toward what other people are doing. It is helpful to have the community there to see there is another way and to ask about their experience. There is also an amazing set of advisors who have become friends. It’s great to sit down with entrepreneurs and talk about what kind of lifestyle we want and what are our actual goals.
Nikhil: The Harvard Law School transactional law group has also been helping us through every legal question that comes up. On the tactical side you need great advice. For example, we are raising funds, and there is so much paperwork that goes along with it. We sent it over to our friends at the law school and asked them to explain it to us in plain English so then we can negotiate it. The quality of their work is phenomenal.
Chris: The faculty have also been amazing, sharing their expertise and helping us get in touch with people. Just two weeks ago when we were thinking about negotiating a new pool, we sat down with one of the foremost negotiation experts in the world and he walked us through how he would set it up.
How do you manage the demands of b-school and running a business? [28:32]
Chris: It is quite physical, and you have to choose between what you really care about – business, academics, social life, sleep, but you can’t lose sight of what the true value of HBS is. We also want to make sure we get to know our classmates and have a good balance.
Nikhil: Chris is being humble, he makes it look very easy – he is our section social chair! He is a great example of how you can effectively manage time across different things. For me I also balance between my wife and HBS, and she has made some sacrifices regarding time with me and also has taken some things off my plate. That is an amazing support structure to have.
What are you doing over the summer? [30:40]
Plans for the future? Could you see this model working with credit card debt or mortgages? [31:19]
Nikhil: We do think this model is scalable. One that naturally has a lot of group buying power and already fits with the model is the graduate student loan pool, because the start date is all the same. We need to move quickly to capture that. The second part will require modification to the base model. We are not fully certain of how that model will work yet, but we are thinking of things like auto loans and mortgages. Those are not on a nice schedule, but we are thinking about how to structure, and both are on the horizon.
What would you have liked me to ask you? [32:28]
Chris: Why we are doing this. We didn’t plan to be doing this, but to some extent we fell into it because we needed to use the product itself and saw so much value in it ourselves. Then we were helping friends and then helping their friends, and the amount of validation makes this an extremely fun and rewarding experience. We are able to run every idea we have past our classmates. There are some businesses that if we were starting might detract from our relationship with our classmates, but in fact in this case we are helping them and they are helping us.
Nikhil: My mind went to the metric we track closely – the percent of people who join us and where they come from. 90% of people come from referral. We are so thankful to our member base because this doesn’t work unless we have a member base that is active and spreading the word from a grassroots perspective.
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