How a student finance startup created a team, interviewed users

From left: Sparrow CEO Harrison Hochman, COO Daniel Kahn, and CTO Griffin Morris in New York in August 2021. Courtesy of Harrison Hochman.

Harrison Hochman, co-founder of Sparrow, talks about building the student finance startup during the COVID-19 pandemic.  

How did you meet your co-founders?

By way of introduction, I was born and raised in Los Angeles, went to Stanford for an undergraduate and graduate degree, and was lucky enough to meet Daniel three years ago in Tel Aviv, when we were both a part of a program. He was working for a venture capital firm, and I was co-founding a variant of Sparrow. We started off as friends and ended up really becoming close. In the summer of 2020, right as COVID was rolling around, I asked him if he wanted to co-found and to my amazement and pure joy, he said yes. My connection to the third founder, Griffin, goes back a long time. I’ve known Griffin for probably well over 10 years. We grew up together and went to the same middle and high school. He’s always been consistently the smartest guy I’ve ever known. I went to Stanford; he went to M&T at UPenn. Somehow he’s still the smartest guy. The three of us specialize in different parts of the business. 

Why did you select a close friend as a co-founder?

There’s a stigma around co-founding with a close friend because business can get in the way of friendship. And I too, was quite cautious about that when starting Sparrow and thinking about who I should be doing this journey with.

The thing that got me through that, though, was a saying that co-founding is like a marriage. You’re spending that much time together, you have that much emotionally invested in each other, and your baby is the company. Upon that realization, it became quite natural for me to want to start this with someone that I was familiar with, battle tested, and really enjoyed being around. 

Though you’ve known your co-founders for a while, what have you learned about them?

The need for communication. To be honest, trying to strike a balance during a remote environment setting makes it incredibly difficult. Speed is the biggest advantage a startup has by far. Remote work can either stagnate or really accelerate development depending on how you communicate. In the beginning, I heard that open and consistent communication is always better, and you err on that side rather than not wanting to bug your co-founder. But really trying to find the balance there, especially because we’re all in different cities, has been a constant struggle. 

What’s Sparrow?

Sparrow is an online student loan marketplace where students and parents can shop for personalized student loan offers through a single application. On Sparrow, students submit a single application for a private student loan, we pre-qualify them and get real loan offers from over 10 lenders, automatically. It’s essentially just the Expedia of student debt. If you’re a student, and you’re looking for an in-school student loan junior year, you’ll probably come across a NerdWallet page, and that NerdWallet page will have their top student lenders. The problem with that search is that those 10 lenders when you see that list has no personalization. So you don’t know if you’re eligible with any of those lenders. And if you are eligible, at what rate do you qualify? You have no way of comparing them from that list. In order to do so, you have to go lender by lender and see if you are eligible, redundantly fill out the same information across all these applications, and then eventually do your comparison. That’s a massive amount of inefficiency and leaves a lot of money on the table because you don’t exhaustively search the market for student loan offerings. So what we do is through a single application, we will take your information, and through the pricing API that we’ve built into these financial institutions, automatically and synchronously shop your rates with these lenders who compete for your business. Then we’ll return back to this student borrower all of the various offerings that are available to them. So instead of seeing a list of APR ranges, they see a list of personalized offers. 

What I like to compare this to is Google flights. Imagine if you wanted to search for prices of an airline ticket between Los Angeles and JFK, and you searched on Google flights, you put in your dates, your round trip preference, and they showed you five different airlines with price ranges. You can get between $50 – $500. That’s not actionable, so you will then go to each airline individually and try and see how much your ticket costs. That antiquated comparison is this exact thing that’s happening in student debt today, which is why I say we’re trying to build the Expedia of student loans. 

Why student loans?

The inception story starts my Griffin and Daniel’s freshman year in college. So this is a time in our lives when we meet students from all across the globe, and we genuinely think that through these students, you can see the future. But what we came to realize across our four years at university, especially during COVID, when students were hard hit, is that that future looks markedly different for two types of students. The first type of student is a student that universities love to place on brochures. This is someone that comes from absolutely nothing, and then leverages that college experience as a tool with which to enact change in their life. But the second type of student was a much more overlooked case, demonstrated by a mutual friend of Daniel and mine. So this mutual friend was born and raised in a middle class suburb outside of Los Angeles. He’s got a ton of older siblings, none of which have gone to college, but he’s determined to flip the script. And he’s told that his attendance at a private institution is his ticket to a better life. But what’s not included in that advice is the financial hardship associated with his attendance. To make it out, our friend had to take out $25,000, and an 8% APR before the first year of university. So while he’s sending money back home, his friends are fielding internship offers. While he’s scouring the internet for better rates on his student loans, his friends are attending business organizations and networking events. For our friend and thousands of students across the country like him, his ticket out was non inclusive. It didn’t include that last mile of expenses associated with his attendance. And from his story and hundreds of calls with students across the country, we distilled down the problem to efficient search.

How did you conduct user interviews?

We spent the summer of 2020 and the fall hosting conversations with students, alumni, financial aid offices, and industry experts in student lending. One person led to two, three, four, etc. The other method that we would do is really LinkedIn. Cold outreaches are effective if you personalize a message. 

When you first start, conversations are awkward because you don’t have the structure to them. You sign on to a zoom call, look at each other for 15 minutes with a blank stare, and you don’t know the progression of the conversation or the natural arc. The most awkward is when you’re trying to end the conversation and thank someone for their time, but not cut them off and get into final words so that they think highly of you and your concept, but not drag it on. It takes a few repetitions to get right. Once you have that down, probably past 15 or 20 calls, the rest of them come naturally. 

Have you always wanted to found a company?

Prior to the pandemic, I had a completely separate industry in mind. I wanted to do investment banking and it was quite natural for me to go into finance or FinTech, which was tangentially related. The pandemic gave me the opportunity to take a step back and ask myself some pretty deep and soul searching questions, which I definitely wouldn’t have asked if I didn’t have the time.

One of my closest family friends actually questioned my career decision – not just the company, but the very foundation of the idea – and recommended that I do something better. It’s disheartening when someone doesn’t believe in you. It’s even more disheartening when someone doesn’t believe in you to the point that they feel compelled to actively persuade you not to do that thing. It’s coming from a good place because they care for you, which really makes you question what you’re doing. In January and February 2021, there was a trough where we were trying to figure out our product. Then we delayed strategic considerations and heavily revised. That was scary to pivot after we raised a little capital, then you start to question the foundation of the concept. It all goes back to having a strong team. If you have a strong cast around you, then though it may seem cliche, I feel like you can get through most things together. And that’s really what’s helped us get to where we are.  

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