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Felipe Vergara and Lumni: Launching an Innovation in a Developing Economy

14 Pages Posted: 21 Oct 2008  

Gosia Glinska

University of Virginia - Darden School of Business

S. Venkataraman

University of Virginia - Darden School of Business

Bidhan L. Parmar

University of Virginia - Darden School of Business

Saras D. Sarasvathy

University of Virginia - Darden School of Business

Abstract

The case chronicles the development of Lumni, Inc., an international start-up offering innovative mechanisms for financing higher education. It focuses on: the details of decision making required to transform an idea into a viable business; building partnerships; the challenge associated with raising venture capital; and the challenges of creating a new market where human capital can be traded to finance higher education.

Excerpt

UVA-ENT-0083

Felipe Vergara and lumni:

launching an innovation in a developing Economy

Felipe Vergara's heart pounded in his chest as he rushed through the international terminal of the Santiago Airport in Chile. For the CEO and cofounder of Lumni, Inc., and Lumni Chile, October 3, 2002, was a day for celebration: the launch of Lumni's first human capital fund. But the 34-year-old entrepreneur had no time to celebrate. The start-up needed his continuous attention, as did Primera Languages for Business, the company he had founded a year before to support himself and to bankroll Lumni.

For Vergara, the fund's launch was the culmination of 12 months of hard work. A year before, he had met Miguel Palacios, who introduced him to what Vergara thought was a revolutionary idea for financing higher education. At the time, Palacios, a Batten Fellow at the Darden Graduate School of Business Administration at the University of Virginia, conducted research on human capital contracts (HCC), relatively unknown financial instruments that allowed students to tap their future earnings' potential to fund their college education. Palacios believed that someday HCCs would become a reality, making higher education more accessible to bright, lower-income students. Vergara, a Wharton MBA and McKinsey alumnus with a passion for the education industry, believed he could take the innovative concept and create a sustainable system to finance higher education in developing economies, where student loans and scholarships were scarce. He persuaded Palacios to partner with him in the start-up.

In a year, the founders had managed to launch the first human capital fund in a developing economy and to raise enough money to finance six undergraduate students at the top Chilean universities. The first group of investors responded enthusiastically to the idea of investing in human capital, and expressed strong interest in committing more financial resources if the model proved itself. But Vergara did not dwell on Lumni's achievement for long. He was preoccupied with the new strategic initiatives he and Palacios had been discussing for some time. As he boarded the plane, Vergara took a deep breath. He needed the eight-hour flight from Santiago to Miami, Florida, to clarify his thoughts.

. . .

Keywords: Financing, decision making, leadership, entrepreneurship, strategy, innovation

Suggested Citation

Glinska, Gosia and Venkataraman, S. and Parmar, Bidhan L. and Sarasvathy, Saras D., Felipe Vergara and Lumni: Launching an Innovation in a Developing Economy. Darden Case No. UVA-ENT-0083. Available at SSRN: https://ssrn.com/abstract=1278400

Gosia Glinska (Contact Author)

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

S. Venkataraman

University of Virginia - Darden School of Business

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

Bidhan L. Parmar

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

Saras D. Sarasvathy

University of Virginia - Darden School of Business ( email )

P.O. Box 6550
Charlottesville, VA 22906-6550
United States

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