Summary
Financial services are still confusing for the average consumer — despite the availability of information on the internet. This confusion arises in part from the fact that smaller banks and credit unions may have a limited digital presence, if they have one at all. At the same time, these smaller financial institutions often offer better terms on loans than the larger, name brand banks. But if consumers can’t find them, this resource simply goes to waste.
Lend-Grow has created a platform that helps connect borrowers with smaller, local lenders. The company hopes to provide borrowers with more competitive loans while also leveling the playing field for smaller banks and credit unions. We interviewed co-founders Nish Krishna and Harris Schachter to learn more about their vision for the online lending marketplace.
Note: This interview was conducted over phone and email. It has been lightly edited for clarity and length.
Interview
Can you give us a brief elevator pitch for your company?
Nish: Lend-Grow’s goal is to connect borrowers with 1000+ local lenders that are often harder-to-find online and usually have better deals on loan. Lend-Grow offers a complete digital growth platform for local lenders: LoanHub, a rate aggregator with information on rate competitiveness and trends from 300+ local lenders; Lend-Grow, a marketplace to pre-qualify and route borrowers in real-time to local lenders; and Ask Lend-Grow, a recommendation engine to help local lenders make smart, data-driven decisions.
What inspired you to take the leap and build this company?
Nish: In early 2017, I passed on a key management role at LendingTree and instead found myself accepting a position to set up a consumer loans business at a relatively obscure mid-sized lender, PenFed Credit Union. Over the next two years, I had the opportunity to grow PenFed’s unsecured loan portfolio from $250 million to $1.2 billion. In the process, I met many peer local lenders that were offering better financial products like PenFed — lower rates, lower fees — but [who were] struggling with online growth, overlooked by current marketplaces. My co-founder Fred — who had been the Chief Credit Risk Officer at PenFed — and I were convinced that we were onto something that not only was an overlooked business opportunity but also could serve a greater good, help people get out of debt faster by helping them find better products offered by these local lenders. We started Lend-Grow.
What past experiences prepared you to start, build, and lead your company?
Nish: Over past ten years, I had the chance to see the best of both worlds — working at large companies like Capital One and E*Trade I built sophisticated, digital, and data-driven businesses and working at regional lenders such as M&T Bank and PenFed, I understood the true value of building long-lived relationships with consumers. At Lend-Grow, we want to combine the best of both worlds, the better products offered by local lenders with the frictionless, digital customer experience offered by larger lenders in delivering the best value for consumers.
What is your vision for the future of the industry you are operating in?
Nish: We want to democratize lending. Unlike other industries, the financial services market is still very opaque. Most of us have gone through mortgage refinance shopping in the past few months. Think about how you found the best lender — an overwhelming majority of you relied on a friend or a broker. Now think about how crazy that research process is in this day of everything online — do you ask around and primarily rely on your limited friends and family network in shopping for travel, retail, household goods. Even shopping for houses (Zillow) and cars (CarMax, Carvana) have moved online. We envision a future when people have the info at the tip of their finger on the best deal for financial products out there — not the best deal that they can learn from friends and families, and certainly not the best deals offered by current marketplaces that serve offers from a limited number of lenders on their platform.
Who is on your team and how did you come together?
Nish: Fred Rubin and I started Lend-Grow. Fred heads Risk and Compliance. Fred has been on both sides of the table in legal and compliance — as an OCC bank examiner enforcing the compliance and then leading as Chief Credit Risk Officer at multiple banks. Fred and I have both worked at Capital One and PenFed Credit Union. Harris heads borrower growth and marketplace adoption. Harris and I worked together at Capital One where Harris managed organic growth for the credit card business. Harris helped me grow the small business card business at Capital One. He has over the years consulted and helped a number of Capital One executives who went on to become CMOs at various companies on performance marketing. He was on the top of my list of people that I called when Fred and I started looking for Lend-Grow’s Head of Marketing. We were very lucky to convince Harris to take a chance on Lend-Grow and quit his job as Head of Digital at an established company and join us.
Do you have any competition, if so, how do you differentiate?
Harris: We have some competitors in the space, but no one is approaching the loans marketplace like we are. Some direct competitors include LendingTree, CreditKarma and NerdWallet, which are all loan marketplaces as well. However, we are different in two key ways. First, if you use those sites, you’ll find the available banks to be mostly the same — large financial institutions. Lend-Grow focuses on small banks and credit unions who typically offer better rates (due to the low overhead compared to the big banks). People want to access these smaller community banks, but often cannot do so because many have poor or no digital customer experience. We provide access to these smaller lenders through the platform. The second point of differentiation is our innovative Payback Rewards program, which helps people get out of debt faster by making deposits to their loan account each month, just for keeping on-time payments. Both of these differentiators have so far resulted in strong traction among early adopters.
What does your business model look like?
Harris: Our business model is to connect borrowers with local lenders. Lenders pay us a fee — a percentage of the loan balance funded. We never charge the borrowers, in fact we pay a small portion of the fee we earn from the lender to pay down the loan of borrowers through Payback rewards deposited directly into their loan accounts every month for three years.
What brought you to equity crowdfunding and how do you intend to use the money you raise this round to scale the business?
Harris: Crowdfunding is not only a proven method of fundraising, but I also find that it attracts like-minded individuals to our company and mission. For us, it is not just about finding investments, it is also about assembling an extended team of individuals who share the same vision we do, who see the massive potential in this market, and to build something truly remarkable.
What do you want potential investors to know about you and/or your company?
Harris: This is a large market — the 1,100 mid-sized ($1-100B assets) local lenders alone have $6T in assets and constitute 30% of the lending market. Since we launched Lend-Grow in March earlier this year, we have seen a rapid growth. In September alone borrowers applied for loans totalling $34 million. This is just operating in 28 states and offering a single product. A massive growth opportunity awaits us as we expand to all 50 states and add personal loans, auto, and home in 2021. The Lend-Grow team has done this before at a local lender, PenFed Credit Union, where we grew consumer loans massively before launching Lend-Grow. It would be fun to do it in a marketplace context and help many other local lenders.
As you think about the business 5-10 years down the road, what do you see exit opportunities looking like? Have you set any future goals for the company?
Harris: The fintech space enjoys many high value exit opportunities, such as those we’ve seen over the last couple of years. Also when you look at marketplaces, this can compound the valuation. For example, Credit Karma was acquired for $7 billion by Intuit, Credible was acquired for $265 million by Fox, and ValuePenguin was acquired by LendingTree for $100 million. There are two exit scenarios, yr 3-5 when we expect to achieve $50-55 million in revenues, there are few large players that have been very actively acquiring, $300-500 million range. The other scenario occurs in yr 7-8 when we reach $80-100 million in revenues when IPO and SPAC type of opportunities will exist.
We at KingsCrowd are excited to see where Nish, Harris, and their team take the company. Lend-Grow is currently raising on MicroVentures.
