David Haber is the co-founder, CEO and visionary behind Bond Street, an online lender that empowers small businesses by providing financing in a simple, transparent and fair way. Haber leads Bond Street’s overall company vision, strategy, fundraising and business development functions.
Through Bond Street, Haber aims to transform business lending through technology, data and design. He believes that small business owners are the foundation of the American economy, yet they have been ignored by innovation in today’s banking system. Haber envisions Bond Street to become a financial advocate for every business owner.
Before co-founding Bond Street in 2013, the Harvard grad co-founded Locus Analytics, a startup asset management firm where he was portfolio manager for the firm’s $40 million in assets under management and ran product development for its analytics platform and was also an investor at Spark Capital where he focused on marketplace and financial services investments.
Bond Street touts well over $1 million a week in demand for loans from small businesses across various industries. Loans can range from $50,000 – $500,000 with rates from 6%-22%. Bond Street’s process is 100% electronic, streamlined to save hours of paperwork and in-person visits to a bank branch, providing a decision on new loan originations in days. Some clients funded by Bond Street include:
- Joe Coffee (financed the opening of its 11th location in New York – breaking with its traditional banking relationship)
- Gin Lane (a creative agency behind the brands of J Crew, Saturday’s and Harry’s – financed the company’s headquarters opening in Chinatown)
- Bec Brittain (a New York-based Vogue featured lighting designer – funded her exhibition at an important industry trade show)
VCs and angels have backed Haber’s vision employing technology as a way to make small business lending faster, more cost efficient and more convenient. Bond Street’s VC backers include, Homebrew (lead), Founder Collective, Redswan and Collaborative Fund. Angels in the company include UBS Head of M&A Larry Grafstein, PineBridge COO George Hornig, Founder of Royalty Pharma Rory Riggs and LowerMyBills.com Founder Matt Coffin.
Haber and I recently connected via email to discuss Bond Street’s inception, brand of affordable financing that resonates with the large demographic of companies……
Erin: Please describe how Bond Street put its belief that “growing small business should be simple, transparent and fair” into practice. Why does transparency, user experience and brand connection matter in commercial lending?
David: In an economy where banks continue to retreat from lending to small businesses, the sentiment has become clear — entrepreneurs are looking for a faster, fairer and smarter alternative for financing their businesses. This comes at no surprise, given that the loan application process hasn’t changed much in the past 50 years. Small business owners are still required to walk into a branch, hand over paper financial records, and ultimately wait weeks to get a decision — with limited visibility into the likelihood of the outcome.
In the wake of this credit crunch, there have emerged a number of alternative lenders providing ‘working capital’ to small businesses. With opaque rates, high fees, and daily deductions, these seemingly painless alternatives make it difficult to understand the cost of borrowing and can ultimately lead to a spiral of debt.
Bond Street believes that entrepreneurs deserve better, and we have built a world-class team to redefine small business lending through technology, data and design. Our streamlined application allows a business owner, in just a few minutes, to share their financial accounts with direct connections into products like QuickBooks, bank deposits and the IRS. Customers speak directly with an advisor to understand their options and receive a decision in less than 48 hours with funding in under a week.
We are passionate about fostering a community of amazing businesses through a relentless focus on customer service. For our customers, it’s ultimately about more than just economics. They want a partner who truly cares about their success.
Erin: How will Bond Street adapt to ever advancing technology and borrowers’ expectations for faster loan approvals and shorter funding wait times? How will Bond Street aim to be steps ahead of banks as more investments in fintech?
David: Bond Street was built on the belief that technology, data and design will revolutionize the lending industry and we’ve built an incredible team that is working every day to exceed our customer’s expectations.
I was previously a venture investor at Spark Capital where I focused on marketplace and financial services investments including companies like Orchard, Plaid, Quantopian. My co-founder and our CTO Peyton Sherwood was previously the head of product and engineering at Venmo, a mobile payments startup acquired by PayPal. Peyton spent more than 6 years working at D. E. Shaw & Co in technology for the firm’s founder, David Shaw.
We’ve been fortunate to surround the company with an incredible group of entrepreneurs, investors, and veteran financial services executives who share our long-term view that transforming the existing financial system must come from a relentless focus on technological innovation matched with superior customer experience.
Erin: What is Bond Street’s company vision and strategy?
David: Bond Street’s vision is to transform small business lending through technology, data and design. Small business owners are the foundation for growth in our economy and the traditional banking system has left them behind. We’re building a better future where access to capital is simple, transparent and fair.
Erin: While at Spark Capital, you invested in a few leading financial technology companies including Orchard, Plaid, and Quantopian. How did this experience spark an interest in P2P lending? Have you sought their counsel?
David: I joined Spark Capital in the summer of 2011 and stayed for about 2.5 years before I left to found Bond Street. The firm had been around for about five years and had previously been very successful consumer internet and adtech investors (with early bets in Tumblr, Twitter, Admeld, etc).
Having spent the previous two years working in financial services for an incredible entrepreneur named Rory Riggs, I came to Spark with a thesis around how technology might reshape the financial ecosystem, not just in lending, but in the enabling technologies which power all levels of the broader fintech stack.
Our investment in Plaid is a great example of this, as they are powering a new ecosystem of financial applications (such as Robinhood, Abacus, among many others) by providing seamless access core bank transaction data. They are disrupting companies like Yodlee, much in the same way Stripe has unseated traditional payment companies like Authorize.net through better technology, lower cost, and significantly improved user experience.
We also saw the need developing within the lending ecosystem for a company like Orchard. As the shift from peer-to-peer to marketplace lending became more clear, we realized that there needed to exist a platform that could help power the execution, reporting and technology that a new wave of institutional investors would need to access platforms like Prosper, Lending Club (and the proliferation of others on the horizon). In Matt Burton and his team, including Angela Ceresnie, David Snitkof, and Jonathan Kelfer, we saw a group with deep technology and risk manage experience who were was perfectly positioned to usher in this changing landscape.
We’re still very close with their team. In fact, Angela and David helped facilitate an introduction to their former boss, Jerry Weiss, who was most recently the head of risk management for small business lending at Citibank. We pulled him out of the bank to join us as our first hire, and Chief Credit Officer.
Ultimately, what drove me to leave Spark to start Bond Street was the need I saw in the market from a large number of amazing, fast-growing small businesses who were struggling to raise bank financing. At the same time, I saw many of the financial software companies were beginning to launch APIs which I understood would make data collection and underwriting a more seamless experience from the staid, paper-driven processes at the banks. The timing was right when Venmo was acquired by PayPal in late 2013 which freed Peyton up to join me in building Bond Street.
Erin: What led to your founding Bond Street and targeting SMEs? How does Bond Street Platform fill a needed niche in the growing P2P lending market?
David: Access to capital for small businesses is major a problem for our country and our economy. During my time at Spark, I came into contact with dozens of incredible businesses who were struggling to raise bank financing, despite strong growth and profitability. This pushed me to conduct extensive research on the market, which included conversations with the heads of small business lending at many major and regional banks across the country.
The more I learned, the more I realized that tremendous structural issues – like increased regulation, limited technology, and high overhead – make it very difficult and unprofitable for banks to originate and underwrite small dollar loans to small businesses.
I also saw a large number of alternative lenders who were levying exorbitant rates to businesses whose risk I intuitively felt was much lower than the rate they received.
As successful as some of these companies had become, I felt that there was still a large void in the market for Bond Street to build provide affordable financing and to build a brand that resonated with the large demographic of companies that I felt deserved better.
Since founding Bond Street, we’ve been incredibly fortunate to see a lot of demand from some very high quality businesses while spending virtually nothing on marketing or customer acquisition. Instead, our customers are spreading the word to their friends, peers and colleagues and referrals represent the largest driver of our origination volume. We’ve been very lucky to work with companies like Gin Lane, Joe Coffee, and Bec Brittain among many others, and we’re just getting started.
Erin: What have you learned from your experiences at Spark Capital, New Ventures and Locus Analytics, that has shaped Bond Street?
David: I learned that it never pays to optimize for economics, and instead focus on learning as much as possible and surrounding myself with exceptional people. After college, I thought I might go into finance like many of my peers, but instead decided to work for a tremendous entrepreneur named Rory Riggs with whom I co-founded Locus Analytics.
Rory had built a number of businesses across biotech, private equity, railroads and billboards. More importantly, he showed me that despite his incredible success, one should stay humble, work hard, and always be generous.
At Spark, I learned that it pays to be a contrarian and to have conviction in my beliefs. One of the things that I always admired about the team at Spark was that they never cared who else was ‘in the deal’ — something that often plagues many investors looking for ‘social proof.’ They would plant the flag and lead the investment regardless, because they had a strong conviction in the entrepreneur and in the opportunity.
I try to bring these principles to bear at Bond Street both in setting the vision for the company and also in attracting exceptional people to help make that vision a reality.
Erin: Please describe your team and its fundraising and development functions.
I co-founded Bond Street with my good friend Peyton Sherwood. He was five years ahead of me at Harvard where he studied computer science. After graduation, he joined D.E. Shaw & Co where he worked directly for the firm’s founder, David Shaw, on a variety of technical and research projects. He went on to lead product and engineering at Venmo, which was ultimately acquired by PayPal in 2013. Peyton leads product and technology as Bond Street’s CTO.
Jerry Weiss joined us as our first hire and Chief Credit Officer. Jerry was previously the head of risk management for Citibank small business lending, and brought with him a 28 years of experience managing large portfolios and teams of credit and risk management professionals at places like Bank of America, Chase and Washington Mutual. He is one of the most experienced credit professionals in the industry.
Eddie Serrill was most recently VP of Revenue at TrialPay, a large online ad marketplace. Eddie leads business development for Bond Street, and was previously an investment banker, and venture capitalist. Eddie holds an MBA from Wharton.
Steve Recio joined us from Hunch (acquired by eBay) where his team was responsible for the eBay homepage. He previously worked at Thumbtack and studied computer science at Stanford.
Troy Shu joined us from AQR Capital Management, where he was a quant and engineer responsible for writing trading algorithms on the stock selection team. He previously studied computer science and economics at the University of Pennsylvania and Wharton.
Jeremy Ruch joined us from GIC, Singapore’s sovereign wealth fund where his responsibilities spanned analyzing investments in equities and real estate.
Erin: Who do you see as Bond Street’s peers and how do you see Bond Street as a catalyst for P2P lending disruption and innovation?
David: Online lending is in its early stages. There is almost a trillion dollars worth of market cap in the top 10 banks in the US alone, and today the entirety of the lending ecosystem (across consumer, small business and real estate) represents a bit more than $10B in total originations. We estimate that the small business market alone represents well over $500B in addressable demand. Needless to say, there is a lot of opportunity to build a number of meaningful companies in the space.
We have been incredibly impressed by the growth and thought leadership that Lending Club and Prosper have fostered in the market. The Lending Club IPO was a watershed moment for our industry, one that has forced the traditional financial institutions to take note. Their IPO also made it clear to consumers and business owners alike, that there are real, viable financing alternatives to the monolithic entities that they’re used to.
We are excited by the positive impact Bond Street is having on the market by bringing a superior customer experience to entrepreneurs across the country. We are leveraging technology to anticipate the needs of our customers, to manage risk more intelligently, and to provide the capital and insight these businesses need to grow.
Erin: What is Bond Street’s fee structure for services? How much revenue is Bond Street generating and projecting to generate in the next year?
David: Bond Street receives a flat origination fee from our borrowers upon successfully funding their loan. Likewise, as a marketplace lender all principal and interest payments are passed along to our capital partners. In exchange for facilitating the transaction, we receive a 1% fee of outstanding principal balance. Net-net our economics are 4-5% of volume through our marketplace.
While we do not share our performance figures or projections publicly, we have been very excited about our volume to date (we’re currently seeing 40% month over month growth on the platform with little to no marketing).
Erin: Please share your clients and how you initially secured their confidence. How will Bond Street expand? Where do you see Bond Street in five years? Ten years?
David: Bond Street has been overwhelmed by the reception we have received from the small business community. We initially secured a small amount of lending capital and were surprised that within a few weeks we had deployed what we expected to lend in a couple of quarters. I believe that this appetite came from a combination of the simplicity of our process and the exceptional service that we offered our customers. While we haven’t invested in marketing, we’ve been thrilled to see our early customers spreading the word to their friends, peers and colleagues. We’ve also been happy to see some very high quality businesses who could easily have qualified for bank financing, return for their second and third loans.
I see Bond Street becoming the leading platform for small business lending. Not just in providing the right type of financing for every business need, but also in leveraging technology and service to help entrepreneurs think more strategically about growing their companies. I aspire to build a brand and community that people want to be associated with.
Erin: Please discuss why non-bank financial lending is predicted to grow to $1 trillion dollars in the next 10 years and is currently doubling in size every nine months.
David: While technology has revolutionized industries from retail to media, finance has remained widely untouched until the past decade. As consumers become increasingly accustomed to instant online access and superior services in the rest of their lives, they have begun to expect a similar experience with their finances. The traditional financial institutions have not structured themselves for this new customer dynamic and they have not invested in the technology needed to take advantage of the new sources of data and capital. As a result, disruptive companies like Bond Street are positioned to fill the gap and gain substantial market share from the incumbent institutions.
Erin: What is your opinion of the Jobs Act, title II, III, IV?
David: The Jobs Act was a strong step toward democratizing investing and access to capital. I think it is important that all companies can gain access to the capital that they need to build their business. We are trying to solve this problem for credit worthy small businesses, but we are not the solution for everyone. For some businesses, particularly those who are early on or unprofitable, the ability to go out and solicit equity investors is crucial for them to access capital. This is especially true for business owners who are not directly connected to wealthy investors or venture capitalists.
We hope that this will encourage more people to become entrepreneurs and start businesses or invest in new opportunities. Once those businesses grow a bit more stable, we hope to provide lending capital to them so that they can continue to invest in growth.
Erin: Please share your predictions and expectations in the alternative lending industry during 2015. Given the IPOs of Lending Club and On Deck, how will Bond Street become a contender?
- Speed will become a focus of borrowers – Over the last few years the IRS, accounting software and banks have made their data available over APIs. This has allowed progressive companies to shrink the loan application from 20+ hours of preparation to under 10 min. As customers understand the potential, they will begin to seek it out these improved experiences.
- Transparency will become table stakes – In the consumer space, customers have gotten accustomed to trading information for improved service and transparency. Like many consumer trends, we expect this trend of improved transparency to push into business lending.
- Deeper relationships – Consumers and businesses have been slowly disenfranchised by their financial providers. We have begun to see them turning to alternative solutions that offer a more personal relationship or improved services. We expect this trend to continue and that experience will be a major factor in financial decisions.
- Banks will get into the tech game – The explosion of fin tech and the creation of major players like Lending Club will create pressure for banks to create online lending solutions. 2015 is the year they will start to react and incorporate best practices either through strategic partnerships or by acquisition.
We’ve never been more excited by the opportunity ahead of us and we look forward to sharing some of our meaningful milestones soon!
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