Investing strategy: pre-IPO
Blend is a fintech company that is transforming the $ 14 trillion consumer lending market by creating a quick and easy route to obtaining a loan, mortgage or opening a deposit. Blend’s electronic platform helps financial institutions increase productivity, improve user experience, and strengthen customer relationships. The main office is located in San Francisco, USA. The company was founded in 2012.
Blend technology is a practical tool for all stages of the financial service cycle, which makes the process quick and easy without reference to the working hours of the financial institution and its geographic location.
- Total funding: $ 685 million
- Final round: $ 300 million — Series G
- Latest Valuation: $ 3.3 billion
- Last round share price: $ 5.1
- Last round date: January 2021
- Key Investors: Andreessen Horowitz, Canapi Ventures, Capital One Ventures, Coatue, 8VC, Emergence Capital, Founders Fund, General Atlantic, Greylock Partners, Lightspeed Venture Partners, Temasek, Tiger Global Management
Blend in numbers
- More than $ 1.4 trillion in loans and mortgages processed by the Blend platform in 2020; an increase of more than 2 times compared to the previous year.
- More than 1 million people received a mortgage loan through the platform.
- Blend proceeds approximately 30% of the US mortgage applications.
- 285+ clients including Wells Fargo, U.S. Bank, M&T Bank, SWBC, Navy Federal Credit Union; 70+ new clients in 2020.
- 60+ integrations with leading IT content producers; a modular platform that allows you to reduce product development time from several months to several weeks.
Blend operates in the US $ 14 trillion consumer lending market. It is a dynamically growing niche stimulated by low interest rates.The need to transform the banking industry has been forming for many years, but restrictions due to COVID-19 have launched this process, and now it will only accelerate.
Debt balance and composition, US $ trillion
Product and technology
Blend technology is a set of digital modules (including presets and templates) that do not require writing additional code. Ready-made modules allow financial institutions to quickly introduce new products and services and adapt to customer needs. Some modules are described below, but their list is much broader.
The mortgage module provides fast and effective support for the entire cycle of real estate purchase — from checking documents using electronic databases and evaluating an application to approving a loan and closing a transaction. In addition, the system offers the most suitable insurance.
The consumer lending module allows the bank’s client to quickly navigate the variety of offers and choose the best solution. All stages — from selection to closing a deal — take place remotely and electronically. Integration with leading KYC providers ensures transaction security.
The new car loan module allows you to quickly and efficiently close loans for the purchase of any vehicle, from a car to a boat.
Interest rate on loans with duration of 90+ days
Investors see Blend’s niche as promising. We see this in the example of PayPal (NASDAQ: PYPL) stock, which has grown by 23% YTD, and the company’s market capitalization is now $ 334 billion.
More than 270 US financial institutions use Blend products. Blend’s clients include the largest US banks Wells Fargo and the U.S. Bank. In 2020, the company added 70+ financial organizations and began to process 30% of all mortgage applications.
Round F for $ 685 million was closed on January 13, 2021, and increased the company’s capitalization more than 2 times — up to $ 3.3 billion. The purpose of the round is to finance the development of products in related niches, including car loans and consumer loans.
Further growth for Blend will be driven by growth in consumer lending, expansion into other niches, cross-selling to existing customers and expansion into international markets.
Nima Ghamsari, founder and CEO, remains the leader of Blend. The number of employees has already exceeded 600 people, having increased by 60% in 2020.
The workforce is very diverse and represents a healthy combination of experience in fintech startups (Invoice2Go, Path, Salesforce) and industry leaders (Microsoft, Amazon, Bloomberg, and Citibank).
Risks of investment
A shrinking consumer lending market or increasing competition could impact the growth of Blend’s business. Both scenarios lead to the main risk — the refusal of financial institutions from Blend products.