Most alternative finance companies seek to meet the needs of an underserved niche in the marketplace while a few have wider aims.
Count AvantCredit among the latter. The Chicago-based company was recently ranked sixth on Forbes 100 Most Promising Companies list thanks to an impressive growth pace which sees it with more than $1 billion in funding, 550 employees, and $75 million in annual revenue in just over two years of operation.
Investors love AvantCredit. Within its first sixth months of operation AvantCredit attracted $1 million in seed funding, an $8 million Series A round, and a $25 million debt facility. A year later they closed a $75 million Series C round and two $200 million debt financings.
“Our mission from day one has been very simple – to reduce the cost and barriers of borrowing for consumers,” said AvantCredit CEO Al Goldstein. “There is lots going around so we boil it down to providing a better customer experience for the average borrower in their entire credit process.”
AvantCredit seeks to make their already impressive timeline exponentially better by becoming a one-stop shop for consumers to access credit, Mr. Goldstein said.
“Today we are offering a personal loan product for consumers in the US and UK. Our goal over the next 12 months is to expand to one more country and we will likely come to Canada soon.”
AvantCredit began differentiating themselves from the beginning by prioritizing technology.
“We view ourselves as a pure tech and analytics company,” Mr. Goldstein said. “My two co-founders were in Y Combinator. One (Paul Zhang) runs our technology organization and one (John Sun) runs our credit and risk organization.”
Through the use of that blend of analytics and technology, AvantCredit is able to offer customization beyond the desires and practical capabilities of big banks.
“We are able to price risk and credit to produce a unique product for a given customer as opposed to more traditional lending which is here is a product do you fit it or not,” Mr. Goldstein explained.
With no physical branches to maintain, AvantCredit can focus more of its resources on the technical aspects of their platform, as they seek to create the optimal experience for its online clientele, who are growing increasingly comfortable maintaining their finances through mobile technology.
“Tech control is everything we do,” Mr. Goldstein said. “We are expanding our mobile presence and concentrating on creating an experience where the customer has full control over their relationship.”
“It starts with the customer experience by making it seamless and transparent. It continues with credit analytics and our ability to use the advanced technology as we learn to price risk of an individual customer better so we can give a better rate relative to the average.”
Beyond the savings realized through the absence of branch maintenance, AvantCredit has used technology to generate efficiencies in additional places, Mr. Goldstein said. All of their regulatory compliance is done through technology as is their relationship management.
“The idea is to reduce the servicing and operating costs and therefore being able to pass it on to the customer,” Mr. Goldstein said
Mr. Goldstein described cyber security as “an ongoing battle.” He added that approximately 200 staff are devoted to technological aspects of the company. There have been no cybersecurity breaches and minimal customer fraud.
“That translates to better prcing for the consumer,” Mr. Goldstein said.
Most alt-fi companies are situated on the coasts, but AvantCredit is based in Chicago. Given the industry’s online nature, does physical location matter at all?
“Location matters as far as quality talented people,” Mr. Goldstein offered. “We are a tech company so it’s all about human capital.”
“I think Chicago is underrated, like Santa Monica. Chicago has a great workforce. Obviously the University of Chicago, University of Illinois with its’ engineering program, and Northwestern have great talent, people who are really loyal and do not jump around as much.”
AvantCredit is deliberate in its creation of a culture that will attract and retain that top talent. Of the dozens of companies I have profiled over the past three years, they do by far the best job of communicating that culture to prospective employees via their website. In fact they are one of the few who devote any online attention to that at all.
“This is my third company, it’s all I’ve done in my career,” Mr. Goldstein explained. “What I’ve figured out is clearly there is a problem in financial services and I think people understand that. It comes down to can you execute and deliver your great service.”
“What we’ve learned is to do that you have to attract top talent. The way to do that is to create a system where it’s all based on talent and execution and the best people win and get to excel. That’s core to our long-term growth.”
By creating and also maintaining that meritocracy, Mr. Goldstein sees the best people developing their best ideas unencumbered by the politics and jostling for attention that plagues many companies.
“So you have to start with people who are driven and highly motivated by a singular goal,” he confirmed. “That is step one. Then make sure there’s no politics, just smart, hungry people who are trying to innovate and create value and I think we’ve done that.”
“The key is getting really good people and being very selective. Only bring in people who buy into the long term vision.”
AvantCredit also extends this philosophy to its coding, which they describe on their website as a draft. This open source philosophy has been beneficial, Mr. Goldtsein believes.
“We are trying to attract the best of the best when it comes to tech, analytics, and data engineering. I think we’re on the forefront of using the latest technology and analytics coming out of academia.”
“So we are building lots of things that do not exist in the marketplace and we selectively look at things we open source in order to build our brand in the technology community. A lot of our people come from acaedmia and I think it’s something that expands the overall community and so it’s been part of our strategy.
Then there is the general atmosphere AvantCredit strives to create. Mr. Goldtsein said AvantCredit’s open floor plan helps communication. They also hold regular town halls, demo days and staff outings to encourage cohesion. Remote work opportunities, gym subsidies, a flat team structure and a physical location in a cool part of Chicago are attractive to their target staff demographic.
Look for even more impressive growth as more people, both in the United States and in other countries become familiar with alternative finance, Mr. Goldstein predicts.
“Fintech started 10 years ago in lending and credit and it’s expanded to other countries. Now consumers are starting to become aware. You’ll see massive growth in all these platforms.”
That increased awareness will not only attract more clients, but also more companies seeking to attract those clients. How does AvantCredit intend on standing apart?
Take that desire to meet multiple needs for each individual consumer and add superior technology, Mr. Goldstein said.
“Our core thesis is a little different than everyone else in that we’re trying to be a one-stop-shop for the needs of the average customer. Over the long term, that will differentiate us along with our ability to use technology and analytics to drive down the cost for that universe.”
AvantCredit plans on adding more products as they grow. There’s also room to progress with their technology.
“Currently, half our applicants know the result in real time,” Mr. Goldstein said. “The goal over the next year is for virtually all of our customers to get approved in real time. We’re still doing verification manually for customers that fall outside of our risk parameters, but the idea is to continually improve those risk parameters so virtually everyone will know in real time. Virtually everyone does know in 24 hours.”