Nathan Latka (00:00):
Hey folks. My guest today is Tom Burnside, CEO LendingPoint. He is leading lendingpoint.com, an AI-driven credit tech lending platform. He sees the company as a way to do well and do good simultaneously by protecting, nourishing, and growing each consumer’s financial future. He does this with over 25 years of experience and a wealth of industry knowledge. Prior to LendingPoint, he’s an accomplished credit and financial services leader and trusted data scientist. Tom Burnside, CEO LendingPoint leads the rest of the team in serving their borrowers, their originating financial institutions, their merchants, and other service providers while delivering predictable returns to their capital market providers. Tom, are you ready to take us to the top?
Tom Burnside, CEO LendingPoint (00:35):
Nathan Latka (00:36):
All right. So what gave you this idea? I think back in, was it 2013, the start date?
Tom Burnside, CEO LendingPoint (00:41):
Well, it was 2014. The end of 2014. We really started funding in 2015. Yeah. What gave us an opportunity is, what we were looking at, was a marketplace that was serving some of the credit bands, well, really kind of the assets that other banks and otherwise wouldn’t buy. What we saw was an opportunity for the kind of the more challenged credits to start there, understand that, do it really well through AI, and then continue to broaden our funnel. And so today we fund all credit bands from 550, all the way up to 850. But we started in that really that 660 and under space, just so we could try to understand them, give them a reasonable price, and a reasonable product. And tell their story in a way that nobody else was telling it.
Nathan Latka (01:24):
So these are folks, if you’re listening, and you’re doing $50,000 a year in annual revenue, and you want to take out a what? A $5,000 loan, Tom, something like that. They can check out your offer.
Tom Burnside, CEO LendingPoint (01:32):
Yeah. $5,000. Now that market goes all the way up to $50,000. So as we got better on the marketing and better on the understanding of the customer, we’ve been able to expand the offers.
Nathan Latka (01:43):
Sorry, what did you start with, though? What was your initial sort of target offer size in 2014?
Tom Burnside, CEO LendingPoint (01:48):
It was about $5,000. It was about $5,000. At the very beginning, we started at $5,000.
Nathan Latka (01:51):
So that was your sort of thesis. And then it scaled from there. I guess, take me back to one of those early deals. So I’m a consumer. I have a great… You said a credit score above what?
Tom Burnside, CEO LendingPoint (02:00):
So, typically, in the early days that credit score would be around 620, 625, maybe in that area.
Nathan Latka (02:05):
Okay. And so what might that offer look like?
Tom Burnside, CEO LendingPoint (02:08):
Well, it was either somebody that had a light credit footprint, right. They were just getting established, and nobody could really kind of put all the other kind of API and data information together to be able to tell their story. So there’re a lot of other things that you would look at outside of just credit. You might look at phone bills. You might look at rent history. You might look at some other things to tell the story of their willingness to pay, right? Or their ability to pay. And so those are the things we really focused on. I mean, one of the problems you always have is fraud. And we focused a lot on KYC, Know Your Customer. And we were able to get a very predictive outcome on those particular scores. This was typically somebody that was either on the way back up, had gone through a dip, or just had a very light credit footprint.
Nathan Latka (02:49):
And today, even back then in your proformas, when you’re building in sort of a charge offer or losses or bad debt expense. Is this 2%, 3%, 4%, what do you build in as a buffer?
Tom Burnside, CEO LendingPoint (03:00):
Well, really what you’re doing is the AI models have done an amazing job of predicting risk. And so the way that the AI models work today is it predicts risk, puts you in a category. And then tells me, okay, basically here’s what the risk is going to be. But then pricing is the next kind of optimization tool that we use. And we have about five different buckets of credit grades, or risk, right? But we now are up to 400 different pricing points inside of those grids. So we are getting really, really good at giving you the right product, at the right time, at the right place, with the right terms and conditions so that you can understand how affordable it is for you to finish a project or to resolve some consolidation of bills or whatever it is that you need to do.
Nathan Latka (03:45):
Oh, what’s going on there? YouTube. Good to see you guys. Now, imagine this. You love watching these interviews with SaaS founders. But imagine if we took all of the valuation data out from over 2,807 interviews I’ve done manually, saves you a lot of time. Well we’ve done this, we’ve built it into the beautiful interface inside of Founder Path. Check this out. I’ll show you how you can access this in a second. But you log in, you connect your Stripe account. You see your valuation real time. You can see what it changed over the past 88 days and even set goals for valuation this year. Now, the secret valuation is there’s many different ways to value a SaaS business. So the reason you’re going to see three or four different valuations inside of your founder path dashboard, this is all free by the way, is because depending on who’s doing the buying of your SaaS company, you’re going to get a different valuation.
Nathan Latka (04:34):
A VC’s going to pay a different valuation. Private equity firm is different. If you’re going to do a minority sale, that’s different. And if you sell the whole business, that’s a different valuation. You can see all those when I hover over here, right? So the teal is what a VC would pay. Yellow is what private equity, and red is if you sold the whole thing outright. Now, what’s cool about this, is this is not built off random data. Again, you guys hear these interviews on YouTube. All these data are built from real time valuation data points, founders share with us on the show. So traction 1.2 million, seed round 3.7 raise. They sold 22% of their business. Go in here and filter by the event. Maybe you only want to see companies that have sold the whole business. Well, here are a bunch that have been acquired, the valuation, and the multiple.
Nathan Latka (05:20):
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Nathan Latka (06:03):
Again, all that valuation data live right inside the platform. I hope to see you there. All right, let’s jump back into the interview. So let’s stay in 2014, because you’ve had a lot of growth. Let’s stay in 2014, though, for another minute or two. I’m one of your first customers. I have a 650 score, 700. I go ahead and take 5k. When am I going to pay you back, over what term total? So is it $5,500 over six months? Or what does the term look like?
Tom Burnside, CEO LendingPoint (06:27):
Yeah, typically the average price back in those days was about 22, 23%. Your weighted average coupon, if you think about it in that particular way. And it was typically over three to four years is what we were doing.
Nathan Latka (06:42):
Well, that’s a long payback period. That’s a long time to payback.
Tom Burnside, CEO LendingPoint (06:45):
Oh, absolutely. Yeah. Even back then, the models were doing a really good job of predicting somebody. Typically, what happens, and this is why we saw the opportunity. In this particular area, you saw a lot of very, very short transactions, 6, 8, 12 months. And we saw an opportunity to give somebody something that was very affordable. And so we didn’t want to go below 24 months, and we were able to get those out as long as 48 months, even back in the day, by taking the AI information and doing a better job of telling the story. And therefore giving them something that was affordable, because one of the problems is if you’re paying back $5,000 over 12 months, it’s a very expensive payment. When you start to elongate that out, it becomes very affordable.
Tom Burnside, CEO LendingPoint (07:24):
And you give them the opportunity to get back on their feet and be able to pay back. And now, most of those customers have come back to renew with us or come back to take another loan with us. We now have about 30% of the base is in a renewal status with us, because we made it affordable. They were able to pay it back, and they’re able to take more money.
Nathan Latka (07:42):
Just to be clear, if I take that $5k from you in 2014. I pay it back over three to four years. My total interest on that $5k over four years is $1200, right? That’s 23%ish. Or is it 20% per year?
Tom Burnside, CEO LendingPoint (07:53):
No, that’s roughly about 23% over that period of time.
Nathan Latka (07:56):
I see. I see. Interesting. Okay.
Tom Burnside, CEO LendingPoint (07:59):
Yeah. Typically, what you’d see in this market, there’s a discount rate, or you would see a percentage. That’s not what we did. We actually use an interest rate. And if we were charging 23%. 23% a year based on the outstanding balance, which averages out to about 23 to 30% over the life of three years.
Nathan Latka (08:20):
Okay. Got it. So, I mean, can we basically say, that’s effectively an 8% APR or interest rate?
Tom Burnside, CEO LendingPoint (08:28):
No. You would want to think about it as an interest rate. Yeah. It’s a 23% interest rate, right? So it’s not really a discount. It’s just a simple interest rate, like you’d pay for a car, or a house, or anything else that you’d do. If you’d take some of these discount rates, they could be upwards over a 100% interest. And so we think that we are given the best deals in the marketplace, hands down.
Nathan Latka (08:48):
Yeah. I would agree with that based off comps I know, but talking about the pure interest rate makes you seem really bad. It makes anyone seem bad, because the numbers are scary. I totally get this. You give people a long time to pay back. It makes it sound a little bit better, but the reason I’m asking these questions is you were able to secure. To lend, you have to secure money to lend. Right? You secured $100 million, basically, on day one. I believe. So how did you do that?
Tom Burnside, CEO LendingPoint (09:14):
Yes. Well, look, I mean, some of this was based on track record, so we were able to get better pricing on the facilities that we borrowed from for ourselves to be able to make that money available to our customers. So we were able to get some pretty good rates back in the day. Those rates have come down a lot, right, over the last few years.
Nathan Latka (09:32):
Wait Tom, come on. What was good back in the day?
Tom Burnside, CEO LendingPoint (09:35):
What was good back in the day? We started off at around a 10% cost of funds on our own.
Nathan Latka (09:41):
Were there warrants involved?
Tom Burnside, CEO LendingPoint (09:44):
There were some warrants in there. I think we gave up 1% in the first year to get some of the good deals.
Nathan Latka (09:49):
That’s not bad.
Tom Burnside, CEO LendingPoint (09:50):
Not too bad, not too bad. We didn’t feel too bad about it. But the good news, because we were able to save money. We were able to push that forward to the customer.
Nathan Latka (09:59):
No, that’s great. I mean, that’s exactly why you want to be able to negotiate, obviously, that low cost to capital. Now, was your credit box really tight? Did they really restrict you? What states you could lend to? Scores 650 or above? Or did you have enough flexibility to actually deploy that capital?
Tom Burnside, CEO LendingPoint (10:14):
Yeah, we had enough flexibility. I mean, obviously being in this market for quite a while, what we did is we really used more of our own equity. Our advanced rates were a little bit lower, so our box was wider, so we could test more. So we were able to go right out of the market and test it in the best of ways. We did most of it on our own balance sheet to start with, just so we could prove the concept and the model worked.
Nathan Latka (10:35):
So, Tom, just be clear, you raised equity on day one. And you were using that capital to test?
Tom Burnside, CEO LendingPoint (10:40):
To test the market. That’s right.
Nathan Latka (10:41):
How much on day one? Do you remember?
Tom Burnside, CEO LendingPoint (10:43):
Well, yeah. What’s interesting, the team we have here raised about $220 million off friends and family. Just really no outside rounds, but friends and family. We raised that over about probably four or five different tranches that we raised. But we didn’t really consider them A rounds, B rounds. It was our friends and family coming to the table. We had other deals that we had done together that worked out well. And so it was relatively easy to raise that. Our first institutional raise didn’t actually happen until 2020.
Nathan Latka (11:13):
Well, that’s why I’m asking. So that capital you started your balance sheet on day one, was that a prom note on the operating company, or was it actual equity that your friends and family… They put money in for equity in the business?
Tom Burnside, CEO LendingPoint (11:25):
Combination of both. Some of it was just pure equity. Some of it was more mezzanine-type structure, right? So a little combination of both, but it allowed us to use that money to leverage, to be able to get us access to capital, be able to test our models, and make sure that our models were as predictive as we were hoping they were going to be. And they became that over a short period of time. And therefore, then the cost of capital continues to go down as your performance of the models are better. It’s magic that way, right?
Nathan Latka (11:57):
There’s a lot of FinTech entrepreneurs listening to this interview, and they’re all wondering how much loan tape and vintage history do they have to build to drive their costs from 12% and 1% warrants down to 8% or bringing a bank on top of the credit fund or whatever to drive the blended down. What did you back then have to grow your loan tape to, to get significant savings below that 10% cost to capital on your first $100 million?
Tom Burnside, CEO LendingPoint (12:19):
That’s a great question. I think there’s a couple of things. The weighted average life of an asset, even though you write it for 24, 36 months. People end up paying it off in 18 months, or they pay it off in 16 months. So within about a year and a half, you have a pretty good idea of how the curves are going to work, because most of your losses are really front-ended. In the first six months, you’ll see about 60% of your losses on a vintage analysis curve. So it’s relatively easy. Once you get past six months, they can kind of predict the rest of your curve. And so a year into it, you’ve got a couple turns of products. But it really wasn’t until we got over call it $100 million of transactions until they said, look, you’ve got enough scale, enough predictability, and a couple turns of the product. That we feel comfortable in giving you better pricing and better advanced rates.
Nathan Latka (13:10):
Okay. This makes sense. A couple of things I want to pull out here, because it’s great for consumers listening. First off, you don’t charge prepaid penalties, which is great. Right? You let people pay off early if they want.
Tom Burnside, CEO LendingPoint (13:19):
That’s right. Yep.
Nathan Latka (13:20):
So very flexible capital product. That’s fantastic. No hidden fees. Talk to me about scale that first year. So just total amount of loans done in 2014. Do you remember?
Tom Burnside, CEO LendingPoint (13:29):
Yeah, it was about $15 million. It wasn’t a lot. It wasn’t a lot.
Nathan Latka (13:34):
But it felt like a lot back then, though.
Tom Burnside, CEO LendingPoint (13:35):
It sure did. And we learned a lot.
Nathan Latka (13:39):
Well, I was going to say, I mean, we can sort of calculate, right? If you had 15 out, you gave us 23% minus 10%. What is that? 13 points of spread. Right. That’s nice. It’s good business. So you go, okay, we’re onto something, what’s next?
Tom Burnside, CEO LendingPoint (13:51):
Well, then you have these little things called losses, right? So you have the cost of capital, but you also have losses. Your second-largest component. So it was a lean year, but it was a great year of learning. A great year of kind of understanding how their credit models were going to perform, and what we needed to augment them to get the losses in line with where we were hoping them to be.
Nathan Latka (14:13):
I love this. Okay. Guys, this is year one. You just heard it, year one. Now, let’s go fast-forward, Tom Burnside, CEO LendingPoint. 2018, how much total capital raised over the prior four, oh sorry, lent over the prior four years.
Tom Burnside, CEO LendingPoint (14:25):
So, what’s interesting about it is we hit about 360 or so. So things were starting to grow.
Nathan Latka (14:33):
$360 million in loans in 2018.
Tom Burnside, CEO LendingPoint (14:35):
Yeah. The capacity is starting to grow, now. We’re starting to get in a great place. The models are performing well. We have a couple different lines of credit now, at this point. All of them have been up-sized, so now we have access to roughly, I think, at that particular point about 350 to $400 million of capacity, at that particular point in time. So life is getting better. Cost of funds are coming down by a couple of points. So those spreads are widening, which is always good. It helps pay bills.
Nathan Latka (15:03):
So I mean, we’re talking you’d get down to 7% in 2018, 6%, something like that?
Tom Burnside, CEO LendingPoint (15:08):
It was about 8%. It was about 8% at that point. Right.
Nathan Latka (15:10):
Tom Burnside, CEO LendingPoint (15:11):
I mean, it wasn’t until you really cross over a half a billion dollars of originations a year, until pricing really starts to come of real scale.
Nathan Latka (15:17):
When did you hit that?
Tom Burnside, CEO LendingPoint (15:19):
We hit that in 2019.
Nathan Latka (15:21):
Okay. That’s half million in new originations.
Tom Burnside, CEO LendingPoint (15:23):
Yeah, 2019 we cross over. Yes.
Nathan Latka (15:25):
Wow. Okay. That’s fantastic. I mean, one of the problems a lot of folks have when they do these deals is they think they want to go raise a big warehouse facility. The problem is, you end up with unused fees, if you can’t attract cusTom Burnside, CEO LendingPointers and deploy it quickly. It sounds like you just told me, in 2018, you had 400 million capacity, but you did 360 million. That’s very good optimization in terms of actually utilizing what you took down on the facility size. How did you plan that well?
Tom Burnside, CEO LendingPoint (15:49):
Well, the nice thing about growth is our AI models from a marketing perspective have really led who we go after and how big that TAM is or that Total Addressable Market. So we knew, basically, based on our efforts, what we needed to do to grow the next 10 million, the next $20 million a month. Right. And so what you’re really trying now to do is line up capital, right? The capital that you need to backstop that advance rate and continue to grow the business. And so that was all kind of coming together at that particular point, and really the limiting factor was capital. Just how much capital do you have on the books. That was really more of your limiting factor, more so than the capacity of the lines.
Nathan Latka (16:34):
Yep. Very cool. And then fast-forward to date, obviously, we’re in the middle of 2022. But what was 2021 total new loans done that year?
Tom Burnside, CEO LendingPoint (16:41):
- I mean, it was a very interesting year. We grew 144% year-over-year, 20 to 21.
Nathan Latka (16:48):
What number? In capital deployed?
Tom Burnside, CEO LendingPoint (16:51):
Nathan Latka (16:52):
What number grew by that amount? The capital deployed or the revenue?
Tom Burnside, CEO LendingPoint (16:56):
The funding levels. And we’ll talk about revenue here in just a second, but the funding levels themself. We went to $2.1 billion in 2021, which is a huge growth. We slowed down a little bit during COVID in 2020, but then we had sort of close to a little under a billion, then went to $2.1 billion. So we had significant growth, kind of year-over-year. This year we’re already starting out about almost $900 million just first quarter.
Nathan Latka (17:30):
You’ve already done $900 million in Q1.
Tom Burnside, CEO LendingPoint (17:32):
Nathan Latka (17:33):
Tom Burnside, CEO LendingPoint (17:34):
Yeah. It’s growing quickly now.
Nathan Latka (17:36):
That’s incredible. Okay. I didn’t bring it up, but you did. Talk to me about revenue.
Tom Burnside, CEO LendingPoint (17:41):
So from a revenue perspective, I think, there’s probably two pieces here. In 2021, we were at about $330 million.
Nathan Latka (17:49):
That’s a run rate and that’s net interest margin, or is that before you pay out your cost to capital?
Tom Burnside, CEO LendingPoint (17:56):
This is our net revenue, right.
Nathan Latka (17:58):
After you pay back your warehouse providers, all that.
Tom Burnside, CEO LendingPoint (18:01):
Nathan Latka (18:01):
Wow. $350 million, you said?
Tom Burnside, CEO LendingPoint (18:03):
Nathan Latka (18:03):
$330 million. Okay.
Tom Burnside, CEO LendingPoint (18:05):
So approximately $330 million, and we’ll be around $600 million this year.
Nathan Latka (18:09):
That’s incredible. When was your first million dollar year. Do you remember? Was that 2015?
Tom Burnside, CEO LendingPoint (18:12):
Yeah, it was 2015.
Nathan Latka (18:15):
Yeah. You got there pretty quick, because I’m doing the spread on $15 million out, right. With 13 points of spread. You get there quick.
Tom Burnside, CEO LendingPoint (18:21):
Nathan Latka (18:21):
Interesting. Most businesses like this have trouble scaling for two reasons. They have to fight yield compression. Right. Because more money will plow into the market. Right. If it’s a known asset class, right. The second is your Google ad expense goes up, right. You have to have CAC arbitrage, somehow. So how have you fought both of these headwinds on both sides keep scaling so fast?
Tom Burnside, CEO LendingPoint (18:43):
Well, look, I think the question has always been in the FinTech space. Is it scalable? Is it predictive? Right? And is it sustainable? Can you continue to grow it at the appropriate rates? And I think we’ve answered those questions. First of all, the biggest challenge you have is you have to be able to optimize your cost, to acquire a customer. And that really comes through your ability to renew a customer. I mean, we have an 86 net promoter score. We work really hard on our customers to make sure that our customer is having a great experience, because they have a great experience, they come back. They see you as kind of that trusted advisor. So, I mean, right now, about 25 to 30% of our base runs in renewals. Just renewals alone. These are customers just coming back.
Nathan Latka (19:27):
So right now, if you look at your loan tape, how many customers have at least a dollar out with you?
Tom Burnside, CEO LendingPoint (19:33):
We’re right at 300.
Nathan Latka (19:35):
Tom Burnside, CEO LendingPoint (19:36):
… thousand customers.
Tom Burnside, CEO LendingPoint (19:37):
Yeah. And we’ve serviced about 450,000 in total.
Nathan Latka (19:41):
Wow. So that’s a very high renewal rate, actually. Right? I’d expect that I’m going to be way higher, if people weren’t coming back. But it’s actually not a big number of people.
Tom Burnside, CEO LendingPoint (19:48):
That’s right. And the average transaction today is about $11,000. Right? So it’s moved from the $5,000 days to about $11,000, today.
Nathan Latka (19:58):
It’s still the average deal, three to four year payback, 23% ish.
Tom Burnside, CEO LendingPoint (20:03):
Well, we bought a point of sale company, and so things changed a little bit when we bought the point of sale. We bought the point of sale company. We were able to move to 7 and 10 year paper for home improvement. So we’re in the home improvement space, and point of sale, as well as medical. And in those spaces you tend to go a little longer in turn on a direct to consumer type of product. It’s typically still around five years, to the typical duration.
Nathan Latka (20:29):
So this is really interesting. I talked to a lot of SaaS founders that have built a really interesting marketplace that maybe connects. I’m going to make this up, a lumber provider of two by fours with construction workers. And there’s a massive audience on both sides, and they sit in the middle. And what they’re doing now, is sort of factoring the paper right on 30 day things. Correct if I’m wrong, you effectively understand how exciting this is. You might go buy that thing, and you already know the finance side of the business. So you’ll sit in the middle and just start doing that in the construction space.
Tom Burnside, CEO LendingPoint (20:57):
Nathan Latka (20:57):
Tom Burnside, CEO LendingPoint (20:58):
That’s right. Yeah. I mean, for an example, if you look at our eCommerce space. I mean, we’re sitting there to help the small business or the eCommerce business. We’re helping them buy inventory, so they can deploy it. So they run a sale, they run low in inventory. They use us as backstop to be able to fill back up the inventory.
Nathan Latka (21:18):
Tom Burnside, CEO LendingPoint (21:19):
So we set on the consumer side, as well as small business.
Nathan Latka (21:22):
I’m just impressed you’ve been able to do this, because there are competitors that only do one of these things that you’re dealing with. So like billd.com does this in vendor management construction, obviously, Paylocity and Clearco in the eCommerce space. All the areas you just mentioned, there are a billion dollar competitors. So how are you winning? How are you going into these markets and sort of building a better mousetrap?
Tom Burnside, CEO LendingPoint (21:45):
Look, we have an amazing team. We really do. I mean, the team has been around this space for a very long time. We also have great connections in the financial markets. So we’ve been able to get the lines of credits of the things we need to do, and in order to be able to provide this service. Our platform today, services banks, and credit unions, and ABSs, forward flows, as well as our own balance sheet. So we have a lot of optionality for our customer, and we continue to grow the optionality to be able to make sure that we can aggressively price. That we can give them the right product at the right time with the right amount of money to fulfill whatever it is that they’re trying to do at that point.
Nathan Latka (22:22):
I have a bunch of other questions on how you securitize and all that, but unfortunately we’re running low on time. So I’ll just simplify that question. How much debt capacity do you have, right now? You’re doing $900 million a quarter. How much could you lend?
Tom Burnside, CEO LendingPoint (22:35):
We can easily get to a billion two, a billion five with what we have right now. It’s a combination of warehouses. ABSs, forward flows, bank commitments, things of that sort that make that happen. But we know we can give to at least a billion five. And the question really is, in this market, we’re seeing some pullback from some of our competitors. And I think it’s an opportunity. We have the right kind of product and the performance and portfolio. I think we’re going to continue to take advantage of the marketplace where it’s at.
Nathan Latka (23:03):
You know better than anybody. What are these kinds of companies getting valued at, today? Let’s look at 2021, is it a multiple on your 330? Or do you get a lower multiple on loans done, $2.1 billion?
Tom Burnside, CEO LendingPoint (23:16):
This is the challenge for valuation, right? The challenge of valuation is a very fast-growing economy, earnings lag. So typically, these are discounted cash flow models and really looking more at a multiple of revenue. Typically, and a lot of times, it’s either forward or post. But a lot of times they’re looking forward now, because on a really fast-growing revenue economy, they’d probably look more, like in our case, at $600 million than they would look at the $330. You know what I’m saying? That is a valuation challenge, because a fast-growing company will continue to have massive scale and efficiencies of scale. And growth and revenue that won’t show up in earnings in the first year. So you really kind of need to do it more as a discounted cash flow, we seek primarily, over a five-year period or even a 10-year period to pick up the value of what you’re creating.
Nathan Latka (24:07):
So if you do this analysis last year, what did you value the business at? If you run in a DCF model on it? I mean, definitely in the billions, right? You passed five billion.
Tom Burnside, CEO LendingPoint (24:16):
I’m going to hold that at this particular point.
Nathan Latka (24:19):
Guys, I got so much. The flow is so good. We’re smiling, we’re laughing. And then I hit him with valuation, and he shuts down.
Tom Burnside, CEO LendingPoint (24:26):
Yeah. Well, here’s the deal. We’re making money. We’ll make 100 plus this year.
Nathan Latka (24:32):
100 million net.
Tom Burnside, CEO LendingPoint (24:33):
Yeah. A $100, $120. And we’re one of the only ones that are growing at the rate we’re growing and making that level of profit. We’re going to let the markets decide that, at some point. But we feel like we’re in a really great spot. We feel like things are moving in the right direction. The predictability of the models continue to get better. The AI’s growing fast on both the credit, but also on the pricing of the products. And it’s really accelerated our growth, and we’re pretty excited about where we’re at.
Nathan Latka (25:05):
Let me just put this. The $125 million, Warburg put in. More or less than 5% of the business.
Tom Burnside, CEO LendingPoint (25:13):
Yeah. Warburg’s an amazing partner.
Nathan Latka (25:18):
This guy’s a great politician over here.
Tom Burnside, CEO LendingPoint (25:23):
Look, Warburg. That was the first institutional round that we’ve taken.
Nathan Latka (25:27):
Tom Burnside, CEO LendingPoint (25:27):
And they’ve been amazing partners. Look, they have been really, really good. I think we do well as a company, so that helps the relationship.
Nathan Latka (25:35):
They were debt-first, I imagine. Right. Were they one of your debt partners early on?
Tom Burnside, CEO LendingPoint (25:38):
Nathan Latka (25:39):
Oh, they weren’t. Oh, wow.
Tom Burnside, CEO LendingPoint (25:40):
No, no, no. They came in during COVID. So even during COVID, the models really held. The beta risk was still low. And they followed us for about six months, and then jumped in. And so yeah. Great partners. They put in $175 million now of themselves into the company. So-
Nathan Latka (26:02):
How much was secondary?
Tom Burnside, CEO LendingPoint (26:05):
Nathan Latka (26:07):
Oh, I thought all of it would be secondary. You’re printing out $100 million in free cash flow. Why wouldn’t it all be secondary?
Tom Burnside, CEO LendingPoint (26:13):
Well, remember, we continue to pour that money back into the business right now to continue to grow it. At the pace we’re growing, you need to feed the proverbial beast, right? So that money keeps going back into the organization, and we have taken no secondary. We have poured all the money back into the company to keep the company growing.
Nathan Latka (26:30):
Well, Tom. Okay. Last question as we wrap up. How do you keep early employees excited about an eventual payday? You’re not public. There’s no secondary options. They’ve been with you since 2014. You maybe use options to recruit them. When are they going to see money?
Tom Burnside, CEO LendingPoint (26:44):
When the market’s ready, we’ll be ready. Look, we have an amazing team of people. A lot of these people have worked with me at least two to three other companies. And they believe in kind of the overall dream in where we’re going. And our success is squarely on their shoulders.
Nathan Latka (27:04):
When did you hire your last CFO? Your current one that’s with you, when did you hire him or her?
Tom Burnside, CEO LendingPoint (27:08):
Nathan Latka (27:10):
Interesting. All right, guys, I expect an S-1 filing in Q3 this year. You heard it here first. Tom Burnside, CEO LendingPoint, let’s wrap up. I’m going to get him in trouble.
Tom Burnside, CEO LendingPoint (27:20):
Nathan Latka (27:21):
Tom, let’s wrap up here with the famous five. These are easy. Number one. Favorite business book.
Tom Burnside, CEO LendingPoint (27:25):
I’m a Jim Collins fan. Right? And so anything Jim Collins writes I’m a big fan of. Good to Great is probably my favorite.
Nathan Latka (27:38):
Number two. Is there a CEO you’re following or studying?
Tom Burnside, CEO LendingPoint (27:43):
Yeah. I mean, look, I think Jamie Diamond has got to be the guy, right? He’s been very much on top of his game.
Nathan Latka (27:49):
Number three. What’s your favorite online tool for building LendingPoint?
Tom Burnside, CEO LendingPoint (27:55):
Oh boy. I don’t know that I can answer that question. I’m going to offend somebody.
Nathan Latka (27:59):
All right. We’ll skip that one. Stay neutral. Number four. How many hours of sleep do you get every night?
Tom Burnside, CEO LendingPoint (28:04):
Nathan Latka (28:06):
And situation? Married. Single. Kids
Tom Burnside, CEO LendingPoint (28:09):
Married and two daughters.
Nathan Latka (28:11):
Two kiddos. And how old are you, Tom?
Tom Burnside, CEO LendingPoint (28:16):
Young. I’m 58.
Nathan Latka (28:18):
- Last question. Take us back to your 20-year-old self. What’s something you wish you knew?
Tom Burnside, CEO LendingPoint (28:24):
It was all going to work out. Keep going.
Nathan Latka (28:27):
Guys, there you have it. There’s a lot of flash in the pan. Startups raising a billion dollar valuations right now, that have lent the total of 15 million or something. It’s crazy. Then you look at this story. It’s unbelievable. Back in 2014, they said, you know what? We have an opportunity here to do good, and do well at the same time. 15 million loans done, average loan size of $5,000 bucks to consumers with a 620 credit score or above. They made money that first year by raising capital at about 10%, lending it at about 23%. You make a spread. Fast-forward to 2018, 400 million capacity, 360 lent out, same economics, a little lower cost capital. But now today, incredible growth. They have about $11,000 on their average loan size. $600 million is the revenue they’ll do this year, with about 120 profit. 30% of new customers are repeat. 300,000 customers to date as they continue to scale with very little outside capital. Thanks so much, Tom, for taking us to the top.
Tom Burnside, CEO LendingPoint (29:15):
Appreciate the time.
Nathan Latka (29:18):
One more thing before you go. We have a brand-new show. Every Thursday at 1:00 PM, central. It’s called shark tank for SaaS. We call it Deal or Bust. One founder comes on, three hungry buyers. They try and do a deal live. And the founder shares backend dashboards. Their expenses, their revenue, ARPU, CAC, LTV, you name it. They share it. And the buyers try and make a deal live. It is fun to watch, every Thursday, 1:00 PM central. Additionally, remember these recorded founder interviews go live. We release them here on YouTube every day at 2:00 PM central, to make sure you don’t miss any of that. Make sure you click the subscribe button below, here on YouTube, the big red button. And then click the little bell notification to make sure you get notifications, when we do go live. I wouldn’t want you to miss breaking news in the SaaS world, whether it’s an acquisition, a big fundraise, a big sale, a big profitability statement or something else.
Nathan Latka (30:09):
I don’t want you to miss it. Additionally, if you want to take this conversation deeper and further, we have by far the largest private slack community for B2B SaaS founders. You want to get in there. We’ve probably talked about your tool, if you’re running a company, or your firm, if you’re investing. You can go in there and quickly search and see what people are saying. Sign up for that at nathanlatka.com/slack. In the meantime, I’m hanging out with you here on YouTube. I’ll be in the comments for the next 30 minutes. Feel free to let me know what you thought about this episode. And if you enjoyed it, click the thumbs up. We get a lot of haters that are mad at how aggressive I am on these shows, but I do it so that we can all learn. We have to counter those people. We got to push them away. Click the thumbs up below to counter them and know that I appreciate you guys’ support. All right, I’ll be in the comments. See ya.