I am delighted to announce today that Spark Capital has led a Series A investment in Bond Street. Bond Street’s co-founder & CEO, , previously worked with us on the investment team at Spark, so this reunion is especially sweet.
It is no secret that we’ve been focused on financial services investments for some time now at Spark. We’ve made a number of investments in the space, both early and expansion stage, and will continue to make more. We’ve invested in infrastructure software businesses like Plaid and Orchard, as well as consumer brands like Wealthfront and Affirm. We believe that financial services is undergoing a period of unparalleled innovation, and we aim to play at multiple layers of the stack and across a number of key consumer and business offerings.
The small business finance space is one that is particularly exciting to us. We’ve estimated that there is ~$280B in unmet annual demand for U.S. small business credit based on research from leading investment banks. A recent Fed study indicated that it takes 33 hours on average to complete and submit loan applications to an average of 2.7 financial institutions. Shockingly, businesses still can’t apply for a loan online at any bank in the country! Further, the established banks decline ~80% of applicants. We think this is largely a function of the current underwriting process – it costs the same for banks to underwrite a $50K credit as it does a $5M loan. This immediately disqualifies many small business for bank financing.
We believe this is all poised to change. The internet and its associated services for the first time have made small business financial and business data accessible in real time. Underwriting can now be a process that takes hours or minutes instead of days or weeks, and at a much reduced cost. Reaching these businesses has also become far more accessible, and maintaining ongoing relationships with them through innovative products that smartly leverage data is now a reality.
David, and the Bond Street team have done a great job building a beautiful customer experience for small businesses. Their first term-loan product leverages a best-of-breed loan application, smart data hooks and a seamless underwriting process to give small businesses access to the capital they need at the rates they deserve.
Most importantly though, Bond Street’s mission to become the financial advocate for every small business is what gets me most excited. This approach goes beyond any given loan product. It’s about much more than that. I’m thrilled to be in business with the Bond Street team, alongside Jefferies, Homebrew, Founder Collective and a number of other terrific investors.
Long live small business!