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Billion Dollar Unicorns: Avant is Revolutionizing Consumer Credit

Posted on Tuesday, Oct 6th 2015

According to the latest Federal Reserve data, the US consumer credit market size was $3.4 billion in 2014, recording a 10% growth over the $3.1 billion credit as of 2013. Avant, the latest entrant to the Billion Dollar Unicorn club, is trying to convert this industry to an online marketplace and is seeing great success so far.

Avant’s Offerings

Chicago-based Avant was founded in 2012 by serial entrepreneur Al Goldstein, Paul Zhang, and John Sun. Through his experience with his initial ventures, Al realized that there was a huge opportunity in providing credit alternatives to near-prime or mid-prime borrowers. He noted that the market was dominated by customers who were earning between $50,000-$60,000 a year and had credit scores between 600-700. He also realized that these consumers were not being provided with access to credit by companies that are taking advantage of technology and analytics at the forefront. Al joined hands with his former interns and set up AvantCredit with a vision to build an online capital line. They wanted to leverage Big Data analytics through algorithms and machine learning for creating an online-only delivery mechanism to provide credit to consumers and lower borrowers’ cost of borrowing.

Today, Avant provides access to consumer installment loans in the US and the UK, which can be paid back with simple, equal monthly installments. Consumers also have access to the late fee forgiveness plan. On an average, Avant services loans of nearly $6,000. Customers apply online or through a mobile app and nearly half of their customers are approved in real-time with no human interaction within a few minutes. Loan interest rates range from 9% to 39% based on risk that Avant’s analytic tools calculate. Its advanced machine-learning algorithms evaluate over 10,000 variables to project the consumer’s long-term performance to offer the best rate possible. Avant is different from other online lenders like LendingClub because it targets a different consumer class and funds the loans itself, instead of offering a peer-to-peer lending service.

Earlier this year, Avant acquired YCombinator-backed startup ReadyForZero for an undisclosed sum. ReadyForZero helps consumers manage their personal debit and credit using online financial software. Its platform allowed consumers to import data from their financial accounts including bank accounts, credit card accounts, and loans and used this information to make recommendations on how to make extra payments to save on interest and work out methods for better rates and get to zero debt as soon as possible. Avant believes that some of ReadyForZero’s customers may not be eligible for Avant’s loans, but with careful financial planning, these consumers would soon become Avant’s customers as well.

Avant’s Financials

Avant has grown rapidly over the past few years. It has processed over $1.4 billion in loans so far to more than 300,000 customers. Revenues have grown from $7 million in 2013 to $75 million in 2014. UK accounts for almost 20% of their revenues. Detailed financials are not known, but it has delivered operating profits in the last quarter of fiscal 2014.

Avant has been venture funded so far with $1.73 billion in debt and venture funding investments from August Capital, Balyasny Asset Management, DFJ Growth, General Atlantic, JP Morgan Chase & Co., KKR, Mark Friedgan, Peter Thiel, QED Investors, RRE Ventures, Tiger Global Management, Jeffries Group, and Victory Park Capital. Its last funding round was held last month when it raised $325 million at a valuation of nearly $2 billion. That is a significant increase from its $875 million valuation earlier this year.

More investigation and analysis of Unicorn companies can be found in my latest Entrepreneur Journeys book, Billion Dollar Unicorns. Unicorns will also be discussed with some special guests during our 1M/1M Roundtable programs over the next few weeks. To be a part of the conversation, please register here. The term Unicorn was coined in a TechCrunch article by Aileen Lee of Cowboy Ventures.

This segment is a part in the series : Billion Dollar Unicorns


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