by Dan Levitan, Partner
For the past year or so, the hype cycle around innovation in financial services squarely centered on Bitcoin – the wild gyrations in price, unsavory characters running exchanges, massive currency speculation, and governments cracking down on it.
Millennials don’t want their parents’ legacy banking system. Rather, Millennials want a new consumer experience that looks, feels, and acts like they do. This kind of innovation is more about applying technology to help consumers actually enjoy their financial services experience. It’s about building great consumer brands that integrate themselves into the lives of their customers.
It’s why we’re so excited about our latest “seed to Series A” investment in Earnest led by CEO Louis Beryl and COO Ben Hutchinson, both co-founders of Earnest. Louis and Ben are building a blockbuster consumer brand for financial services in an industry ripe for disruption.
In a nutshell, they’re building a consumer brand in an industry that consumers love to hate – banking and financial services – by using technology, data science, and a commitment to long-term client relationships. We believe that their approach will lead to an enduring consumer brand where customer relationships are measured in decades, not dollars.
Earnest uses data to more fully understand its clients’ good financial decisions and rewards them with lower rates as well as an incredible experience – from awesome service, (or “client happiness” as they insist I call it) to online control and flexibility.
With Earnest, consumers are empowered to take control of their financial well-being and future where, when, and how they want to – all at a lower cost and dramatically improved experience than what they get today. Great consumer brands emerge vis a vis the alchemy created when you merge trust and knowledge with ease of consumer experience through technology, which is what makes Earnest a winner.
My partner Rebecca Kaden first met co-founder and CEO Louis Beryl over dinner in June 2013 when he was a Partner at Andreessen Horowitz. Louis was the only one at the dinner who challenged the table to think big – how can Silicon Valley innovate and ignite consumer passion in an industry where high fees, poor customer service, and legacy technology are the norm.
At Maveron, where we’ve built our reputation on consumer-led venture, we’ve developed a rigorous methodology for sourcing and ultimately investing in seed rounds that lead to Series A rounds. With Louis and Earnest, we were struck by the following qualities:
1 – Deeply insightful entrepreneurs. At our first dinner, we knew Louis was a winner. His depth and quality of thought, passion for brand building, and extreme attention to consumer desires, intentions, and fears in the financial sector were immediately evident, even from a single meal. We felt that it was only a matter of time before Louis left venture to become an entrepreneur.
2 – Bold vision for disrupting mega markets. Two months after initially meeting Louis, he reached out to tell us that he’d left Andreessen to start a new kind of bank, called Earnest, which would combine access to data, software, and a consumer-centric approach to create a better banking business — one that is not only more profitable but actually delights its customers who are openly unhappy with the solutions currently out there. To achieve this lofty goal, Earnest would start with one of the most difficult and frustrating pain points on both the customer and banking sides: loans.
3 – The ability to recruit all stars to scale the business. As early stage investors, we often need to look beyond the pure metrics of the business model because they simply don’t exist. In the early days of Earnest, they presented a hypothesis based on three main factors.
First, many people are more trustworthy than the current system recognizes; second, credit scores are a very crude measure of someone’s risk; and third, the best customers know they deserve a better offering than what is currently out there.
But while it was early days, we were already wow’d by Louis’s true data-first approach, detail orientation, unabashed conviction around conquering one of the biggest zones of innovation, and, from the start, ability to put together a world class team that believed in succeeding against this giant vision.
Inspired, we participated in the seed round in August 2013 and invited Louis and Ben and their two all-star early employees to set up shop in our San Francisco office, where we hosted them.
4 – Low technology risk. Nearly eight months after moving in with Maveron, Louis had grown the team to 25 people. The team had been busy: they’ve launched two live and quickly scaling consumer lending products, which are based on one of the most advanced and forward-thinking sets of algorithms that is replacing old school, backwards-looking FICO scores and uses data to automatically and accurately price borrowers with superior rates.
5 – Early consumer validation. Most of all, Earnest had secured an early set of customers who were raving about the opportunities Earnest created in their lives and the differences they saw in the products—and endorsing Earnest’s model with 100% on time payments on the loans.
The bottom line is we believe there is potentially no greater market opportunity than financial services, and banking in particular—an old, giant behemoth out of sync with how younger, rising generations are leading their lives and making their decisions. And which has yet to take true advantage of the data and technology now available to both better serve customers and create stronger, sturdier, bigger businesses.
We are proud to partner with Louis, Ben, and the Earnest team in their quest to build a new, enduring leader in the consumer financial services category and a breakout consumer brand. And we’re always on the hunt for the next generation of world-class entrepreneurs and billion-dollar consumer brands. ###