David Haber

David Haber

CEO and Founder Bond Street

THIS CHAT HAPPENED ON July 19, 2016

Discussion

David Haber
David Haber@david_haber1
Hey, I'm David Haber, Co-Founder and CEO of Bond Street. We aim to reimagine small business lending through technology, data and design. Prior to starting my company, I worked as a venture investor at Spark Capital. I've now had experience on both sides of the table as well as raising (and investing) millions in debt and equity. Ask me anything!
Uhma
Uhma@deleted-594972 · Brr
Hello David, What is your view on Bitcoin loan industry? Thank you.
David Haber
David Haber@david_haber1
@victorpolyushko Thanks for the question! I think Bitcoin is a promising vehicle for reducing / removing interchange fees (especially cross-border). What's interesting about that is the idea that foreign capital could more easily flow to emerging markets (in small dollar increments, without incurring those transaction costs). Access to capital for individuals / business owners is an even more acute challenge in other parts of the world than in the US --- and there is an equally / more compelling opportunity for investors to earn meaningful returns. So I'm bullish, but I think bitcoin as a store of value needs to become less volatility for it to be used more prominently.
Karim Daghari
Karim Daghari@deleted-538914
Hey David, when you first started this venture how much did you start with? What were the hurdles that you had to overcome?
David Haber
David Haber@david_haber1
@karimdaghari My partner Peyton and I both quit our respective jobs (he was leading engineering at Venmo and I was an investor at Spark Capital) with really just an idea and a deck. Over the next few months we built an initial prototype of our loan application and ended up raising $1.5MM in seed capital from a handful of different venture firms / angels. That allowed us to build a team of 7 people and ultimately raise a larger Series A as well as $100MM in lending capital commitments.
Andrew Bass
Andrew Bass@andrewdbass · Startup junkie and improving hacker
What was it that made you decide to pull the trigger on your new venture?
David Haber
David Haber@david_haber1
@andrewdbass There were a few things that happened that played an important role. 1) The opportunity to build Bond Street with my partner Peyton Sherwood. We'd known each other since 2009 (he had been at D.E. Shaw & Co for about 5 years at that point, prior to moving to Venmo to lead engineering. I had always wanted to start a company with him and finally had the opportunity after Venmo was acquired by Braintree, and ultimately Paypal. 2) There were a lot of things changing from a technology perspective that created this opportunity. Access to key small business financial data was quickly becoming accessible via APIs across a number of financial software companies (i.e. Intuit w/ Quickbooks, Xero, Stripe, Braintree, Expensify, etccc). 3) I kept seeing the opportunity come up in conversation with entrepreneurs and small business owners who were having difficult raising bank financing // or could but kept saying how painful the process was. 4) I could see the market evolving from my perch as a VC at Spark where I had been focusing on fintech / marketplace investments and knew that it was going to change the way entrepreneurs accessed capital.
Andrew Bass
Andrew Bass@andrewdbass · Startup junkie and improving hacker
@david_haber1 Thanks! Good luck!
Thomas Stöcklein
Thomas Stöcklein@tomstocklein · FoundersFundersFuture.com
What were some of the most memorable pitches you reviewed while at Spark Capital?
David Haber
David Haber@david_haber1
@tomstocklein there were many memorable ones. Some of the most notable were seeing one of the earliest prototypes of the Oculus Rift at SXSW with Nate Mitchell prior to them raising any VC money. One of the Spark co-founders, Santo Politi, led that investment which obviously had an incredible outcome. Seeing that play out from investment to exit in less than a year was pretty wild. I also remember having a call with Evan Spiegel from Snapchat I think after their seed round. Lastly, I remember us seeing a pitch from Mike Cagney of SoFI prior to them raising their seed round of financing. Overall though, working at Spark was an incredible opportunity to build relationships with a large number of founders who have stayed friends to this day. It also gave a great perspective for how venture firms are run / which has certainly been helpful in navigating fundraising here at Bond Street.
Thomas Stöcklein
Thomas Stöcklein@tomstocklein · FoundersFundersFuture.com
1) How do you see the "unbundling" of the big banks evolve over the next 5-10 years? 2) Do you think large banks will eventually start competing with companies like Bond Street by offering similar products & services or simply do a number of bolt-on acquisitions?
David Haber
David Haber@david_haber1
@tomstocklein I think you are going to continue to see meaningful bank disintermediation happen not only in online lending but across different areas of lending in general. Increased regulation has not only made small dollar loans difficult for banks (not to mention a lack of process / technology to do them cost effectively) but its also created inefficiency in larger loans to middle market companies (which an entire ecosystem of 'Direct Lenders' are taking advantage of --- companies like Ares, Goldman GSO, Golub Capital and others are making $100M+ loans to businesses largely in the wake that the banks have left as they've retreated from the market. In the online lending world, I think you're going to see a shift from simply focusing on an individual transaction (be it refinancing, working capital or a growth investment) to companies building technology / product to create a longer-term and more engaged relationship with their customers. You're starting to see this (though its still very early) with Prosper's acquisition of Billguard (now Prosper Daily) as well as Affirm's acquisition of Sweep. In my mind, the way that valuable brands are going to be built in this space over the long run is by competing not just on rate and speed, but also in leveraging technology to provide value to customers beyond the loan. In Bond Street's case, we collect so much information across any individual customer / across our portfolio, there are many compelling ways to surface those insights to our borrowers to empower them to make better financial decisions and ultimately growth their businesses more strategically. I think you will start to see banks attempt at creating online lending portals. And there are probably less than a dozen banks who would have the resources to execute on that (potentially fewer). They'll also need to navigate the fact that the largest banks have spent hundreds of billions of dollars on branches (Wells has 6K, Chase has 5500). These are huge fixed cost investments that are likely becoming less and less relevant over time. So while I do believe that access to capital will be available online, I think there are a lot of contributing factors as to why thats going to be a long transition. I also firmly do NOT believe that banks will build technology / product themselves that offers value beyond the loan.
Thomas Stöcklein
Thomas Stöcklein@tomstocklein · FoundersFundersFuture.com
From an investor's perspective, if you had to pick a few pre-revenue FinTech startups right now, what companies would you personally invest in?
David Haber
David Haber@david_haber1
@tomstocklein great question! I'm a big fan of what Quinten Farmer and his team at Even are doing on the west coast -- helping consumers smooth their hourly income (which is a big problem for a large portion of the country's labor force). I am biased, but I also love the guys at Plaid (no longer pre-revenue) as well as the guys at Orchard (same). Fawce and his team at Quantopian have a really big idea around building a distributed hedge fund which empowers anyone around the world to have the tools / resources to build a trading business for themselves. There are so many others! I'm very biased, but am hugely bullish on Fintech as an investment thesis --- we're still in the earliest innings.
Thomas Stöcklein
Thomas Stöcklein@tomstocklein · FoundersFundersFuture.com
What are the most common mistakes small businesses make when it comes to managing their cash flow and capital structure?
David Haber
David Haber@david_haber1
@tomstocklein common challenges that we see with our customers are managing accounts payable / receivable cycles. So working capital / cash can become a challenge if not monitored properly. Many early-stage businesses (would argue) raise equity when they should be growing organically or raising debt capital instead. Think there is a culture of venture capital / equity that has blinded many entrepreneurs from all of the financial tools at their disposal (namely the other side of the balance sheet). If you're not building a hyper-growth business, venture capital is likely not the right type of financing for you.
Thomas Jung
Thomas Jung@tjdashin · Scientist / Technologist / Entrepreneur
Do you believe that having a great pitch is more important than having a functional prototype?
David Haber
David Haber@david_haber1
@tjdashin Almost always, yes. As a founder you need to be able to clearly articulate your vision in a compelling way. You need to make people 'believe.' I think this is true not just for investors, but also in building your team. Your company is only as good as the people you're able to recruit, and you need to 'sell' them as well.
David Haber
David Haber@davhab · Co-Founder @ Cognitir
In your view, what's the impact that the availability of data and big data technologies will have on your industry in the next 2-5 years?
David Haber
David Haber@david_haber1
@davhab first off, great name! I think it's already having a huge impact and will only continue to do so. I see a future where access to capital doesn't require a form loan 'application.' Instead, we're analyzing signal that we're seeing in the various data sources we have access to and anticipating future financing needs before our customers ask for them. In this way, we can surface insights (risks or opportunities) programmatically to our customers, but also offer new capital via push notification. Think you'll see the market move away from loans or lines to really just 'Capital on Demand' and I think data and the way that it is interpreted is going to be fundamental in making that leap.
Laf. Julius
Laf. Julius@laf_julius · co- founder @evolvesports
How's it going David...What are some sectors you are currently interested in? Are you looking to invest in a seed round?
David Haber
David Haber@david_haber1
@laf_julius to be clear, we are a lender (not an equity investor) so we only work with companies with at least 2 years of operating history and doing $200K+ in revenues.
Andrew Flynn
Andrew Flynn@andrewpflynn · Growth, Staance
Hi David! You guys are currently investing in companies with more than 200k/yr + 2years under their belt. Is this something you'd like to get lower with time? Or was this simply the gap in the market you're looking to serve? Thanks!
David Haber
David Haber@david_haber1
@andrewpflynn Yeah, it's definitely on our roadmap to expand the size / scope / duration of our loan products to serve as wide a customer base as possible. This likely means targeting smaller companies as well as much larger ones over time. Similarly, we anticipate offering a host of different financial products beyond term loans.
Jason Cavness
Jason Cavness@jasoncavness · CEO/Founder of cavnessHR
How did you recruit/select your CTO at Bond Street? How do you lead the separate worlds of tech and finance to make sure everyone is on the same path?
David Haber
David Haber@david_haber1
@jasoncavnesshr As I mentioned in an earlier answer, my co-founder Peyton Sherwood and I had been friends for about 4 years prior to starting a business together. We compliment each other really well both in terms of work / management styles but also in our own functional skillsets (he leads tech while I lead all things business). To your second question, I think its important not to view tech and finance as separate worlds. The most interesting companies are those who fully embrance 'financial technology.' We deeply understand the capital markets side of our business, but our DNA is also largely in technology / in building great customer experience. Think we're seeing a trend where finance companies are recognizing they need to become technology businesses and tech companies are starting to become finance companies. And the most progressive ones are right in the middle.
Thomas Jung
Thomas Jung@tjdashin · Scientist / Technologist / Entrepreneur
Wireless blockchain comm... Any thoughts on the possibility of its wide-spread use?
David Haber
David Haber@david_haber1
@tjdashin Think I answered this question in part earlier in the thread in relation to bitcoin lending. Think the blockchain has a lot of really exciting applications when it comes to helping execute transactions / contracts (again, beyond simply bitcoin as a store of value -- but using the public ledger to authenticate critical transactions). I am admittedly no bitcoin / blockchain expert, but you're starting to see this happening with broader bank adoption, etc.
Thomas Jung
Thomas Jung@tjdashin · Scientist / Technologist / Entrepreneur
@david_haber1 Thank you for answering our questions. Hope to do business in a few years! :)
Ben Tossell@bentossell · newCo
If you had to swap lives for a week with a tech ceo/founder who would it be and why?
David Haber
David Haber@david_haber1
@bentossell I mean, living as Elon Musk for a week would be pretty epic.
Emily Hodgins@ems_hodge · Operations @ Product Hunt
Hi David, what advice would you give to a first time entrepreneur raising money for the first time?
David Haber
David Haber@david_haber1
@ems_hodge make sure that you are deeply passionate about whatever you are pursuing. Regardless of how successful a company is, it's incredibly difficult. You want to make sure that you have the grit to overcome obstacles and see it through. A good litmus test for this is asking yourself whether you would raise capital / pitch someone that you care about (outside of your parents). So, would you go to your girlfriends/boyfriend's parents and ask them to invest? Not suggesting you actually do this, but if you're comfortable pitching in an otherwise uncomfortable scenario then you're probably well positioned for what's to come. Also, team team team --- be deliberate about who you hire and don't compromise. It pays huge dividends over time.
Thomas Jung
Thomas Jung@tjdashin · Scientist / Technologist / Entrepreneur
What is your advice for someone who loves to innovate and help others, but doesn't care much for forcing an application of a product for the sake of revenue? I may be committing a VC sin here.
David Haber
David Haber@david_haber1
@tjdashin contribute to the Open Source community!
Thomas Jung
Thomas Jung@tjdashin · Scientist / Technologist / Entrepreneur
@david_haber1 I'll find someone who can compliment me. I still have to eat. I do know of someone who isn't fond of software patents. haha.
Andrew Ettinger
Andrew Ettinger@andrewett · 👟 @wearAtoms // ex @Twitter @ProductHunt
What is the hardest thing about raising that you've experienced?
David Haber
David Haber@david_haber1
@andrewett raising debt is a lot more complicated than raising equity (also something I didn't have prior experience with). Ever term that you are negotiating ultimately determines your business model, whereas, most equity term sheets are outlining the upside / logistics of a future liquidity event. That's obviously a simplistic overview, but in general its true.
Andrew Ettinger
Andrew Ettinger@andrewett · 👟 @wearAtoms // ex @Twitter @ProductHunt
What's one thing no one told you before you became an investor?
David Haber
David Haber@david_haber1
@andrewett early stage venture is as much about access and luck as it is about skill.
Thomas Jung
Thomas Jung@tjdashin · Scientist / Technologist / Entrepreneur
Thank you again!