Al Goldstein: The real estate business was a lot more competitive and a lot more difficult. What we saw was a huge opportunity in providing credit alternatives to near-prime or mid-prime borrowers. Half of the credit spectrum are all customers making about $50,000 to $60,000 a year and with credit scores between 600 and 700. However, they are not provided with access to credit by companies that are taking advantage of technology and analytics at the forefront. Our vision for the company is that we want to build an online capital line. We started this business about two years ago and it has worked out great because my two co-founders were my former interns in my first company. One is from a technology background and one from a data and analytics background. I’ve spent four years or so in my first business and then went out to the Valley and participated in Y Combinator. We’ve had a great run so far.
Sramana Mitra: Are you based in New York?
Al Goldstein: We’re based in Chicago.
Sramana Mitra: Thanks for the overview. Tell me a bit more about the circumstances that led to the concept of this company. What exactly was going on in the market that told you that this is an opportunity that you wanted to go after?
Al Goldstein: Having done a few different companies, I realized that timing is very important. Specifically, what led us to start AvantCredit was that prior to the financial crisis, there was a lot of access to credit for consumers. We’ve obviously heard a lot about what happened in the real estate market, but the same thing didn’t quite happen in credit cards, installment, and consumer credits. Things were going along fine. In 2008, we hit the financial crisis and that amount of revolving credit went down by billions. We had lots of regulations and all the banks retrenched. Billions just left the system. At the same time, there was this massive amount of demand from consumers who don’t have savings to pay for emergency expenses in the United States. That’s the industry macro-demographic, which sets the stage for a lot of demand and limited supply.
Then you add the fact that now we have Big Data. We have lots of data sources. We have advancements in algorithms and machine learning to figure out how to use that data. Then you have the third piece, which is consumers are ready to transact online. Therefore, reducing the operating expenses in branches. This was a massive opportunity. If we were able to build an online-only delivery mechanism in which we would provide credit to consumers and, at the same time, take advantage of the fastest and the most industry-leading analytical tools, we can really build a long-term sustainable business. That’s the industry backdrop. We just happened to have the right team at the right time.