One of the many things this crazy year will be remembered for is dead unicorns. The road to IPO is littered with $1 billion+ duds: Uber, GreenSky, WeWork. The carnage has been so bloody, some venture capitalists and tech founders are beginning to realize that being able to make money may be a more important indicator of success than stratospheric growth.
Case in point: On the same day most people were watching the Peloton IPO land with a giant thud, 14-year-old Oportun quietly and successfully debuted on the NASDAQ, trading 8% above its IPO share price at the close after raising roughly $90 million. (Full disclosure: My organization, the Financial Health Network, was an early investor in the company and still holds a less-than-1% stake.)
Oportun makes small consumer installment loans, often to Latinx customers with limited or no credit history. The company operates retail stores in 12 states and online, and it estimates that the 3.2 million loans it has made to date have saved customers $1.5 billion in interest in fees compared to other lenders. And, the company has been consistently profitable on a pre-tax basis for over four years.
Technological advances enabled Oportun to build an underwriting platform for lower-income people without a traditional credit score, an audacious idea back in the days before iPhones, Amazon Web Services and Big Data. Today, the technology that enables the company’s lending is critical, but it is also table stakes. Over time, the leadership and directors of the company came to understand that Oportun is not a technology company but a tech-enabled financial services company.
That may not sound sexy, but steady growth coupled with consistent profitability can be a winning formula, at least for companies outside of the traditional software sector. Let’s be honest: Most of what we call fintech is really more “fin” than “tech”. Today, whether start-up or incumbent, every financial services company is technology enabled, or should be. That doesn’t make them tech companies.
Read the full article from Jennifer Tescher in Forbes here.