Rafe,
This is a note one of our board members got from Upstart IR.
Thanks for your email and happy to clarify. Neither of you are precisely correct. We have 42 traditional bank partners that originate and hold loans, this makes up about 1/4 of our total volume. The other 3/4 of our volume is originated by one of two banks that act as conduits (including CRB). After origination, and seasoning for a few days, these loans are sold to a group of ~160 credit investors (hedge funds, mutual funds, etc). We also stand up a securitization, approximately every quarter, in order to provide liquidity to these credit investors. However only a minority of credit investor volume is ultimately securitized (largely opportunistically, such as over the last year when markets were particularly constructive) with most held for yield on their balance sheets. Hopefully that helps and please let me know if you have any other questions.
That is complex stuff. “Seasoning for a few days”? Does this involve Kung Pao sauce? Seriously what on Earth actually happens in the seasoning process of a loan?
With CRWD the company sells a product to companies. Our tech experts vouch for the tech therefore the process could not be simpler. Classic B2B w subscription component. No need to deep dive into the details of the tech. We all know enough.
With Upstart the company partners with lenders, who lend to consumers, has products in development (auto, mortgage) that are unproven, is sensitive to macro economic conditions and as you note is not SaaS.
We have not had a financial equivalent of Muji to help us all cleanly, clearly understand how this stuff works, though some have better industry knowledge, grasp than others.
What we have is a perfect storm of greed at the TAM, emotion of the benefits to humankind, heightened fear (recent sector rotation, wild AMPL drop, war in Ukraine, interest rates), an almost record-breaking amount of stock price volatility, and a CEO (like the car guy) who tosses out big lines, for example, comparing UPST to the early days of Google. And suggesting literally everyone in the world may one day use UPST.
Note that no one ever got this upset about Zoom Video. Or Shopify. Or back in the day, Skechers. Why? Cause everyone knew what we were dealing with. The heat alone here is proof of complexity.
Best,
BD
PS - On conflict in general. Anger and fighting are fueled by people failing to validate each other’s opinion. If you ever rage at your spouse or lover, watch what happens when you both clearly validate each other’s take. “Oh, dear, you’re mad because you felt insulted by what I said. I don’t think I said that but I see why you do, therefore I am sorry. Maybe I could have spoken more clearly.” Once you both agree on what even happened, the emotion dissipates. But when people have no clue what the heck the other person is even remotely talking about, anger floods in. This is a force at play here. We can’t find a clean clear shared grasp of factors to discuss, therefore emotion fills that void. Please do not respond to this! Just trying to help lower the temperature.