CommonBond Raises Equity, Debt and Acquires Personal Finance Startup, Gradible
Did someone say trouble in (online lending) paradise?
CommonBond has raised $30 million in equity, $300 million in debt and acquired a personal finance startup, Gradible.
The New York-based online student loan lender that specializes in higher education loans raised $30 million in series C equity round from new investor Neuberger Berman along with existing investors August Capital, Tribeca Venture Partners, Social Capital, Nyca Partners and Victory Park Capital. Individual investors in the round included finance veterans like former Citigroup CEO Vikram Pandit, former Thomson Reuters CEO Tom Glocer and former Barclays Private Wealth CEO Tom Kalaris.
The company plans to use the funds towards hiring folks in finance, sales and technology, building new technology platforms and scaling its loan operations. Founded by Wharton graduates David Klein, Michael Taormina, and Jessup Shean in 2012, CommonBond started as many startups do, with a founder’s problem of lack of affordable graduate student loan options. Today the company has crossed $500 million in funded loans and provides MBA loans, refinances student loans and offers personal loans.
Non-bank student loan providers make up just a sliver of the market, says CEO David Klein. “Over 99.99 percent of the student loan market is driven by the federal government and private banks and the the tiny piece of the market is made up by CommonBond and SoFi,” he said. “And as big as that sounds, relative to the largesse of the market, we don’t even make up a percent of that.”
The Gradible acquisition should answer some of that for CommonBond, giving it access to 40 million students and a network of employers. It plans to build a portal for employers who can contribute directly to their employees’ monthly student loan payments, through a student loan contribution platform similar to a 401(k) matching program.
CommonBond competes with rivals like SoFi which has made news for everything from being offensive, offering dating services, selling mortgages and its purported plans to become a bank. And CommonBond isn’t shying away from other loan products either. “Our long term vision is to provide our customers with their evolving needs and we are well positioned to provide other products and services over time.”
In terms of its lending operations, CommonBond uses a hybrid model of funding by holding half of the originated loans on its balance sheet and selling the other half on a marketplace. “To weather any storm, it’s important to diversify capital sources and we think the hybrid model will end up being the only option,” Klein said.Last modified: October 20, 2016
Srividya's work has appeared in publications like Money magazine, Advertising Age, FirstPost and The Economic Times. She has also dabbled in business intelligence solutions, and holds a Masters degree in Business and Economic Reporting from NYU.