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Digital lending platform Blend valued at over $4B in its public debut
Mortgages may not be considered sexy, but they are a big business.
If you’ve refinanced or purchased a home digitally lately, you may not have noticed the company powering the software behind it — but there’s a good chance that company is Blend.
Founded in 2012, the startup has steadily grown to be a leader in the mortgage tech industry. Blend’s white label technology powers mortgage applications on the site of banks including Wells Fargo and U.S. Bank, for example, with the goal of making the process faster, simpler and more transparent.
The San Francisco-based startup’s SaaS (software-as-a-service) platform currently processes over $5 billion in mortgages and consumer loans per day, up from nearly $3 billion last July.
Today, Blend made its debut as a publicly traded company on the New York Stock Exchange, trading under the symbol “BLND.” As of early afternoon, Eastern Time, the stock was trading up over 13% at $20.36.
On Thursday night, the company had said it would offer 20 million shares at a price of $18 per share, indicating the company was targeting a valuation of $3.6 billion.
That compares to a $3.3 billion valuation at the time of its last raise in January — a $300 million Series G funding round that included participation from Coatue and Tiger Global Management. Also, let’s not forget that Blend only became a unicorn last August when it raised a $75 million Series F. Over its lifetime, Blend had raised $665 million before Friday’s public market debut.
In filing its S-1 on June 21, Blend revealed that its revenue had climbed to $96 million in 2020 from $50.7 million in 2019. Meanwhile, its net loss narrowed from $81.5 million in 2019 to $74.6 million in 2020.
In 2020, the San Francisco-based startup significantly expanded its digital consumer lending platform. With that expansion, Blend began offering its lender customers new configuration capabilities so that they could launch any consumer banking product “in days rather than months.”
Looking ahead, the company had said it expects its revenue growth rate “to decline in future periods.” It also doesn’t envision achieving profitability anytime soon as it continues to focus on growth. Blend also revealed that in 2020, its top five customers accounted for 34% of its revenue.
Today, TechCrunch spoke with co-founder and CEO Nima Ghamsari about the company’s decision to go with a traditional IPO versus the ubiquitous SPAC or even a direct listing.
For one, Blend said he wanted to show its customers that it is an “around for a long time company” by making sure there’s enough on its balance sheet to continue to grow.
“We had to talk and convince some of the biggest investors in the world to invest in us, and that speaks to how long we’ll be around to serve these customers,” he said. “So it was a combination of our capital need and wanting to cement ourselves as a really credible software provider to one of the most regulated industries.”
Ghamsari emphasized that Blend is a software company that powers the mortgage process and is not the one offering the mortgages. As such, it works with the flock of fintechs that are working to provide mortgages.
“A lot of them are using Blend under the hood, as the infrastructure layer,” he said.
Overall, Ghamsari believes this is just the beginning for Blend.
“One of the things about financial services is that it’s still mostly powered by paper. So a lot of Blend’s growth is just going deeper into this process that we got started in years ago,” he said. As mentioned above, the company started out with its mortgage product but just keeps adding to it. Today, it also powers other loans such as auto, personal and home equity.
“A lot of our growth is actually powered by our other lines of business,” Ghamsari told TechCrunch. “There’s a lot to build because the larger digitization trends are just getting started in financial services. It’s a relatively large industry that has lots of change.”
In May, digital mortgage lender Better.com announced it would combine with a SPAC, taking itself public in the second half of 2021.
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NYSE proposes big change to direct listings
The New York Stock Exchange filed paperwork this morning with the U.S. Securities and Exchange Commission to allow companies to raise capital as part of a direct listing.
Direct listings are a way for companies to go public by selling existing shares held by insiders, employees and investors directly to the market, rather than the traditional method of issuing new shares. Direct listings have become increasingly popular since Spotify’s 2018 exit, which allowed its employees immediate liquidity, removed preferred access from bankers and allowed for market-driven price discovery. Companies, like Spotify, that opt to complete a direct listing are able to bypass the financial roadshow, thus avoiding some of Wall Street’s exorbitant fees. Historically, however, these companies have not been able to raise fresh capital as part of the process.
The NYSE’s new proposal seeks to change that. Specifically, the stock exchange plans to amend Chapter One of the Listed Company Manual, which outlines the NYSE’s initial listing requirements for companies completing initial public offerings or direct listings. If the amendment is approved—the NYSE is subject to the regulatory oversight of the SEC—companies going public on the NYSE will be permitted to raise capital through a direct listing.
The document states the proposed change “would allow a company that has not previously had its common equity securities registered under the Act, to list its common equity securities on the Exchange at the time of effectiveness of a registration statement pursuant to which the company will sell shares in the opening auction on the first day of trading on the Exchange (a “Primary Direct Floor Listing”). The proposal would permit a company to conduct a Primary Direct Floor Listing in addition to, or instead of, a Selling Shareholder Direct Floor Listing.”
The proposed hybrid model is likely to appeal to Silicon Valley tech startups, who’ve grown more familiar with the innovate route to the public markets following Spotify and Slack’s direct listings. On the backs of these exits, tech industry leaders have touted direct listings as the latest and greatest path to the public markets. Venture capitalist Bill Gurley, in particular, has encouraged companies to consider the method. Meanwhile Silicon Valley darling Airbnb, which has stated its intent to go public in 2020, is said to be considering a direct listing rather than a traditional IPO.
Gurley, who has expressed his discontent with bankers’ inability to adequately price IPOs, recently hosted a one-day conference focused on direct listings titled Direct Listings: A Simpler and Superior Alternative to the IPO. The event was attended by members of tech’s elite, including Sequoia Capital’s Mike Moritz and Spotify chief financial officer Barry McCarthy .
“Most people are afraid of backlash from the banks so they don’t speak out,” Gurley told CNBC earlier this year of his decision to publicly advocate for direct listings. “I’m at a point in my career where I can handle the heat.”
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Slack prices IPO at $26 per share
Slack’s public debut is happening Thursday on the NYSE and the company has set a reference price of $26 per share for its direct listing, according to WSJ, which would value the company at around $15.7 billion.
The company’s stock is expected to pop at open, according to the WSJ’s sources. Slack is pursuing a direct listing, eschewing the typical IPO process in favor of putting its current stock on to the NYSE without doing an additional raise or bringing on underwriter banking partners.
This isn’t a first for the technology industry, as Spotify did the same thing about this time last year, but it is still an outlier in terms of common practice for startups looking to the public markets for their liquidity event.
Slack, launched in 2013 by Flickr co-founder Stewart Butterfield, was initially built as a side project to support team communication for Butterfield’s game company Tiny Speck. In the intervening years, it has risen to become one of the most recognized enterprise communication tools currently available.
Update: Slack’s pricing and symbol, ‘WORK’ are now officially confirmed.
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Twilio opens trading at $23.99 per share
Twilio is now trading on the New York Stock Exchange under the ticker symbol TWLO. It started trading today about an hour after the NYSE opened, at a price or $23.99 per share. That’s nearly 60 percent above its IPO price of $15. And the price is still climbing. If the stock continues to do well, that could be good news for tech companies and investors, who are likely hoping that a… Read More
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