Blend is now worth $ 4.6 billion. Now what?

Mixing laboratories“The life of a public company is off to a good start.

At the end of last week, Blend sold 20 million Class A shares at $ 18 a piece, raising $ 360 million. The shares closed at $ 20.90, giving Blend a valuation of around $ 4.6 billion. Blend CEO Nima Ghamsari will control 100% of the Class B shares, giving him full control of the company.

The independent public offering comes after a record year for the mortgage industry, in which Blend lost another $ 75 million on revenue of $ 96 million. He also lost $ 81 million on income of $ 51 million in 2019, according to his S-1 file.

The IPO gives the cloud-based software company the ammunition to grow its market share, develop new products, and deepen various fintech sectors, including consumer banking and automotive.

Blend’s investors are apparently convinced that the company can radically transform lending, by simplifying and digitizing regimented but clunky processes that are still quite paper-heavy.

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“I think they are excited about our vision, really happy with our execution and see a huge opportunity for us to serve our clients and grow in the future,” Blend President Tim Mayopoulos, former CEO Fannie Mae, said Friday in an interview with HousingWire. “So the roadshow was very, very well received.”

Blend’s white label technology is driving mortgage applications on the website of traditional banks such as Wells fargo and American Bank, as well as the big credit unions and even tech companies. It verifies income, verifies identities, and has become an essential consumer processing tool for some of the nation’s largest mortgage lenders.

Over the past two years, Blend has acquired his own mortgage and title insurance company (the latter in a $ 422 million transaction).

The startup, led by co-founder Ghamsari, helped 291 clients process an estimated $ 1.4 trillion in loan applications last year, and has pledged to make the processing of a mortgage – or other financial transactions – as easy as choosing a movie that has been curated for them Netflix.

“Consumers now demand that they be able to interact with their financial institution, whether it is a bank, a credit union or an independent mortgage lender,” said Mayopoulos. “They want to be able to do it digitally, they want to do it on their phones. And so I think, I think, lenders of all sizes recognize that, and they’re pivoting to digital experiences. ”

He added, “I think all lenders recognize that in order to be competitive and be successful in the marketplace, they need to be able to deliver seamless digital experiences to consumers. It’s what people look for in all aspects of their lives, whether it’s buying something on Amazon or ordering a movie on Netflix. People want to be able to interact with their bank, their credit union, or their lender in exactly the same way.

As of March 31, 2021, the number of participants in Blend’s “ecosystem” had increased by more than 1,300% year-on-year, the firm said in its prospectus. Blend investors are betting that the business can be more than the technology behind processing mortgage applications.

Blend, which launched in 2012, raised $ 300 million in January, shortly after introducing a series of consumer banking tools.

Company executives and their investors seem indifferent to Blend’s lack of profitability. (It’s normal for investors to forget that a blue-chip tech company is in the red; not so much for low-margin companies like mortgages.) Mayopoulos said the company is focused on leveraging value. long term rather than short term profitability. He also said that the money raised by the IPO will be used to invest in the technology.

As for the challenges ahead, mortgage rates are expected to rise later this year, which would likely reduce the demand for mortgages and lead to a drop in the volume of transactions on Blend’s platform. Blend also has a lot of competition to worry about. Black Knight and ICE Mortgage Technology (formerly known as Ellie Mae) have much larger market caps and a keen interest in every step of the mortgage creation and management process.

But Blend has a good chance of developing a fintech that rivals these behemoths, according to Julian Hebron of The base point. He wrote in a recent note that Blend CEO Ghamsari is great when it comes to products, that it’s easier for the company to attack other elements of consumer banking after mastering the mortgage. and that it is well placed to capitalize on ancillary revenue lines.

“Blend calls the Ancillary Income Lines Marketplaces because their voice usually speaks to the consumer,” Hebron wrote. “So if you get a mortgage, you need home insurance and title insurance. You can get home insurance directly in the Blend app that your bank makes you use, and you’ll see options to select insurance from branded providers, including Blend’s own insurance company they created in. 2018. The same process now applies to title insurance, and these options now include Blend’s own title insurance company they acquired this year. Integrating real estate agents is the next step. This relates to the sensitivity of the product in point 2 above, where you not only add functionality, but simplify the holistic process.

“Everyone in the banking and lending industry knows how difficult it is to deliver this unique experience to the housing consumer. And Blend has found a way to do it where every consumer improvement adds new income without risking base income. “

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