Striking the right balance

October 2, 2023

Since the very beginning, we have tried to operate our marketplace like a stepladder - we found investors in order to get borrowers, then we found more borrowers so that we could find investors, and on and on it went. In good times, we can count on this stepladder to continue to grow our AUM. In more challenging times, whether during COVID or now as the economy is on the ropes, one side tends to outweigh the other. These past few quarters, we've been short on investor capital as we've tapped out our spend for accredited investors and institutional capital was hard to come by. To compensate for this, we've had to downsize the deals we've gone out with and do add-ons to meet the needs of these borrowers. This has put us in a challenging position where the revenue we had hoped to generate doesn't materialize since we make less on smaller deals and add-ons.

All this is poised to change as we just booked one of our best quarters ever in net new money. We now have a much better handle on accredited investor inflows from years of data. We've also been able to successfully close on institutional capital to the tune of $[ ]M in September alone, including $[ ]M from a public interval fund that plans to consistently deploy more over the coming months. This growing predictability in both accredited and institutional capital gives us more confidence in going out to sell underwriters and borrowers on our ability to close deals at the sizes and rates they want. To that end, our October pipeline now looks stronger than ever. With 10 deals guaranteed to close and another potential dozen more in the works, it's shaping up to be another one of our best months ever given the line of sight we have into the capital on the other side.

As we mature, it's all about striking the balance. Instead of a stepladder, we will be tactically matching investor demand with borrower interest, ensuring that growth is managed and controlled on our terms. Everything we've done up to this point, from getting conviction around the return on investment for accredited investors, to a formalized institutional investor acquisition strategy, to securing our credit facility - all of it is designed to give confidence in securing underwriter and borrower interest. 

Q4 is where it all happens, let's make it count.