ZestFinance Raises $20 MillionWednesday, July 31, 2013
A Hollywood company that helps people borrow money is getting a cash infusion of its own.
ZestFinance announced Wednesday it has raised $20 million in series C funding led by PayPal co-founder Peter Thiel. Silicon Valley firms Northgate Capital, Matrix Partners and Lightspeed Venture Partners also participated in the round, among others.
The company uses data analytics to evaluate when a lender should offer loans to people with low credit. While most lenders consider only about a dozen variables, ZestFinance claims to consider thousands before narrowing them down into the most relevant information.
ZestFinance is competing in a space with established leaders. Fico out of Minneapolis is the go-to source for providing credit scoring data.
While Fico's system works, ZestFinance is hoping to do better, said Chief Executive Douglas Merrill.
"If you look at innovation in fintech companies, they are tackling problems that people think are already solved problems," he said. "Well apparently not."
Merrill started ZestCash with co-founder Shawn Budde in 2009 to provide loans to people looking for a quick cash solution. But the company has changed directions (and its name) and now licenses its data-crunching technology to other loan providers.
It currently works with insurance companies and lenders, including subprime lender Spotloan, to determine the risk levels of borrowers.