ZestFinance Raises $20 Million, Led Thiel Capital

Posted Jul 31, 2013

ZestFinance is a company that helps minimize risks involved in offering loans.  The company has received funding from Thiel Capital, the venture capital firm founded by Peter Thiel.  Peter Thiel is known for being a co-founder in PayPal.  Thiel Capital led the $20 million round with participation from Northgate Capital and previous investors Lightspeed Venture Partners, Matrix Partners, Kensington Capital Holdings, and Eastward Capital Partners.  Thiel Capital is taking a board observer seat.

ZestFinance recently shifted their business model from making loans themselves to licensing their technology.  ZestFinance uses algorithms and other data points to determine good credit risks.  They use similar and different methods that traditional lenders use to determine if someone is a good credit risk.  ZestFinance believes that underwriting should not be determined simply based on FICO credit scores.

One of ZestFinance’s customers is Spotloan.  Spotloan is a subprime lender that is owned by the Turtle Mountain Band of Chippewa Indians in Belcourt, North Dakota.  Turtle Mountain uses ZestFinance to make loans at rates that are about half of the ones charged by payday-loan lenders, according to Reuters.

The company is looking into working with insurance companies and credit card lenders.  ZestFinance previously raised $23 million in equity around January 2012.  The company has raised a total of $55 million in equity including the latest round.