Percent is a company that has created a modern credit marketplace that empowers investors, borrowers and underwriters with innovative technology to increase the speed and velocity of transactions at a fraction of the cost. To learn more, Pulse 2.0 interviewed Percent founder and CEO Nelson Chu.
Nelson Chu’s Background
At heart, Chu is an experienced serial entrepreneur. Chu said:
“Prior to Percent, I founded a strategy consulting firm that helped companies build products and raise capital for growth, leveraging my previous experience from global financial institutions, including Bank of America and BlackRock.”
“Outside of Percent, I pursue my personal interests in angel investing, art and philanthropy. My angel investment portfolio includes companies such as BlockFi, Care/Of (acquired by Bayer AG), Clover Health (Stock ticker: CLOV), dv01 (acquired by Fitch), Eden Health, Plentina, Tala, and Uala.”
“I have also been involved in several nonprofits, including previously serving as a Board Member of The Bubble Foundation, Host Committee Member for Alicia Keys’ Keep a Child Alive, and Yamba Malawi.”
Formation Of Percent
How did the idea for Percent come together? Chu reflected:
“The idea for Percent actually came to me while working at my previous startup, which was a strategy consulting firm. There, I started to help startup companies build products and raise capital. I would assist them with their product, marketing, branding and engineering, advising dozens of companies to scale in size. Naturally, I found myself working with fintech clients, due to my finance background, which gave me a view on potential opportunities as well as major inefficiencies to address.”
“The biggest gap I recognized was that the private credit market, despite its potential, lacked modernization and didn’t have an end-to-end solution. That was the white space I identified in the industry, and I sought to bring public market efficiencies to the private market since it was stuck in an analog era. I was ultimately inspired to transform this industry for the better.”
“Overall, it was a tough decision to shut down a viable, scaling business to take a different path – but the opportunity to address the lack of automation, standardization and risk management in a segment of the alternatives market capable of growing over $7 trillion was too tempting. I knew I wanted to modernize private credit and connect borrowers, investors and underwriters through a three-sided marketplace – something that didn’t exist.”
“I decided to jump back into the finance world, but this time, on the technology side. With the help of the best and brightest minds in the industry, Percent moved from concept to reality as a modern platform that connects the full private credit ecosystem into one central marketplace.”
What has been your favorite memory working for Percent so far? Chu shared:
“So many memories come to mind but there is something nostalgic about that first deal we were able to close in early 2019 that proved we actually had a real company with real investors and real technology that worked.”
“It was the culmination of so much of what I had done in my career, from starting in finance to building a consulting company to now building a venture-backed startup that it felt like my life had come full circle.”
Effect From The Economy
Has the current macroeconomic climate had any effect on the company? Chu acknowledged:
“The potential of an economic slowdown has proven to be good for us. Blackstone, Apollo, KKR, JPMorgan and Goldman Sachs are all touting the virtues of private credit in this inflationary and high rate environment.”
“Also, with venture funding close to its lowest levels since 2017 and the collapse of SVB which has drawn more regulatory scrutiny, the challenge to secure financing is in the spotlight, creating a surge in demand for private credit and venture debt in particular. Venture debt is the asset class serving as a much-needed solution for some startups to increase runway with minimal equity dilution.”
“As a projected top-performing alternative investment over the next five years, these circumstances have acted as positive tailwinds for Percent and the industry at large.”
“Given the rise in private credit’s popularity, demand has positioned Percent as the go-to solution in today’s volatile market. We look to continue expanding understanding and access in a fragmented market by powering the sourcing, structuring, syndication and serving of private credit transactions from beginning to end.”
What are Percent’s core products and features? Chu explained that Percent’s modern capabilities and products include:
“1.) Percent for Underwriters – An intuitive platform that delivers time-saving workflow automation, directly solving the notoriously inefficient underwriting process. Our technology streamlines the entire private credit underwriting lifecycle from borrower discovery through syndication to investor servicing.”
“2.) Percent for Borrowers – A tailor-made solution allowing borrowers to easily set up and manage their debt capital needs at little to no cost while addressing major pain points, including lowering the cost of capital, managing reporting and simplifying debt capital management needs. Borrowers can raise capital through corporate loans or asset-backed securitizations, catering to both fintech lenders and high-growth companies seeking funding between equity financing rounds.”
“3.) Percent for Investors – An easy-to-use platform for accredited investors to find, evaluate, and invest in private credit transactions. They can also invest across investment types, borrowers, geographies, and sectors. Investment types include asset-backed notes, corporate loans, and Percent Blended Notes which provide exposure to multiple private credit offerings from a single investment vehicle.”
Evolution Of Percent’s Technology
How has Percent’s technology evolved since launching? Chu pointed out:
“The first iteration of Percent created a value-focused investor experience. It enabled accredited investors to find deals and participate in the historically exclusive private credit market at lower minimums. Now it includes borrowers and underwriters in addition to investors – bringing them all together.”
“The evolution of the platform resulted from:
1.) Learning what was broken by running the marketplace_
2.) Building a team of public debt market professionals led by Prath Reddy, President of Percent
3.) Ultimately, applying proven public debt market concepts and standards to its marketplace.
What emerged is a vertical SaaS solution built on transparency specifically for the opaque private credit markets.”
What have been some of Percent’s most significant milestones? Chu cited the following:
– Released Percent for Underwriters; an intuitive platform that delivers time-saving workflow automation for both buy-side and sell-side firms, directly solving the notoriously inefficient process of sourcing, structuring, syndicating, and servicing lower middle-market debt transactions.
– Acquired proprietary portfolio surveillance and risk management technology from MidCap Financial to further bolster transparency to all transaction participants.
– Entered into an agreement with MTAG Services, LLC to serve as a third-party verification agent on primarily asset-based offerings.
– Ranked on both the American Banker 2022 and 2023 Best Places to Work in Financial Technology lists, was named as a finalist for the Benzinga Awards and the Fintech Nexus Awards; and Percent’s CMO, Jessica Zall, also secured a finalist spot in Markets Media’s Women in Finance Awards. Additionally, Percent ranked No. 15 on Inc. Magazine’s List of the Northeast Region’s Fastest-Growing Private Companies and was honored in Built In’s 2023 Best Places To Work Awards.
– Expanded debt asset class coverage from only asset-based to corporate loans as well, including both traditional lower middle-market loans and venture debt.
– Closed strategic debt financing with Nomura Strategic Ventures with the intent to explore commercial collaborations in 2023 and beyond.
– Successfully arranged $265 million in esoteric asset-backed deals with institutional structured credit investors for two large issuers.
– Successfully closed $29.7 million in Series B funding, more than doubling the company’s total funding, which now sits at $48.2 million.
Customer Success Stories
Upon asking Chu about some customer success stories, he cited two that immediately came to fund: Wall Street Funding and Quiq Capital.
“In September 2022, we announced the closing of the single-largest offering syndicated on the Percent platform to date, with over $20 million invested in Wall Street Funding’s offering of WSF SMB Financing Sr. 2022-2. It was a milestone that marked over four years of growing market adoption at Percent and the expansion of Wall Street Funding’s business since joining our platform. Wall Street Funding first raised $1.5 million on Percent and since then, has scaled its pipeline and deal size with each subsequent offering syndicated on our platform, raising significantly larger sums each time based on strong investor demand. Wall Street Funding successfully closed a $20,005,000 secured corporate loan, attracting 588 investors with investments ranging from $500 to $3,250,000 – marking their 18th syndicated offering. We are proud to have seamlessly integrated into the workflows of borrowers, like Wall Street Funding, to help scale their debt capital while also providing underwriters tools to more efficiently source, structure and syndicate debt offerings.”
“To kick off 2023, we announced the successful closing of Embr Labs, which was the first private credit offering underwritten by our newest third-party underwriter to join our platform, Quiq Capital. Embr Labs, based in Massachusetts, is a consumer health technology company that has developed a wearable device that delivers menopausal symptom relief and body temperature control to women across the U.S. Quiq Capital extended a $2.8 million corporate loan to Embr Labs and syndicated a portion of the loan on Percent’s platform (18%-22% APY range) with a target funding size of $1.4 million. Over a two-week syndication period, Quiq leveraged our underwriter technology, Percent Underwriter, which gave them a direct view into the order book-building process. Nearly 100 investors submitted orders, resulting in a 1.6x oversubscription rate for Quiq’s inaugural. The depth of the order book supported an offering upsize to $1.97 million at a 20% APY.”
“Overall, as of July 31, 2023, Percent investors have earned $33 million in interest since the company launched its first deal in 2019. We have also funded $870 million across 468 deals.”
When asking Chu about the company’s funding and revenue model, he revealed:
“Percent has raised a total of $48.2 million through Series A and Series B funding rounds. Our primary pricing model is based on a recurring monthly platform fee with additional a la carte fees based on additional services required for borrowers or specific deals. For example, a deal-type fee could include a syndication fee for underwriters marketing to Percent investors versus their own private cohort. A borrower-type fee could include weekly or monthly surveillance on a borrower’s loan portfolio.”
Total Addressable Market
What total addressable market (TAM) size is Percent pursuing? Chu assessed:
“While quantifying the potential of the private credit market varies, one thing is certain – the market is growing. Preqin forecasts that private debt will continue to grow to $2.3 trillion by 2027, while KKR states the private credit market is expected to grow from $5.2 trillion to $7.7 trillion by 2027.”
Differentiation From The Competition
What differentiates Percent from its competition? Chu replied:
“While there are several companies within the private credit industry, Percent does not consider itself to have any true competitors. This is because we are the only three-sided private-credit marketplace that connects borrowers, investors, and underwriters.”
“Historically, it has been very challenging for investors to access private credit, but Percent has been a game-changer. Our unique marketplace simplifies investment discovery, giving institutional and accredited investors access to a broad selection of higher-yield, short-duration, securitized investments. In addition to providing access to private credit investments, the Percent platform offers an essential opportunity for corporate borrowers. Particularly in the current challenging and uncertain economic environment, it is more crucial than ever for companies to have access to capital and ways to raise capital when they need it, and Percent is filling that void, generating opportunities for all players within the private credit space.”
Future Company Goals
What are some of Percent’s future company goals? Chu concluded:
“In the next six months, we anticipate that we will increase our number of full-time employees by as much as 14.5% by the end of the year.”
“We look forward to continuing to expand and improve our solutions, further acquiring proprietary technology to bolster transparency to all transaction participants, and exploring commercial collaborations.”
“As a longer-term goal we have set and given the pace of revenue growth and expenses being held relatively flat/consistent, we’re expecting to be able to turn profitable by mid-2024.”
“With multiple predictions that private credit will continue to grow exponentially in years to come, it’s safe to say we are in the midst of private credit’s moment.”
“Previously, private credit has been an asset class that has struggled to innovate for decades. That’s why we at Percent are developing a technology solution to deliver greater transparency, more efficiencies, and more standardization and empower the asset class like never before. In this way, we can unlock unparalleled access to private credit and turn it into the multi-trillion dollar behemoth it has always been destined to be.”
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