Q&A with Jerry Nemorin, CEO and Founder of LendStreet
Jerry Nemorin is the CEO and Founder of LendStreet, an online lending platform that enables individuals who have weathered a financial shock to restructure and pay off their debt. In this Q&A with Launch With GS, Jerry shares how the origin story of LendStreet during the ‘08 recession, the leadership lessons he takes from Nelson Mandela, and his vision for an equitable financial system.
How did you hear about Launch with GS? What has the experience been like for you?
The opportunity to be part of the inaugural Launch With GS Entrepreneur Cohort was priceless. I first heard about the program through a friend and attended an in-person entrepreneur event. I was impressed by the people and organizations Goldman engaged to support the program - a roster of leaders in the movement for equity in the tech industry. That demonstrated a conscious decision and commitment on the part of the GS team to understand the core issues that impact Black and Latinx entrepreneurs and to design an experience that addressed them. The result was a customized comprehensive and practical Goldman Sachs experience that leveraged the firm’s platform and networks to significantly accelerate the growth of my business - from exploring options to lower my cost of capital to business development opportunities. From the onset we collaborated to identify my strategic goals, and Goldman built a team around myself and the other companies to increase access to the people and resources necessary to help each business achieve its strategic goals. Beyond the individual engagements, I learned a great deal from the world class experts that shared their expertise on scaling, building a culture of operational excellence, and understanding the investor perspective, just to name a few. It reaffirmed my belief that the company-building process is scientific, iterative, and requires an ability to engage cross functional partners internally and externally. The program also reinforced the importance of having diverse perspectives in the room to achieve true innovation of the kind that challenges the status quo.
Tell us about LendStreet. How did you get started? What is the mission statement and grand vision?
During the ‘07-’08 Great Recession, I was working in the Financial Sponsors Group of a bulge bracket firm and we were advising clients, mostly distressed private-equity owned companies, on their options to remain viable. We advised a media company to restructure its balance sheet by buying back its own debt, which was trading at a massive discount. During that same time, I was personally lending to distressed consumers who had delinquent debt and/or lower credit scores through a peer to peer lending platform. The light bulb went off and I realized that the consumers, similar to the media company, would have been better off engaging their existing creditors to restructure and buy back their own debt.
I began researching the experience of a consumer in distress and the various stakeholders such as collections agencies, debt settlement, credit counseling, and the emerging peer to peer lending models. I noticed that there were significantly fewer sophisticated options for distressed consumers as opposed to companies.
Due to regulatory limitations, there has always been a misalignment of interests between the creditor, who wants to mitigate risk, and the consumer, who needs flexibility when experiencing an unexpected financial shock that results in distress. Regulation dictates the minimum payment on your credit card, so when a borrower is distressed and his/her ability to make payments is impaired, banks are limited in their ability to provide the necessary relief that meets the borrower’s current reality.
I believe there is a real opportunity to build a product that bridges this gap between the distressed consumer and the creditor where both sides win – the consumer can rebuild their credit score and financial health and the creditor can efficiently recover on distressed assets. The mission behind LendStreet is to deliver financial health for the American consumer and our vision is to be the catalyst for a just and flexible financial system. By partnering with both consumers and banks, we believe we can help to build a more flexible system that improves recovery for both parties and systematically reduces the cost of capital to the everyday American consumer in the future.
Describe the market opportunity and landscape. Who can benefit from LendStreet?
To start, one in three adult Americans has a debt in collections. Total consumer debt surpassed $14 trillion: almost $10 trillion in mortgages, $1.5 trillion in student loans, $1.3 trillion in auto, $820 billion in credit card debt. Four in ten Americans would struggle to cover a $400 emergency expense. One in six are unable to pay their bills in full each month. The average American is overextended, to say the least.
Our vision aims to provide a comprehensive set of financial products and solutions that serve a diverse group of people with unique needs at different stages of financial distress — offering flexibility and paving the way forward for those feeling distressed.
Our first product is a solution that helps consumers right-size their debt during a time of financial distress. The typical borrower is a recovering prime consumer – consumers who have a long history of managing credit, experienced a financial shock, and are actively looking for a solution. For example, one of our borrowers had $25,000 of credit card debt and was struggling to make the monthly minimum payment. We helped the client negotiate the debt down to $15,000 and provide a loan to pay it off with a payment plan that fits her budget. This is a much more viable alternative to bankruptcy for both the consumer and the creditor. Creditors are able to recover more capital in a quicker time frame and our borrowers get payment relief and a path to rebuild their financial life. Clients typically see an 80-point credit score increase within 12 months.
What drives your empathy for these consumers?
My mom and I moved to the US when I was 10 years old. My mom bought a car, and because she was an immigrant, and thus, a “thin file” (i.e., she didn’t have a credit score or profile), the interest on the car was more than the value of the car itself. That really stuck with me.
The pursuit of financial equality and justice is both personal and professional. The financial institution focuses heavily on credit scores and doesn’t leave much room for context around the driving factors leading to your particular score. We’re human, which means we’ll likely face a financial roadblock or shock that destabilizes us temporarily. To improve the system, we have to mimic the fluidity of people’s life situations.
What has been the most exciting moment of building your business? What challenges has LendStreet faced during the COVID-19 pandemic?
The most exciting moment will always be that very first customer LendStreet helped through her financial shock and that feeling grows with every person we’ve helped thereafter. People are simply looking for an opportunity to get back on track financially and rigidity in the financial system is preventing them from getting the help they need. COVID-19 specifically proved that we’ve identified the right consumers who need a solution that meets their extenuating circumstances. Borrowers continue to make partial payments even in deferment. The act of right sizing their debt to what they can pay results in outperformance. Our clients have been performing at the same rate as consumers with FICO scores 100+ points higher, even during the pandemic.
Tell us about the influences that have shaped your character and values as a leader. If you could go back in time, what advice would you give to your younger self?
A lot of my personal and professional guiding principles are informed by Nelson Mandela’s leadership - specifically his tenets around justice and equality. This inspires me to advocate for people and to dedicate myself to helping them achieve a quality life.
I’ve chosen an industry that’s fraught with systemic issues. I am galvanized to fight for what is just. Our approach at LendStreet has always been to be “people first” in our support of and through their hardships. This includes my team who is on this journey with me.
I would advise my younger self to trust yourself, remain steadfast, and always stay focused on the end goal. There will be moments of feeling alone and isolated, but continue to march towards your purpose with conviction.
Can you tell us more about the LendStreet team? How did you meet your co-founder, Tom Coombs?
It’s important to me that we build a diverse team that spans a wide range of industries. With that you get a unique group of problem solvers and there’s never a shortage of ideas. The team is united around our shared commitment in helping people navigate through financial shock and creating solutions that make our financial system more flexible.
A mutual connection introduced me to Tom Coombs, our co-founder. He began his career at Goldman Sachs and is a brilliant product mind. He immediately understood the need for the LendStreet solution and potential impact given the scale of the American consumer debt problem.
What are you most excited about over the next 6-12 months?
We’re witnessing COVID-19’s devastating effect on American households and the problems spiraling out of this pandemic. We are identifying opportunities to build new products to help consumers affected by the pandemic to maintain their solvency and financial flexibility. We look forward to collaborating with creditors to create solutions that further infuse flexibility into the broader financial system while mitigating risk and bridging the consumer to financial success.