Even Financial worth $180 million as 'Google Flights' of online lending

Financial technology startup Even Financial has created a machine-learning powered platform that algorithmically targets and matches customers with lenders, helping banks get a better bang for their marketing buck.

The company announced Wednesday it had raised $25 million from investors including Citi Ventures, Goldman Sachs, and American Express.

The deal values Even at $180 million, according to sources familiar with the terms.

Banks are spending billions to market personal loans, credit cards, and other retail banking products to consumers amid intensifying competition. One startup just nabbed a nearly $200 million valuation for a platform that algorithmically targets and matches customers with lenders, helping them get a better bang for their marketing buck.

Even Financial, a New York-based financial technology startup founded in 2015, announced Wednesday a $25 million strategic investment led by Citi Ventures, with Goldman Sachs and American Express chipping in as well, among other backers.

The company, which has now raised $50 million in total, declined to comment on its valuation, but sources familiar with the deal say the investment values the startup at $180 million.

Even commanded that rich price tag from investors for creating a platform that acts as a digital matchmaker between financial institutions and customers hunting for their services in an increasingly disparate array of venues across the internet.

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Cofounder and CEO Phillip Rosen likes to court comparisons to ITA, the flight software company that created a data-driven marketplace for the airline industry and has been used by airfare search engines ranging from the Delta and United websites to Orbitz and Kayak. Before ITA, which was bought by Google in 2010 for $700 million and now powers Google Flights, people were often at the mercy of travel agents — an almost unimaginable scenario for many today.

But instead of airfare, Rosen and company are connecting consumers to personal loans and high-yield savings accounts. For instance, a consumer could be reading an article at a personal finance website like The Penny Hoarder or Credit Karma and be served with personal loan advertisements showing them personalized offers from Marcus by Goldman Sachs or SoFi.

Or, someone might be logged in to a financial-management app like Pocket Guard or Empower and see suggestions for a high-yield savings account they'd qualify for from Barclays, Amex, or Discover.

Even uses machine learning to sift through piles of data — from the lenders, third parties, and the customers themselves — to predict the type of offer a customer is more likely to respond to and qualify for. The company's engine programmatically takes care of vetting, preapproval, and regulatory compliance, streamlining the process for financial institutions and potentially cutting down on costly defaults and charge-offs.

That, in turn, helps the websites or apps advertising these products — which are often compensated based on successful leads generated — make more money.

Banks spending billions on marketing

There are thousands of such places where customers might be inspired to get a quote or click on an offer, and a large financial institution isn't likely to directly connect with an individual platform unless it has massive scale, according to Rosen. So with Even, banks can instead connect directly with Even's API, which serves as a single conduit algorithmically coordinating the highly dispersed channels of supply.

“The goal is to create this infrastructure and platform that's able to really support the distribution of these products and the engagement with consumers across everything that the consumer used to go to in the branch or agent model,” Rosen told Business Insider. That's welcome news for banks, which are facing intensifying competition in a variety of consumer credit fronts, from mortgages to credit cards.

“User acquisition competition in financial services is probably more fierce than it has ever been in history,” Luis Valdich, a managing director at Citi Ventures who spearheaded the firm's investment, told Business Insider. As a result of the proliferation of fintech competitors in recent years, customer-acquisition costs are growing ever higher, he said.

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Nearly 30 leading US banks and card companies spent $13 billion last year on marketing, according to EMI Strategic Marketing's analysis of data from the Federal Financial Institutions Examination Council. Five institutions — JPMorgan Chase, American Express, Capital One, Bank of America, and Citibank — spent more than a billion each on marketing. These efforts are increasingly shifting away from traditional methods like postal mail and toward digital platforms.

“Even is very much playing at the heart of that” secular change, Valdich said.

Even's growth has been rapid but there are still legacy holdouts

Even's rapid ascent the past year helped it earn the confidence of investors like Valdich, who has followed the company since its early days but didn't invest last year in the firm's nearly $19 million Series A round, saying he wanted to see the startup broaden the set of financial products it could serve.

Even — which now has 78 employees, up from less than 20 at the start of 2018 — started out focused primarily on personal loans but now supports offers for checking and savings accounts, credit cards, student loans, and insurance as well. They're working with more than 60 financial institutions, including American Express, Barclays, Discover, Goldman Sachs, HSBC, LendingClub, and SoFi.

Still, there are some behemoth institutions notably absent from their client roster, including the largest US banks. Garnering buy-in from legacy institutions can still be challenging, Rosen said, as many are wary of relinquishing custody of their brand.

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Financial institutions “really need to do a better job of engaging with customers and acquiring them in an affordable and profitable way,” Rosen said. “And that means engaging with the consumers where they are, which very often isn't the banks branch or the banks logged in experience.”

On the other hand, he added, they're also “very afraid of giving up control over their brand and putting it in somebody else's experience.”

Rosen is confidant the allure of a smarter, data-driven, and cost effective marketplace for reeling in customers will ultimately win the day and become standard — just as it did in the airline industry.

“This year the traction has been tremendous. And the buy-in from our clients, the financial-services companies, it's not just enthusiasm for working with us. They now want to be participants in building it out,” Rosen said.