U.S. markets closed
  • S&P 500

    4,071.70
    -4.87 (-0.12%)
     
  • Dow 30

    34,429.88
    +34.88 (+0.10%)
     
  • Nasdaq

    11,461.50
    -20.90 (-0.18%)
     
  • Russell 2000

    1,892.84
    +11.16 (+0.59%)
     
  • Crude Oil

    80.34
    -0.88 (-1.08%)
     
  • Gold

    1,797.30
    -3.80 (-0.21%)
     
  • Silver

    23.17
    +0.53 (+2.33%)
     
  • EUR/USD

    1.0545
    +0.0017 (+0.16%)
     
  • 10-Yr Bond

    3.5060
    -0.0230 (-0.65%)
     
  • GBP/USD

    1.2270
    +0.0014 (+0.11%)
     
  • USD/JPY

    134.3290
    -0.9770 (-0.72%)
     
  • BTC-USD

    17,096.79
    +133.28 (+0.79%)
     
  • CMC Crypto 200

    404.33
    +2.91 (+0.72%)
     
  • FTSE 100

    7,556.23
    -2.26 (-0.03%)
     
  • Nikkei 225

    27,777.90
    -448.20 (-1.59%)
     

A Once High-Flying Wharton MBA Startup Is Grounded

The original trio of Wharton MBA grads who founded CommonBond. CEO David Klein (center), COO Jessup Shean, and CFO Mike Taormina. Shean, now a managing director at Evercore, left a year into the company’s life, while Taormina departed roughly three years later and is currently co-founder & COO of Alluvial.

Founded by a trio of Wharton MBA students in 2012, student loan company CommonBond is closing its doors. The startup was one of several student-founded fintech companies, including SoFi, Prodigy and Earnest, to disrupt the student loan market.

But CommonBond struggled through the pandemic and the administration’s decision to allow student lenders a reprieve on their loan payments. An attempt to pivot the company to solar financing four months ago wasn’t enough to sustain CommonBond.

“After a 10-year incredible journey, it is with mixed emotions that we announce CommonBond is winding down,” wrote CEO and Co-Founder David Klein in a LinkedIn post. 

A PIVOT INTO SOLAR FINANCING FAILED TO ATTRACT FUNDING FROM INVESTORS

“The story of what has led us to this point starts with Covid. When the pandemic hit, our student business took a hit,” he added. “Half of the refinance market went away as the government paused interest and payments for all federal student holders. More than two years later, that policy is still in place.”

His effort to transition CommonBond into a company that would finance solar installations for homeowners was unsuccessful when it failed to attract the additional investment needed for the pivot.

“The solar business is where we were growing quickly, signing up new installers, and reshaping the way the industry served customers for the better,” Klein explained.” But we were still scaling, not yet profitable, and needed new capital. Unfortunately, we couldn’t pivot the entirety of the business fast enough.”

WAS ONE OF THE EARLIEST MBA STARTUPS ON POETS&QUANTS’ ANNUAL LIST OF THE BEST

For many of its earlier years, CommonBond was among the most successful MBA startups of its generation. It consistently landed on Poets&Quants’ annual ranking of the best MBA startups. CommonBond was one of only three Wharton startups, with Warby Parker, that made the inaugural ranking in 2013. In that year, CommonBond was ranked 64th among the top 100 MBA startups after raising $4.2 million in funding. By 2016, it was among the Top 20, having raised $46 million from investors.

In that year, in fact, three MBA student loan startups were in the Top 20, including Stanford’s SoFi, founded by a Stanford grad, ranking first with $1.4 billion in funding, and Earnest, founded by Harvard Business School MBA graduates, ranking tenth, with $99 million raised. CommonBond came in ranked 19th.

Klein founded the company with Wharton classmates Mike Taormina, currently co-founder & COO of Alluvial, and Jessup Shean, now a managing director at Evercore, the boutique investment bank. Klein served as CEO throughout the company’s history. Shean left as COO a year into the company’s life, while Taormina departed after roughly three years as CommonBond’s chief financial officer.

COMMONBOND FUNDED MORE THAN $5 BILLION OF LOANS

Along with SoFi and Earnest, CommonBond significantly disrupted the student loan market, exploiting intense customer dissatisfaction with the higher interest rates and poor service of the federal government and traditional banks. The fintech upstarts had a particular advantage over the feds. While the government issued student loans to anyone going to college or graduate school, the re-financiers were able to pluck the cherries and reap a bountiful harvest of some of the world’s most sought-after debtors – borrowers with lots of debt but virtually no risk of default.

That early strategy worked like a charm. Over time, CommonBond funded more than $5 billion of loans, with more than one million users and 100,000 customers served. Klein noted that the loans he underwrote saved consumers more than $1 billion dollars. 

“While the outcome is disappointing, the impact we have had will carry on and is something we will always be proud of,” he wrote. “I now turn my attention back to completing the wind-down. Once complete, I’ll think about my next steps. Until then, and with gratitude.”

CommonBond was the first and only finance company with a “1-for-1” social mission: for every loan it funded, CommonBond also funds the education of a child in need, through its partnership with Pencils of Promise. The company donated more than $2.5 million under its “Social Promise,” according to Klein.

Klein’s post on LinkedIn attracted more than 200 comments, including one from a former colleague at American Express where Klein worked before going to Wharton for his MBA. “David, I still remember the day you called to tell me you were leaving Amex to go to grad school,” wrote Joshua Berwitz, now a senior vice president at American Express. “I have watched what you have accomplished with great admiration. I am sure it is a tough time now as you wind down, but what you built, what you chose to support and how you have advocated for your people these last few months says everything about you as a professional and more importantly, as a person. Nobody can take any of that away from you. No doubt you will do other great things and positively impact many others along the way.”

DON’T MISS: THE TOP MBA STARTUPS OF 2021 or THE MOST DISRUPTIVE MBA STARTUPS OF 2021

The post A Once High-Flying Wharton MBA Startup Is Grounded appeared first on Poets&Quants.