Fintech co Lendbuzz becomes a unicorn

US-Israeli company AI-based auto financing platform Lendbuzz has raised $45 million in equity and $300 million credit for loans at a company valuation of $1.1 billion. In its last financing round in June 2021, the company raised money at a valuation of $850 million, so it has become a unicorn today.

Although Lendbuzz operates in the challenging US credit market, it has been one of the most profitable Israeli startups over the past year due to its unique niche market and the algorithms developed by its founders at MIT.

Lendbuzz, which was founded by CEO Amitay Kalmar and CTO Dan Raviv is based in Boston and has a development center in Israel. The company has developed a technology that predicts more accurately than other companies in the automobile market the ability of a borrower to repay the loan taken for the purchase of a car from a dealership in the US. Unlike other companies that provide a loan, such as Pagaya for example, it is focused exclusively on the automobile sector and is active only in the US. This is also part of the secret of its success: we are talking about loans of large amounts ranging around tens of thousands of dollars and potential borrowers have a greater interest in sharing personal data with Lendbuzz personal data that other companies would have difficulty asking from users.

This improves Lendbuzz’s forecasting algorithm and allows it to more accurately assess who will repay the loan and who may risk default and also offer lower interest rates to better quality borrowers. The company reduces the risk by providing a loan solely for the purpose of purchasing vehicles that can act as surety, therefore its loss rate is minimal compared with similar fintech companies.

Lendbuzz offers loans through arrangements with about 1,000 dealerships in the US, which buy the loan software and offer credit to customers as a complementary service to the purchase of the car, without the customers needing to directly contact Lendbuzz’s services. In this way the company rolls out worth of $1.3 billion per year, with the ability to grow several dozen times in the coming years in its market share. Among its competitors in the market of loans for car buyers are financial institutions such as Ally Bank, Capital One , Santander Consumer and Wells Fargo.

The new funds will allow Lendbuzz to expand into new US regions, develop new products and enlarge the company’s already 60-strong sales team in the US. The company intends to adopt creative AI models.

Lendbuzz reports annual recurring revenue rate (ARR) of $200 million as of the third quarter of this year and profit of several tens of millions of dollars. The company has 300 employees including 30 in Israel. Kalmar says the company has no immediate plans to go public but this could happen in 2025, depending on market conditions.

Group 1001 led the latest financing round with participation from existing investors including, 83North, O.G. Venture Partners, and MUFG Innovation Partners.

Published by Globes, Israel business news – en.globes.co.il – on October 4, 2023.

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