Dave Girouard is the CEO of Upstart Holdings, a company that uses artificial intelligence to transform lending. Upstart was founded in 2012 by Girouard, Paul Gu, and Anna Counselman. The company went public on the Nasdaq in December 2020.
Upstart’s AI-based lending platform assesses the creditworthiness of borrowers without using the traditional underwriting process. In the past five quarters, over 90% of Upstart’s loans were fully automated, with no human involvement. The company’s stock price has seen significant changes.
It increased by more than 1,200% in the fall of 2021 after its IPO, reaching a market valuation of $30 billion at its peak. However, rising interest rates caused the stock to drop by over 90%, leading to six straight quarters of declining sales and losses. Recently, Upstart has shown signs of recovery.
Sales growth has surpassed expectations, and the company is close to becoming profitable again. The stock has increased by over 100% in the last 12 months, attracting interest from retail traders. Girouard explained that Upstart’s system works like an auction.
When someone applies for a loan, around 100 bidders compete to offer the best credit terms to that person.
Upstart’s financial recovery continues
The company’s advanced risk models allow it to approve more people at lower rates.
Upstart was profitable as a private company and during its first six quarters as a public company. In 2022, the company faced challenges due to deteriorating consumer health, high interest rates, and inflation. However, Upstart is working towards profitability again and was close to being GAAP profitable last quarter.
The company expects to be profitable in the second half of this year. Upstart has navigated through different administrations with the Consumer Financial Protection Bureau (CFPB). In the early days, the company had to address questions about consumer fairness and other concerns.
By 2022, Upstart had been under an agreement with the CFPB for about four years. The company requested to accelerate its processes because waiting for model approvals was detrimental. This decision proved to be beneficial, as Upstart no longer faces many questions about AI fairness due to evident benefits and robust fairness and explainability testing.
Upstart’s platform connects borrowers with banks and credit unions, using AI to ensure better risk assessment and loan approval rates. This benefits both parties by making lending more efficient and equitable. Despite past challenges, Upstart Holdings continues to stand out in the financial technology space, driven by innovative AI applications and a commitment to improving credit accessibility.
The company is poised for a rebirth, aiming for sustained profitability and growth.
