How Nova Credit caught the eye — and dollars — of A-listers
Nova Credit, a fintech company that translates other countries’ credit bureau information into data American banks’ underwriting systems can understand, has raised $50 million in funding from an A-list mix of venture firms and celebrities.
The investors include Kleiner Perkins, Canapi Ventures, Index Ventures, General Catalyst, Nyca Partners, Sound Ventures (a venture capital fund founded by the actor Ashton Kutcher and the producer-talent manager Guy Oseary), former baseball slugger Alex Rodriguez and The Edge, the U2 guitarist.
It is one of the first investments for Canapi, the venture capital firm recently launched by former Comptroller of the Currency Eugene Ludwig and Live Oak Bankshares CEO Chip Mahan.
Nova Credit — like other fintechs including Remitly, Petal, TomoCredit and CreditStacks — seeks to help immigrants with good credit in their home countries obtain access to financial services when they move to the United States.
When new arrivals apply for a credit card, student loan or apartment rental, they are typically declined because they lack U.S. credit history. Often, they cannot even get a phone.
“In the world of telecom, if you lack a U.S. credit history, you can only gain access to a prepaid plan,” said Misha Esipov, CEO and co-founder of Nova Credit. “Anyone with a credit history can get a plan and is eligible for financing.”
Currently Nova Credit shares credit histories from 11 countries including Australia, Canada, India, Mexico and the U.K. with banks, lenders and telecommunications companies. A billion credit history reports are available through this network.
Nova Credit won a valuable partner in American Express in October. The card issuer uses Nova Credit’s technology to instantly issue credit cards to immigrants with no U.S. credit history. When the news of that deal broke, the company got calls from several other large U.S. financial institutions who have taken an interest in supporting the newcomers segment, according to Esipov.
Some celebrities, like Rodriguez, want to be seen as supporting newcomers, too.
“It's an incredibly polarizing customer segment and one that's been grossly underserved by the U.S. financial system,” Esipov said. “This audience of folks either has firsthand experience with these problems or they have family or loved ones that have had some version of this problem. They're excited to take a stand and help this problem go away.”
Esipov said he does not actively seek famous investors.
“Most of that came through our existing investors who understand the mission of our work, who understand the value of our product and thought, hey, you should talk to Alex Rodriguez — he would take a personal interest in what it is that you stand for,” he said. “He's been known to be very invested in the Dominican Republic, as an example. And that's one of the countries that we're bringing in online as soon as possible.”
How it works
Nova Credit sees itself as a giant cross-border credit bureau.
It has partnerships with credit reporting agencies in 25 markets around the world, companies like Experian, Equifax and TransUnion.
“We are actively building those integrations as quickly as possible,” Esipov said.
It’s built an aggregation layer that sits on top of this network of credit bureaus.
“Through consumer consent we have the ability to move that information from one market to another,” Esipov said.
Nova Credit calls this a credit passport. “The same way that your passport is your key to entry to travel the world, your credit passport is your key to accessing finance around the world,” Esipov said.
Through Nova Credit’s network, immigrants can pull their cedit histories from their native countries. The company applies its analytics and translation layer to convert that information to a format that can be interpreted by underwriting software.
There are countries that do not have credit bureaus, like France. Nova Credit has not come up with a solution to this yet. There are countries like Brazil that only report negative information, unlike the U.S. where negative and positive financial behavior is reported.
Most negative reporting environments are starting to transition to positive, Esipov said.
Financial products are different around the world, too, which also makes it hard to translate credit scores from one country to another.
Sarah Davies, who until recently led risk and analytics at VantageScore, leads the team that standardizes data definitions and translates credit reporting information between countries.
The product is free for consumers. Nova Credit makes money through its contracts with banks, card issuers, telecom firms and other enterprises.
Next steps for the company include increasing the number of countries with which its technology works and improving the predictiveness of its software.