Investment in set point | Andreessen Horowitz

Behind many of life’s most important financial transactions – whether buying a house, applying for a mortgage, getting a small business loan or refinancing a personal credit card – is a network of trust and credit relationships. Billions of dollars of these transactions are funded every day via warehouse facilities by the world’s largest investment banks, credit funds and capital market counterparties. And while much time and investment has been spent over the years in the fintech industry to innovate on the consumer-facing front of these transactions, the reality is that many of the capital markets workflows behind the scenes remain largely manual – a product of e- mail, Excel and FTP folders. The result is more friction in this system and higher costs for both borrowers and lenders.

We experienced this problem first hand at my last company, Bond Street, a small business lender that I co-founded in 2013. We raised over $900 million in debt capacity across a few major capital markets counterparties, and while we were the front of our experience with borrowers was a streamlined with APIs and smart mobile-optimized UX, the back end of originating and funding these assets was a complicated web of CSV exports and manually generated reports.

In order to originate and fund a small business loan, we needed to gather documentation (i.e. tax filings, business financials, credit reports, etc.), verify that the asset fit within the eligibility criteria set by our lenders (usually performed by a third-party data agent), and finally report on the performance of these assets on an ongoing basis against a set of complicated parameters (ie concentration limits, cumulative delinquency, default rates, etc.). The consequences of making a mistake – i.e. creating the wrong loan or triggering a covenant in our credit agreement – ​​can be severe, requiring us to buy back the asset with equity or risk being shut down completely (which could mean lights out for a early stage fintech company).

As a result of this experience, I have always believed that these manual workflows in the capital markets can and should become software, and that there can be an opportunity to build a network that can deliver significant value to fintech companies as well as provide peace of mind to their lenders.

It is with this task in mind, as well as our belief that the future of private markets liquidity will start with investor relations software, that we are so excited to partner with Stu, Ben, Michael and the entire team at Setpoint. They have done an incredible job of transforming these capital markets workflows into a Funding OS – with an initial focus on the proptech space, where the document-intensive nature of real estate transactions is even more severe. Their product not only helps leading proptech companies like Opendoor and Flyhomes scale their origination and capital markets activities with less manual work, but, importantly, it also helps reduce the time it takes to keep these assets on the balance sheet. This minimizes the equity intensity of these businesses and/or the amount of interest paid to expensive mezzanine borrowers – an important benefit in this macro environment.

We are delighted to partner with such experienced entrepreneurs and have been incredibly impressed with the capital efficiency with which Stu and the team have scaled the business. We are also particularly excited about the potential for network effects here. Just as Carta built distribution among startups and consequently allowed venture investors to monitor their entire portfolio in one place, Setpoint is also beginning to deliver significant value to the world’s largest credit investors across many of their inventory relationships. This results in more borrower introductions and a move into other asset classes such as detached house rentals, mortgages, as well as consumer/small business products.

We believe Setpoint is well positioned to help improve the workflows behind life’s most important transactions, and we couldn’t be more excited to lead Setpoint’s Series A funding round and join their board.