Columbus may have lost the contest to get Amazon’s HQ2, but another West Coast tech company will open its second headquarters in central Ohio early next year.
Upstart, which launched in 2012 in the San Francisco Bay area, will bring about 100 employees in its first year and expects to grow to 400 or 500 within a few years with a plan to overhaul the mortgage lending industry, said Dave Girouard, founder and CEO.
Girouard founded Upstart after working for Google, and has hired some staff away from the search engine giant. It was while working at Google that he became interested in applying technology to other industries.
He saw opportunity in the credit market “because 98 percent of Americans use it” and because he believed traditional formulas could be improved.
“Far more people are credit worthy than traditional systems recognize,” he said. “And even those who do qualify are often paying more than they should.”
Lenders have traditionally based their decisions on such underwriting criteria as FICO score, credit report and income. Upstart’s system includes such things as colleges attended, area of study, grade-point average and work history.
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By applying data science to the business, Girouard believed Upstart could make it easier and faster to get approved for a loan, and at lower rates.
“The system we built had loss rates less than half of traditional systems, and every month it gets better,” he said. “We also have a lot of automation, and you can apply online. Most traditional systems take weeks before a loan is approved, but in our case you can get approved for a loan in minutes.”
Data-driven mortgage loans and appraisals are “the wave of the future,” said Marianne Collins, executive director and chief operating officer of the Ohio Mortgage Bankers Association. “This is nothing new, but it is the way it’s going to be in the future. We’re the generation where we want it now. That’s why Quicken Loans had such success — they’re now the No. 1 lender in the country.”
More than 60 percent of loans originated through Upstart are entirely automated, Girouard said.
Here’s how it works: Since 2014, Upstart-branded loans available thru Upstart.com have been originated through a New Jersey lender, Cross River Bank. Those loans — about 215,000 of them totaling about $2.7 billion — are commonly purchased by more than a dozen different institutions, including Morgan Stanley and Goldman Sachs.
More recently, Upstart has begun to license the technology to banks to enable their own lending efforts. The company calls the technology “Powered by Upstart” and describes it as “software as a service” or “lending as a service.” Upstart has signed several banks but hasn’t announced the names yet. Some of the loans consumers can get on Upstart.com actually come from these bank partners.
Even though the business is growing, and much of it is done online, Upstart officials concluded that they needed to expand their physical presence beyond California in order to keep growing. Upstart chose Columbus for several reasons, Girouard said.
“Probably the most central reason is the availability of a lot of incredible talent,” he said. “For a company like ours, it’s always a challenge bringing on a lot of high-performing, capable people. The Bay area is getting more and more difficult all the time.
“A university town is great — and Columbus has a lot of financial services, so there’s a lot of related talent, too.”
The quality of life in Columbus also helps attracts talent, Girouard said.
“We hired a guy recently, who lives in Texas, and when we made an offer to him he said, ‘No way in hell am I living in the Bay area,'” he said. “A little while later, when we told him about Columbus, he signed the next day.”
One Upstart employee who needed little persuasion to move here is Ohio native Grant Schneider, the company’s leading data scientist who will run the Columbus office.
“It’s really exciting,” Schneider said. “It hasn’t fully sunk in yet. I always viewed my desire to return to Columbus as in conflict with my desire to remain at Upstart.”
Schneider, who grew up about 15 miles outside of Marietta, earned bachelor’s, master’s and doctorate degrees at Ohio State. Toward the end of his time in Columbus, he read an article about Upstart and “I sent them a cold email, and that led to some casual phone conversations and that led to more formal interviews.”
When Schneider started at Upstart “it was about 20 people and a large room. It’s about 180 now.”
Upstart executives are still looking at locations for the Columbus office, and said it’s likely they will choose a building either in Downtown or the Short North.
That’s fine with Schneider, who has joked to colleagues at Upstart that “my goal is to sort of move the center of gravity of the company to Columbus. I think our executive team will fall in love with Columbus. Anytime I’ve visited in the last two years, there’s just an excitement in the air.”