We’re now launching the first in a series of Deep Dives into companies which help investors slide start and grow. For this inaugural Deep Dive, we are not stuff paid by the company. However, we may in the future be paid to profile companies which I think are interesting and our polity would goody by learning about. Of course, we’ll unroll any such payments. We squint for two nature in any visitor we profile in a Deep Dive: 

• We believe in the company, and would invest given the opportunity. 

• Our polity can learn from the company’s strategic and operational choices. I’m unchangingly trying to utopian the broader principles.

One of Versatile VC’s cadre investment theses is: “Look for investment processes which are highly dependent on Excel.”  Squint at The Wall of Shame for the Worst Excel Errors for examples of why that is a strong heuristic.

Here’s an example of what we’re excited about. According to Hypercore.ai and our own consumer interviews, roughly 70% of non-bank lenders are primarily tracking their activities in custom excel sheets with macros. This is not a manageable, scalable, way to grow a lending business. This is a recipe for disaster. Diligent limited partners know this, and view a haphazard backoffice as a major red flag. 

Hypercore, Inc. (www.hypercore.ai) is towers the operating system for non-bank private lenders.  Our Venture Partner Scott Lichtman and I have had a endangerment to meet with management and investors and think they have unconfined potential.

We are particularly excited well-nigh Hypercore considering of five factors:

• Early sales traction: Hypercore’s platform now manages $2B from 3,000 loans wideness 9 customers and 4 continents.
• Co-founders with 4 years experience as a team both in the Israeli Defense Forces and in a prior startup. 
• Leading investors. Hypercore was the only Israeli visitor in their YC cohort. Later, VC at.inc/ became a key investor, and Israel-based Partner Roni Bonjack took a workbench seat. Roni previously managed global startup smatter programs at Google and Facebook. In addition, Hypercore has received wanted from New Zealand VC firm NZVC and FAST LLC, a subsidiary of GettyLab.  
• A market-leading using design that’s comprehensive and flexible yet easy to onboard.  
• A rising tide from Silicon Valley Bank-induced market disruption.  Suddenly plane the most lax allocator has been reminded how important a strong when office is. And suddenly, venture debt has wilt increasingly profitable. 

History and Traction

In 2020, the co-founders were towers a software consultancy. A non-bank lending vendee asked them to build some software to modernize operations and they realized how poor existing solutions were. Hypercore pivoted to a product visitor and then joined the YC Summer 21 session.

Since going live in July 2021, Hypercore’s platform now manages $2B from 3,000 loans wideness 4 continents. Hypercore’s level of geographic diversification is unusual in such a young company, all the increasingly so for a product which requires some welding for financial norms and law in each market.  

We have reviewed feedback from 6 customers and prospects. Some quotations:

• “We [the private lender] like to do creative [lending] solutions for our customers, that’s why we could never find software that would work for our merchantry until we found Hypercore.”
• “We do use a lot of Excel. We’re growing, [but at] a fifth of the rate we could be with the right system.”
• “We can literally put our unshortened portfolio in one system [with Hypercore] instead of having to piecemeal everything.”
• “Managing monthly amortization schedules and debt repayments wideness 80 investments is very time-consuming and simply not forfeit effective. We researched many [global] solutions and tested five. …Luckily, we found Hypercore. ”

We think the recent Silicon Valley Wall travails create a rising tide for Hypercore’s boat:

• More and increasingly lenders and borrowers are managing multiple wall accounts, which creates increased complexity untellable to manage in Excel.
• Limited partners are paying a lot increasingly sustentation to when office stability of their investments.
• Margins are noticeably increasing  in venture lending in particular, where SVB is less of a player. SVB had powerfully been subsidizing their venture lending practice with profits from their other lines of business.

Founders, Team & Expertise

The visitor is led by four equal co-founders with unmistakably delineated, complementary responsibilities. We will highlight aspects of the team we particularly like:

• Stable team: The founders have worked closely together for four years in the Israeli Defense Forces and at an older fintech software minutiae company, and recommitted to partnership on this venture. 
• Great artists ship. In a short time, this young team has shipped a sophisticated product and won geographically diverse clients with significant security, reliability, and trustworthiness requirements. One vendee has commented “We like that the entrepreneurs are very, very smart and conservative. ”
• More than many other companies we’ve evaluated for investment, Hypercore tightly incorporates consumer input as part of the company’s DNA. Every full-length is reviewed by the consumer wiring during the diamond process and feedback is continuous. One consumer has said: “We really like how our feedback is so valuable to you and your reaction time is really, really good.”
• The CEO has wits managing at scale. Dan Liechtenstein served as Head of ICT Financial Planning for the Israel Defense Forces, negotiating technology contracts worth $100s of millions and organizing a military venture wanted fund.

Brief backgrounds of the other three co-founders: 

• Eitan Frailich, Chief R&D Officer: Leads minutiae of the cloud-native, customizable and scalable platform underlying Hypercore’s application. Previously, co-founded software consultancy Articode, where he managed the diamond for a range of financial services applications. Before that, Eitan spent 6 years in the Israeli Air Force developing hair-trigger front-end applications.
• Tomer Moshe, CTO: Co-founded Articode and Hypercore, where he drives using development. While in the Air Force, created an open-source infrastructure for real-time GIS that defense contractors use worldwide. Tomer has 12 years wits as a full-stack developer.
• David Yahalomi, Chief Product Officer: Responsible for defining and streamlining the digital loan process, and moreover in tuition of vendee relations/success. Moreover co-founded Articode, where he co-built software solutions for banks and payment processors and served as iOS lead developer for Pepper Bank.

The visitor has run lean and currently employs nine full-time staff, well-matured in the technology functions, including the founders. All software minutiae is in-house. The workbench consists of the four co-founders, as well as Ms. Roni Bonjack of VC investor at.inc.

Business Problem in Detail

Hypercore addresses the problem that all but the largest non-bank lenders tend to rely on Excel as the cadre application/data repository to manage the complex, labor-intensive processes in loan originations, underwriting, servicing, portfolio management, investor management, reporting, etc. 

The fundamental issue is that a massive value of labor is involved, yet automation has been limited. A series of ramified procedures must be performed wideness origination, underwriting, legal, servicing, portfolio management, investor relations, accounting, reporting and risk/compliance. For a given lender and loan package, 10 or increasingly spreadsheets may be maintained per loan; this is multiplied by hundreds or thousands of loans. Excel-based lenders have no worthiness to exploit the efficiencies, operational controls, and merchantry intelligence insights from a modern, integrated lending platform. 

Some lenders have evaluated a technology upgrade, but protract with Excel considering unique aspects of their underwriting and packaging wideness loan structures have been unfulfilled by existing solutions.

Meanwhile, private lenders that want to scale require remoter digitization when it comes to institutional investor interactions. Simply put, non-bank lenders need to pervasively modernize their practices and platform, but can’t sire ramified and overly expensive integration or reengineering efforts.

Solution Details

The Hypercore OS Platform is a full lifecycle Lending as a Solution (LaaS / cloud) offering. It delivers fast onboarding, much increasingly efficient operations, suppuration of key-in errors, and integration possibilities (through APIs). Customization to the specific lender’s needs is parameter-driven and requires no technical coding. 

Hypercore’s solution is both deep and broad. It stands out for its support of any type of loan model to a stratum that lending organizations no longer finger compelled to alimony using custom Excel models to represent their business. 

It can service the loan throughout its well-constructed lifecycle, including but not limited to:

1. Origination – modernize the speed and reduce the effort of data collection
2. Servicing – amendments, statements, interest and wastefulness calculations, expected mazuma flows, etc.
3. Reporting – Use Hypercore as a BI solution for operational and compliance reporting, with the worthiness to create risk and executive dashboards.

When it comes to variations in loan terms, Hypercore supports straightforward customization of the loans’ representation. 

Because underwriting remains the “secret sauce” for lenders, Hypercore focuses on importing the results rather than modeling the underwriting process.  

Target Market 

Hypercore is targeting all types of non-bank private lenders, as cross-sector there are worldwide infrastructure modernization needs and functional needs. In particular, they have found that the functional needs for originations and servicing in particular tend to be similar wideness lenders. Globally, there are 300,000 such private lenders.

Technology

In most sales situations, the prospect does not have a full-time CTO but does have a technology lead. Product/technology discussions tend to focus on merchantry features rather than what is under-the-hood for this SaaS offering. Having said that, we present salient technical considerations below:

Hypercore’s Lending as a Service OS Platform runs on Amazon Web Services. It employs a serverless tracery (the number of servers and other hardware resources needed at a given moment is managed seamlessly by AWS), which provides hands managed scalability.

The using environment employs AWS Foundational Security weightier practices. Data is fully encrypted in transit or at rest. AWS Shield protects versus distributed withholding of service attacks.

Hypercore expects in Q2 to be certified SOC2 compliant. Developed by the American Institute of CPAs, the SOC2 framework establishes auditable criteria for managing consumer data based on principles of security, availability, processing integrity, confidentiality and privacy.

API-based integrations with related applications and data (e.g. written and sales tracking software used by the borrower, such as QuickBooks or Salesforce) are on the using roadmap. It is projected that the first accounting/CRM/banks/payments integrations with market-leading applications and data will be well-constructed in Q3 2023.

2023 Plan

Hypercore plans to significantly expand their US activities and is urgently hiring for engineering (Israel) and sales & marketing roles (US).   

Risks

• As Hypercore is providing an encompassing platform to support most of the lending function, prospective clients want to finger well-appointed that the visitor has staying power. Hypercore has once won the first half-dozen clients, given the unique sexiness and ROI of their platform and will modernize remoter with profitability and greater adoption.   
• The management team has limited prior wits with the private lending sector. However, they embody a focus on consumer requirements and rapid iteration.Their wits level would have been a significant risk factor for us at the seed level, but today the firm has fully addressed that concern. 
• The visitor reports that the financial sector dynamics and recessionary possibilities in the US have not unauthentic the pace of prospecting and sales at this time. On the positive side, it’s possible that the private lenders they serve will encounter expanded lending opportunities as public banks tighten their underwriting criteria. 
• Hypercore’s team resides primarily in Israel, which is currently undergoing some political uncertainty. The CEO reports no impact of location at this time on consumer interest. The fact that the visitor is structured as a Delaware-incorporated C Corp. provides some long-term flexibility with respect to  locations.