Nima, thank you very much for joining us.
Thanks for having me.
Co-founder, CEO of Blend. Nima, thank you. So, Nima, it's always great to have you. Can you just please give us a quick reminder of why you embarked on building Blend, what you were looking to solve, customer target, and then expanding beyond mortgage to consumer banking? Let's hit on those products.
Yeah, so I mean, to start the story, you kind of got to go back to the last financial crisis, 2010, 2009, 2011, and I was working at Palantir at the time. I was an engineer there, and we had just started building out the commercial practice, which was working with banks and some of the biggest banks and Fannie Mae and Freddie Mac. And they all had these massive mortgage portfolios that were very underwater because home prices had come down and people who weren't making payments because they had lost their jobs or whatever. And it was going to be a big problem for the economy, and so we were tapped in to go and say, could we use data to help these banks find alternatives to foreclosing on all these houses, which would have been extremely bad for the economy?
And my going in, for me, by the way, I love that kind of stuff because it's sort of a noble effort and it's one that technology can help with. Noble in the sense that you're helping the economy, you're helping these institutions, and you're helping the consumer, each individual consumer. If you don't get foreclosed on, you get to live in your house longer, which is great for consumers. But anyways, I went in thinking, oh, well, this is a really big problem, definitely. But I kind of assumed going into it that there would be good technology that was powering mortgages because these were like $10 trillion in mortgages at the time. There's like 14 or 15 trillion, some crazy amount now.
It turns out that the technology they were using to power all of their mortgage originations and servicing were green screens and paper and filing cabinets, which for an industry that big and that mature, 30, 40 years old at the time, was embarrassing to me as a technologist. Anyways, I worked on that for a couple of years at Palantir. I kept looking around thinking, where is this technology that powers the mortgage industry in a modern way? Why has nobody created something modern for the mortgage industry? Why are they still using green screens with the largest financial institutions in the country? That inspired me to start Blend.
And it was interesting because when we started Blend, we had this idea of not just making the process modern software, vertical software for banking, but to use data instead of documents so that when you're underwriting a mortgage, instead of relying on humans looking at paper, how do you pull financial data in real time to make the decision, approve the loan in a few minutes rather than in a few days? And that was kind of the core thesis of the company. But it was a pretty nascent idea at the time. And it was probably the hook that led us into the largest institutions in the country, which is who we started with. We started with some of the biggest banks in the country, in the world even, when we started Blend. And then we went down market from there.
And now we do about 20% of the mortgages in the country. The same thesis still applies, which is you can underwrite a consumer using their financial data in real time with modern digital software. And then actually, the expansion to consumer, because you asked, was a natural expansion. One of the beautiful things about vertical software is that you get these customers that if you're super close to them, they want to do more stuff with you. And I was very fortunate, both from my experience at Palantir and also from working with probably what I consider the best vertical software company. The CEO of Veeva at the time became an early investment of one of our early investors. And he spent some time with me and helped me understand how that customer success is what drives vertical software companies to be really valuable.
I spent a bunch of time with him around how do I make that the core DNA of Blend. That's what led us into the consumer banking side. Actually, the interesting thing about consumer banking for me was that I assumed that because those are simpler products, a personal loan, a credit card is a simpler product than a mortgage or a home equity loan. Those products are just as the technology is just as bad. We have customers who are still using green screens for personal. I was talking to the head of the consumer bank at a top 20 bank on Monday, a top 20 bank. They use a green screen system today for all their personal loans and all their credit cards. That really pisses me off. Yeah, that's hurting consumers indirectly.
It's not their fault that that's all that's available to them. And so the consumer side I thought was going to be more built out. And it's not. I mean, it's something that we sort of have had to take the route. And so the natural follow-up from talking to him about that and hearing that from him was like, we have an onsite now set up with them at their headquarters in a week and a half here. And that was from a conversation two days ago. And so it's a huge opportunity in the consumer side. It's another area that's just getting the surface scratched. And frankly, I think of that as almost a bigger opportunity because that definitely applies globally and it definitely applies. There's millions of those transactions.
So even if we charge less money per transaction, which just so people know, our business model is we charge some amount of dollars per funded loan or per opened account at these institutions. We like the success-based pricing goes back to my conversations with Peter Gassner at Veeva. But yeah, it can be a much larger opportunity for us. And I'm pretty excited. It's growing pretty well. It's growing more than 50% year-over-year on that side. So we're not 20% of the market on the consumer side, but it's an area that's a big part of our business and growing much faster than we would have expected coming into this year.
Yeah. No, I mean, it's all terrific. I want to stick just back to mortgage and then I want to go back to consumer after that. But just remind us the title business, your exposures. Give us the background as to why you got into it, just thinking through the mortgage application process and the refi exposure, et cetera, so everyone understands that. Thank you.
Yeah, and I mean, the baseline of the way I think about these problems of, let's just say, solving the origination of a mortgage. I think about all the ingredients that are required to solve that. And the ingredients that are required to solve that is you have to understand the consumer's credit history. You have to understand their income. You have to understand what assets they have, other assets other than the home they're about to buy or about to refinance. You have to understand some more details about the property value and condition, and then you have to make sure that the title is clear so that you can do a transaction on that property. And so all of those ingredients, and then you have to be able to do a closing with that title company.
All of those ingredients are parts of things that I feel like are things that should be built into the Blend platform because they're required parts of the process. You cannot do a mortgage without getting income verified. You cannot do a mortgage without getting assets verified. You cannot do a mortgage without running credit. You cannot do a mortgage without checking the property value or condition. You cannot do a mortgage without getting title cleared. You can't do a mortgage without getting proof of homeowner's insurance. So those are all things that should be built into the platform. And title was just one piece. Now, we bought a title company at the peak of the market, which was, in retrospect, obviously not the ideal timing. But it is a critical part of the mortgage process.
And we're still innovating there, maybe not at the pace that we wanted to because the last couple of years, we don't have to talk about cost yet. I'm sure you have questions about cost, but we've had to do a lot on the cost structure of the business as the mortgage market has come down and the cost of capital has gone up at the same time. But now that we have some of that behind us, I think we're purely on offense and we're turning to innovation. And I think we'll do some cool stuff on the title side too.
Awesome. So the revenue per fundamental, it's improved dramatically. We talked a little bit about additional products, but I'm just curious, the end market, the customer, can you just tell us about how they're thinking about additional products, your ability to expand into adjacent products, et cetera, just helping improve their experience?
Yeah. Well, actually, I'll talk about the positives of the last three years because, as you guys probably know, it's been a brutal three years for the mortgage industry. We went from 14 million originations, went from like eight or nine million in 2019 to up to 14 million in 2021 and back down to four million in 2023 or less than four million originations in 2023, which as a success-based business, even if we have some minimums and guarantees from customers, it still hurts a lot.
The things that have gone our way in the last three years, and I shouldn't say gone our way like we got lucky, but things that we executed against, since 2019, our market share has gone up about 4x in terms of us signing new customers, growing our customer base, doing more loans on our platform, helping our customers gain market share so that they do more of the industry volume on the platform, so that's been going our way, and we've done that through just traditional sales and marketing motion, that enterprise sales and marketing motion with our customers, and then on top of that, our revenue per loan that we do on our platform has gone up materially, I think from the $60s to the high $90s in the last three years as well, and the reason that's gone up is a combination of two things.
One is, as we add more features to the underlying platform that are just built in, we can justify raising prices, not a crazy amount, but a little bit every year that reflects the value that we're adding to the platform for our customers. And they're getting the ROI. It all starts with customer ROI, but they're getting the ROI so they're willing to pay more if they use those features. And so that's part of it. And then part of it is add-ons like Blend Close or the Blend Homeowners Insurance piece, which is another critical part of the mortgage process. Every mortgage has to get approved for homeowner's insurance. Every mortgage has to do a closing. And so we've said, let's digitize those things.
The closing process in particular has been the most high growth area of increasing our revenue per funded loan because we charge an additional separate fee for that. It drives material ROI to the customer and to the consumer. It drives ROI to the consumer because instead of having to go to a dingy title office, they can show up and do their closing on their mobile device, which if 10 million people have to refi here over the next few years when rates come down, how much better is it if they can just do it on their phone and get their lower monthly payment versus having to go into a title office and pay hundreds of dollars for that? That's one piece of it.
And then the piece that's ROI for the bank or lender, which is why we've gotten so much adoption. It lets them close these loans and deliver them digitally. And so that means that they close the loans a couple of days faster, which is material economics to them. And we can deliver that to the secondary markets faster, which means they're getting the money. These are not huge balance sheet businesses in a lot of cases. These are mostly being sold to Fannie Mae and Freddie Mac and Ginnie Mae ultimately. And so getting that money back into their accounts after they fund that loan is so valuable to them.
It's one of those things where, again, technology, everyone wins with technology except for maybe warehouse lenders and these companies that provide hedging and all these kinds of things and the FedEx that is delivering the paper package from the lender to Fannie Mae or whatever it is. Those kinds of things are going to go away. We want to be a key catalyst of that.
Great, great, great. So 20% market share. Let's just hit on the competitive landscape, how it is today versus when housing was very strong. Maybe just touching upon that would be great.
I would say probably the biggest competition in the last two years, 2023 and 2022, when the market was terrible in mortgage, was, there was no industry appetite to do anything interesting in 2022 and 2023 because they were all cutting budget. Their mortgage volumes have gone down, which means their revenue and profit have gone down. There was nine quarters in a row, I think it was eight or nine quarters in a row of negative unit economics for our customers, negative. So the idea of investing more in the business was something that while anybody can say things like, "Oh, we're going to invest through the downturn," the reality is it's very hard to do that. It's very, very hard to do that.
If you're at a bank and your budget is set at the top based on your profitability or if you're an independent mortgage company and you have no budget because you're losing money every month and you're spending time trying to figure out how to get to break even. And so that's been the biggest competition in the last two years. And I will say one interesting thing that's happened is this year when the market has now, they're turning the corner on profitability because they did that two years of cost work on their side, just like we did. We've seen our pipeline just explode as a result of that on the mortgage side. And so that's been a super positive thing for us. This quarter and last quarter have been really, really good quarters. We built pipeline throughout the year to get to this point.
And so I'm very happy with where things stand now. And then as far as competitive landscape, I think in multiple different brackets. So the top bracket is the big banks and credit unions. It's really like the top 30 or 40 banks and credit unions. The only real options there that we see in competitive deals are custom in-house build or us. There's nobody else who comes to the table with a solution that can work for a really big bank that can pull in all the existing bank data, drive a real-time decision, drive a consumer-friendly process that fits into their overall bank brand. That's where we're best in the world. And we think that there's not really a solution like us in that space. So that's the very top of the market. Then there's the very bottom of the market.
We don't really serve the very long tail of the market, not because we don't want to, but because we haven't figured out exactly how to do that in a scalable way. These are very small lenders. They'd be $20,000 or $30,000 a year in revenue for us. I would love to give them access to our technology because they still serve about 20%-30% of the market. There's thousands of these lenders. There's five or six thousand mortgage lenders in the country. So we're working on ways to do that, and especially those that are credit unions or banks, they do other products.
And so maybe there's an opportunity to go with them and say, "Hey, use this for all the products and you can get the mortgage product and we can make it a motion that's beneficial to you and beneficial for us." And they'll typically use something today like something built into the ICE suite or the Empower Constellation software suite. And then there's this segment that's not in the top and not in the tail, which is these independent mortgage banks that do somewhere between one and five billion of originations a year. And probably the most common competition there is SimpleNexus, which is an nCino product, or I guess nCino Mortgage is called now. But we do pretty well in that space too.
Okay. Last summer, around our Investor Day, you had your inaugural Investor Day. A lot of great detail on there, talking through the potential scenarios into 2026. Obviously, the housing market has still been tough. Can you just talk about maybe what's changed versus those initial targets and the way investors should think about that going forward?
I mean, the initial targets, we still stand by. Actually, we stand by that despite I don't know if you saw the announcement we did in the home insurance business where, as a general thesis for Blend, we are going to move more towards software and less towards doing services ourselves. So a month ago, a month and a half ago, we had a homeowner's insurance agency that would help drive home insurance, which is a critical part of the process. And it required manual labor. We had sales agents. That was a mostly digital-first process, but they had sales agents who would get on the phone with the consumer, explain to them their home insurance options if necessary, and walk them through the process. We decided as a company coming into this year, we want to simplify Blend.
We want to make Blend a software platform. That's where we're the best in the world, and not only do we think we're the best in the world there, but we think with AI, we can be the next frontier of partners for banks across all these products to drive humanless processes, and so we decided we're going to double down on software. We're going to double down on AI, and so as a result of that, we said, "Let's take these businesses that we know are important parts of the process and let's find great partners." In this case, we partnered with Covered Insurance, which is backed by RedBird, and we worked with them to come up with a process that is good for them. They're going to make a lot of money.
They're going to help hundreds of thousands of consumers, and they're going to share with us in the economics of that. And so, going back to your question about what's changed since our investor day, that business is going to go from, let's call it X dollars of unit economics to us per funded loan to maybe half as much unit economics, but all contribution profit instead of being 10% contribution profit. And so it's way more profitable for us because we're this software platform that has this unique advantage of we are so widely deployed and we have so many customers who trust us because we take a customer-first approach in the vertical software space.
I think that actually is really an interesting thing about the future of Blend in that we want to become this open platform and let others do the work to bring value to our customers and just take a small percentage of the economics and have that be really beneficial to us and our customers. If others are working around the clock to add value to our customers and to consumers, that's so good for the ecosystem. That's so good for Blend. That's good for the partners. We can turn them on in a flip of a switch. Anyways, yeah, going right back to your question, we stand by those original numbers that we shared last investor day. We might do another investor day at some point in the medium term here.
But even with that, where we're making less revenue per unit on the home insurance side, and we might do other things to drive our revenue per unit down, but our profitability and our involvement up, our profitability up and our involvement down, we still think we can hit the numbers that we shared at the investor day.
Great. Speaking about partners, can we talk about the strategic partner, Haveli, just remind investors what the leadership team brings in terms of experience, what they've learned, how they could help drive shareholder value, revenue growth, etc.?
Yeah. Haveli is an interesting relationship for us because there's nobody who's more skeptical about private equity firms than I am. But it's a relationship I built with the principal founder there over the past four years. It's something where as a founder and as a CEO, everyone promises they're going to add value to your business. Just like everyone during the IPO, everyone promises they're going to hold for a decade. It's the same thing, right? Everyone promises all these things. Then the reality is none of them actually do anything that they say they're going to do. I don't blame them, right? People change with these organizations, and they're pitching you just like they're pitching every other company that they want to invest in or whatever it is.
But I will say that I built this relationship over four years with the founder of Haveli, and I got really comfortable with him, and I got really comfortable with his team, and they have delivered. I mean, they came from a Vista software background. They understand how to operate these businesses. And if there's something I can tell you about me, operating businesses, this is my first time really doing it. I've been in this business for 12 and a half years, and my other job was at Palantir for four years as an engineer. And so what do I know? I'm learning on the fly. And so it's been super positive for us to have an operator partner who is basically, I think of it as like free full-time employees of Blend because they're putting that much time and energy into helping us make our business better.
I think of it as purely positive. They're not having us do anything that's unnatural. We are able to innovate so much more than we were a year ago because of Blend Builder, which is our platform, which I'd love to talk about a little bit. Because of Blend Builder, because of the fact that now we had our first quarter of operating profitability this past quarter, non-GAAP operating profitability. Now it's just like put that fuel on the fire and go after the rest of the market.
Yeah. I mean, as a technologist, you could just see your ability to drive new products and execute. So maybe either Blend Builder, Rapid Refi, just to expand upon that and how that's resonating with the customers and revenue per funded loan.
Yeah. And actually, these are related. Blend Builder and Rapid Refi are related because Blend Builder is the underlying platform that we built over the last four years that we took all the primitives of banking, all the things I mentioned earlier, income verification, credit scoring, underwriting decisioning, asset verification, all the things that I mentioned, homeowner's insurance. And we've made them drag-and-drop Lego blocks that allow you to put together a new flow in a week, essentially. We took all the primitives. And the thing is about every financial product, every consumer financial product, they all have the same DNA. You have to understand the person's ability to get that loan with income and credit and assets. And you have to understand if they're a fraudster. You have to do fraud work. You have to do identity verification work. You have to do all that stuff.
But it's the same across every product, whether it's a mortgage or it's opening a new checking account. And so we have been able to, that platform has allowed us to work a lot faster and innovate a lot more. Rapid Refi is the latest example. We started building that early this year. And we announced it at our customer forum last year that we were going to start working on it. We got a few good partners, some of the largest mortgage servicers in the country. And we've made the Refi process from the ground up something where you as a consumer show up with your existing mortgage. We pull the information in without, it's like you enter one field of information. We pull everything in on your behalf using all the work that we've done in the last decade, all the stuff that's in Blend Builder.
And you see what it can cost you to lower your rate and what your new monthly payment is. And then you can choose if you want to move forward with that on the spot. And so my hope with a product like that, which we built much faster and much cheaper than we would have if we were building from scratch, is that more people can take advantage of the fact that rates come down when rates do come down. And so historically, it was very expensive to refinance somebody. During COVID, you guys probably remember this, we saw 90, 120, 180-day cycle times in terms of the time from when somebody applies to a mortgage to when they get their payments lowered. And we just don't want that.
When rates come down and there's 12 million people who have gotten a mortgage in the last two and a half years, we don't want those people to have to fight to get their mortgage rate lowered when they might be hurting. They might need to be able to pay off other debt like credit cards faster and things like that, and so that's my hope with a product like that.
Yeah, and just making it through, I mean, it's obviously impossible to know when the volumes are going to change. They should increase, but just thinking that you guys have done a great job right-sizing the business, going towards profitability, just thinking through optimizing headcount versus today, what to expect and how we should think that through.
I think as a combination of Blend Builder and our operating partners in Haveli who work with us on the business and just the internal team that we've built over the last three years, two years during this downturn, I mean, I don't think there's another company. This is Nima's view. There's another company that can get as much innovation per dollar and as much operating leverage as we can because of the combination of those things. Having our own platform in particular is really powerful. And then you layer on top of that all the improvements we made to the business and, frankly, the advancements of AI. Stuff we're doing in AI is going to dramatically change the way our customers operate long-term. And so, yeah, I just think while we may increase headcount in certain places, I do want more of the market to know about us.
We've built this whole customer base with 10 salespeople, essentially. And so I do think that the rest of the market needs to hear our story and talk to us, but we're going to make sure we do those things in a way that's high ROI. It's probably the lesson I learned the hardest and that I pay the most attention to. And again, we have a great team now that's in place to go and drive those things. But yeah, while we may spend money in certain places, I really think from an innovation per dollar perspective or an ROI perspective, we should be one of the best in the world.
And you mentioned the pipeline's strong. We've heard this throughout this conference. There was uncertainty leading up to the election. Your end market customers perhaps might be better today versus where they were expected to be. I don't know. But just speak through maybe the engagement that you're seeing since the election, the way to think about 2025 and going forward.
I mean, it's only been a few weeks since the election, so I don't want to speak too soon, but it does seem positive: people's reactions. I think not only do people's reactions seem positive in the general sense that they believe that there'll be less focus on regulation for banks. They believe they'll be able to, that rates will come down over time, even if in the short term rates we saw went up a little bit after the election. There's general optimism, willingness to invest, but actually, I think maybe the hidden, the most positive thing to come from the election will be this administration is going to be very AI-friendly, and a lot of banks were hesitant to adopt AI because they were worried that someone was going to come drop the hammer of justice on them.
And now this is like, I mean, again, AI has to be used very thoughtfully and carefully and in a way that's good for consumers. That's for sure. But it's not a taboo concept. It's not a taboo word. I was at one of your guys' conferences in New York, and I felt like the crazy person in the room because everybody on the panel, all these other tech companies were talking about how AI would never make sense for banks. And I was like, "Guys, banks do so much work with humans that should just like stare and compare documents, stuff that AI can do in real time for $0.005. It's going to change the way that banks operate.
It's just a matter of when," and so the idea that people were rejecting it outright because of regulation, I thought was like, "You're just saying that we should be hurting consumers by not leveraging technology that can make consumers' lives cheaper and better and faster." But I think that's probably the most positive thing that will come out of this administration in an area we're going to lean into very heavily.
Great. I definitely have more questions, but I don't know if anybody in the audience would like to ask a question. Yep.
Nima, question about that. You mentioned Haveli and the operational rigor that they brought. I was hoping you could offer an example or two of that.
Yeah. I mean, I think one of the things about Blend that is really special is that we do innovate and we do build new things. And they've said, "One thing I've always wanted from us as a team is how do we spend less money on, let's call it day-to-day, keep the lights on in the business, right? Running a public company is complicated. Running a 200 bank customer base is complicated." And my first ask to them was like, "How do I work with you guys to help us understand where we're spending money, keeping the lights on, maybe above what peers would be spending or other things you've seen?" Because again, I'm not an operator by background.
How do we drive better operations around the day-to-day, keep the lights on so that we can put all that incremental money that we save into innovation, driving advancement for the customer base? That ultimately is what returns value to shareholders. If I can return money to our customers, they'll pay me a portion of that money. If I save them $100, they'll pay me $10. And that $10 ultimately comes to our bottom line. And so yeah, it's a super important thing for us to not have to spend an obscene amount of money managing the day-to-day of the business, but we were spending a lot managing the day-to-day of the business. And they sort of came in and helped us. And that was my first ask of them.
It's like, "Help us with that because we know it's a lot of work and we got to do it.
How do you think through organic versus inorganic just M&A and the ability to go beyond a 20% market share? What's the philosophy there?
I mean, my issue with inorganic stuff is not that I'm opposed to it. I do think having a big customer base is a strategic advantage for us. It allows us to go to partners like RedBird Covered Insurance and say, "Partner with us, pay us a lot of economics, and you'll get access to this huge customer base." So I do think that that is a strategic advantage for us. I think one of the issues I have with most of the inorganic options that are out there in the market, at least today, is that I think tech is fundamentally changing for banks. And most of the tech that is available to buy inorganically is like it'd be like going to a designer clothing store and buying last year's outfits. And so I just don't know. It's hard, right? It's like that's the trade-off.
It's like you're going to be buying legacy technology mostly, not in every case, in a world that's shifting towards AI. And so how valuable is that customer base and how quickly can we deploy our products into it to get them the real value that we want them to get is a real consideration.
And just with the market, just want to make sure I'm clear. So could you see yourself going beyond the U.S.? Is that an international opportunity, something that you could see for yourself?
Yeah, and I didn't mention this when I talked about Blend Builder, but one of the other things we did when we built Blend Builder out from the ground up, and I really encourage investors. I encourage you. I encourage investors to really understand Blend Builder because it is a fundamentally important piece of the leverage that this company has. The operating leverage that we create is from not having to spend $100 million to go build some new thing. We spend five people in a room to go build the next generation of Refi that I think is going to power so many of people's ability to get their monthly payments lowered, and that's really good economics for Blend. Yeah, I think Blend Builder, we also built that from the beginning to be we can localize products on Blend Builder.
The Spanish-language population in the United States is pretty large. We were always getting this demand from customers to build a Spanish-language version of our product. Instead of going and building a Spanish-language version of our product in the old way, we said, "Let's make Blend Builder interoperable with our current customer base because we don't want to have to go through a big migration for our customers. Let's build a Spanish-language app on Blend Builder, translate it with real humans, and have them actually write." Although AI is getting good at translating things too, so maybe that's a future opportunity for us. We built a Spanish-language version of our application intake on Blend Builder. We made it interoperable with Blend. Now as a consumer, you come in, you click Spanish, goes to the Spanish-language app.
You click English, goes to the normal kind of current Blend flow. And so the same thing applies to international. And actually, because Blend Builder is so flexible and it's all drag and drop, I think international, while it's sort of a daunting opportunity because there are different regulations, there's different integrations we have to do, if we find the right partners to go international, whether it's SIs or it's something else, I think we could take over that too. They have similar probably are even further behind in technology.
Love it. Always love the passion. Nima, we're almost out of time. Unless there's any other questions, I'd like to give Nima the opportunity to provide any final words.
Yeah. Look, it's my fourth year. I think you told me this. My fourth year speaking at this.
Yeah. Yeah.
Third or fourth year speaking at this conference. And it's good because the story is evolving and we're but I think the story is largely the same. Maybe the one tweak this year is talking about a little bit more about AI and all the innovation we're doing there. And I don't think that there is a good AI partner for banks. And I think if there's one thing that people leave here is thinking about that space. Banking is especially unique when it comes to AI. And our early traction there, it's been pretty promising for us. So it's something I've been thinking about a lot in my drive down here yesterday. So anyways, thanks for having me.
Yeah. Love having you. Thank you, Nima.
Thanks, everyone.