A once-high-flying Wharton MBA startup is anchored


The original trio of Wharton MBA graduates who founded CommonBond. CEO David Klein (center), COO Jessup Shean and CFO Mike Taormina. Shean, now chief executive of Evercore, left the company a year behind, while Taormina left about three years later and is currently co-founder and COO of Alluvial.

Founded by a trio of Wharton MBA students in 2012, student loan company CommonBond is closing its doors. The startup was one of several student-founded fintech companies, including SoFi, Prodigy and Earnest, to disrupt the student loan market.

But CommonBond has struggled with the pandemic and the administration’s decision to give student lenders a reprieve on their loan repayments. An attempt to pivot the company to solar financing four months ago was not enough to keep CommonBond going.

“After an incredible 10-year journey, it is with mixed emotions that we announce that CommonBond is coming to an end,” CEO and co-founder David Klein wrote in a LinkedIn post.

A PIVOT TOWARDS SOLAR FINANCING HAS NOT ATTRACTED FINANCING FROM INVESTORS

“The story of what got us to this point begins with Covid. When the pandemic hit, our student business took a hit,” he added. “Half the refinance market disappeared when the government suspended interest and payments for all federal student holders. More than two years later, this policy is still in place.

His efforts to turn CommonBond into a company that would finance solar installations for homeowners failed when he failed to attract the additional investment needed for the pivot.

“The solar industry is where we grew rapidly, bringing in new installers and reshaping the way the industry served customers for the better,” Klein explained. But we were still evolving, not yet profitable, and needed new capital. Unfortunately, we couldn’t turn the whole company around fast enough.

WAS ONE OF THE FIRST MBA STARTUPS ON THE ANNUAL TOP POETS&QUANTS LIST

For many of its early years, CommonBond was one of the most successful MBA startups of its generation. He consistently landed on Poets&Quants‘ annual ranking of the best MBA startups. CommonBond was one of only three Wharton startups, along with Warby Parker, to make the inaugural ranking in 2013. That year, CommonBond was ranked 64th among the top 100 MBA startups after raising $4.2 million from funding. In 2016, he was in the Top 20, having raised $46 million from investors.

That year, in fact, three MBA student loan startups made the Top 20, including Stanford’s SoFi, founded by a Stanford graduate, ranking No. 1 with $1.4 billion in funding, and Earnest. , founded by Harvard Business School MBA graduates, ranked tenth, with $99 million raised. CommonBond ranked 19th.

Klein founded the company with fellow Wharton classmates Mike Taormina, now co-founder and chief operating officer of Alluvial, and Jessup Shean, now chief executive of Evercore, the boutique investment bank. Klein has served as CEO throughout the company’s history. Shean left as COO a year into the company’s life, while Taormina left after about three years as CommonBond’s CFO.

COMMONBOND HAS FUNDED MORE THAN $5 BILLION IN LOANS

Along with SoFi and Earnest, CommonBond has significantly disrupted the student loan market, exploiting intense customer dissatisfaction with higher interest rates and poor service from the federal government and traditional banks. The fintech upstarts had a particular advantage over the feds. As the government handed out student loans to anyone going to college or college, refinancers were able to pick the cherries and reap a bountiful harvest from some of the world’s most wanted debtors – borrowers with lots of debt but virtually no risk of default.

This first strategy worked like a charm. Over time, CommonBond has funded over $5 billion in loans, with over 1 million users and 100,000 customers served. Klein noted that the loans he has taken out have saved consumers more than $1 billion.

“While the result is disappointing, the impact we have had will continue and we will always be proud,” he wrote. “I now turn my attention to the end of the relaxation phase. Once completed, I will consider my next steps. Until then, and with gratitude.

CommonBond was the first and only finance company to have a “1 for 1” social mission: for every loan it financed, CommonBond also funds the education of a child in need, thanks to its partnership with Pencils of Promise. The company has donated more than $2.5 million as part of its “social pledge,” according to Klein.

Klein’s LinkedIn post drew more than 200 comments, including one from a former colleague at American Express where Klein worked before going to Wharton for his MBA. “David, I still remember the day you called to tell me you were leaving Amex to go to college,” wrote Joshua Berwitz, now senior vice president at American Express. “I have watched what you have accomplished with great admiration. I’m sure it’s a difficult time now that you’re unwinding, but what you’ve built, what you’ve chosen to support and how you defended your people for the past few months says a lot about you as a professional and more importantly as a person. . No one can take anything away from you. No doubt you will do other great things and that you will positively impact many others along the way.

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