When entrepreneur David Zalik went on a cross-country roadshow to pitch his latest business idea to bankers, he didn’t anticipate the levels of resistance that he would shortly encounter. Zalik, at that time 32, had been in business for his entire life. He knew how the financing game was played and fully expected that he could drum up enough support from traditional banks to fully finance the launching of his latest venture, GreenSky Credit.
But it turned out that even though the GreenSky business model was one that relied exclusively on making the safest kinds of prime loans, the revenue model of the company was so novel that many bankers thought it couldn’t work. And even the ones who did think it would work wanted to see a track record of success before putting up any loan money. Ironically, the company that sought to become one of the most important lenders in the country couldn’t get a single bank to extend it a loan of its own.
Zalik is proven right again
Zalik eventually ended up financing the entire company himself. Taking on a tremendous personal risk, he liquidated his entire fortune of around $12 million and bet it all on the future of GreenSky. But this would turn out to be one of the best bets that not only Zalik but anyone in the recent history of American business has made.
Just as Zalik had predicted to the dozens of bankers that he visited while pitching his idea, the revenue model worked. The secret to brining all of the parties together and attracting many of the top lenders in the country to sign up through the GreenSky platform was simple: GreenSky made sure that everyone involved with its deals walked away a big winner.
The customers, most of whom were doing high-end home remodeling projects, almost always added more to the value of their homes than the projects themselves cost. At the same time, the lenders were getting some of the top-end borrowers in the market, with the average GreenSky customer having a FICO score in the 800-plus range.