In the mid-2000s, entrepreneur David Zalik was working on his online consultancy firm, OutWeb. The company had a large number of retail home improvement clients, including the likes of Lowe’s, Home Depot and Benjamin Moore. As part of his work with these firms, Zalik got to take a close look at their business model. But he immediately noticed that something was amiss.
Many of the companies were losing huge amounts of money. But this result was hidden. This was because these losses involved deals that were never getting done in the first place. Customers who wished to remodel their homes were coming into the stores or dealing with contractors who bought from these stores only to find out that what they thought their projects would cost was only a fraction of the true estimated price.
This would inevitably cause severe sticker shock, and, in many cases, the customers realized that they simply didn’t have enough money to complete their desired projects. This gave Zalik the idea for GreenSky Credit. By creating a form of instant bridge financing at the retail level, GreenSky would be able to help customers get their projects done and would help home improvement companies and contractors to earn billions that otherwise would have fallen through.
All in on GreenSky
But this idea would hinge on yet-unproven technology. Zalik had to develop a user interface that would allow for instant approval of loans in the five- to six-figure range. He quickly discovered that although the business model was extremely sound on paper, no bank was willing to lend him the money to start the company. As a result, Zalik ended up liquidating his entire $12 million commercial real estate empire and going all in on the founding of GreenSky. If the company would have failed, Zalik would have lost everything.
But the bet not only didn’t fail, it turned out to be what may amount to one of the greatest successes in self-financing a startup in the history of fintech. Today, GreenSky is doing more than $5 billion in loans per year. And the company has grown to a value that some analysts are putting in the $10 billion range.