Key points
- Aven raises over $110M in Series E at $2.2B valuation, doubling its valuation in a year.
- Its Home Equity Card pairs a HELOC with a credit card, cutting interest rates by 50% in 15 minutes.
- Sadi Khan cites $1T in US credit card debt, where consumers pay almost $200B a year in interest alone.
Aven raises $110m to halve consumer credit costs
Aven is betting the cost of consumer credit can be halved by moving borrowing from unsecured cards onto home equity. Card rates have barely moved in decades even as balances reached a trillion dollars, because unsecured lending is quick but expensive and secured lending is cheap but slow to access. The Home Equity Card combines the two, and a $110m Series E at a $2.2bn valuation funds the push. Khan's edge, he argues, is conviction and technical talent.
Takeaways
- Aven's bet is halving consumer interest costs. Aven raised over $110m in its Series E at a $2.2bn valuation, doubling the prior mark. The mission is cutting consumers' cost of capital. They pay almost $200bn a year in interest on $1tn of card debt.
- Secured debt is cheap but inefficient to access. Unsecured borrowing is quick to access and costly, while secured borrowing is far cheaper but slow. Home equity, the largest asset class US consumers own, takes weeks and thousands of dollars in origination fees to reach.
- Card rates have barely moved in decades. Khan traces the thesis to a CFPB chart. Revolving card balances grew to about $1tn over three quarters of a century while card rates held between 20% and 25%, even as the internet and new currencies arrived.
- The Home Equity Card cuts rates in minutes. The flagship product puts a home equity line of credit behind a credit card and can cut a customer's rate by 50% in as fast as 15 minutes. Early customers called to ask whether Aven was a scam.
- Khan tells founders to demand extreme conviction. He tells founders not to start unless the problem is the most important in the world to them. A startup is harder than kidney stones, lasts years, and there are easier ways to make money.
- Aven runs on elite talent and a weekly roadmap. Keeping the best technical talent is Aven's highest priority. Khan asks candidates for SAT scores, reviews transcripts himself and weights the hardest courses, plus work ethic and mission alignment. Leadership meets every Sunday at 6pm to lock the next week's roadmap.
- Founders must own the product and its rules. Aven's first product is both a mortgage and a credit card in a heavily regulated industry, so Khan read Dodd-Frank and the CARD Act himself. He says most new ideas are terrible and he would have shipped a narrower first version.
How Khan makes decisions
- Rank the axes of a decision by importance first, rather than writing a pros and cons list.
- Score each option against those axes. A car purchase might turn on price, performance, reliability and style.
- He used the method to decide to get married, and Aven teaches it in its bootcamp.