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Prime: Lending as a Service for Community Banks

In the past ten years, a new generation of companies has ushered in an unprecedented era of innovation for small businesses.

Companies like Stripe and Square abstracted a decades-old payments infrastructure and made it into composable software for both online and in the real world. Shopify has small businesses finally competing with the behemoth of Amazon (in the second quarter of 2021, Shopify sites traffic surpasses Amazon's). Flexport is transforming logistics and global trade – even leading policy conversations in emergency supply chain failure response management.

Small business owners are now better equipped than ever with the tools to scale – except when it comes to capital.

The 30 million enterprises that make up the small business economy are fundamentally diverse. Their capital needs are different from each other and big businesses; very few are those who know how to service them at scale. According to the Fed, 56% of small businesses do not have their financing needs met. Karen Mills, President Obama’s Small Business Administration chief during the 2008 financial crisis, highlighted cautiously in her book that small business lending by banks was 20% in 2017 compared to 30% pre-crisis.

Covid-19 was the five-alarm fire for the small business economy. Not just a matter of massive credit crunch, large segments of the economy were forcibly shut down, with only uncertainty looming on the horizon. The government spent close to a trillion dollars in the Paycheck Protection Program (PPP) bailout, which, though fraught with a faulty start and allegations of fraud, was ultimately extremely impactful to the survival of millions of businesses.

PPP was also, from a data perspective, a unique opportunity to analyze the landscape of small business and the financial services ecosystem that serves it. An immediate observation was the sheer efficiency of credit unions and community banks in processing PPP loans. We learned that small and nimble community banks are scaling their operations rapidly and keen on adopting fintech. An ecosystem of SaaS offerings that go as deep as core banking rails is helping community banks integrate into the modern financial ecosystem.

At Enigma, we focus on providing transparent data on the identity and health of millions of US businesses. We are modeling the SMB economy merchant by merchant. And we know that many of them are thriving, yet unable to access the capital they would need to invest and grow their business. Over the year, we started working with community banks and became fascinated by how our intelligence on small and medium businesses could better serve them. It was clear from almost every conversation that the biggest gaps were in lending.

We decided that we could start solving this problem by building lending-as-a-service infrastructure across the lifecycle of the loan for a community bank. From origination, underwriting, and risk, to servicing and securitization — there exist along this chain many opportunities to democratize best-in-class loan infrastructure.

Very early on we realized that we would build this as a spin-off. At Enigma, we are, at heart and in our culture, always a data company. Our strategy is to be maniacally focused on data quality, attribute by attribute, entity by entity. We believe it’s very important that data companies not build overly verticalized products, or else we would be competing with an extremely rich and rapidly growing SaaS ecosystem of purpose/domain built applications.

Enigma provides intelligence and context through our dataset, and we stay highly attuned to where and how our data is being used. In the community banking branch of the ecosystem, the gap to deliver automated intelligence was too big. The opportunity was clear, and Prime—a company to be founded by Enigma—was born.

Along our journey to spin off Prime, we were lucky to have been already working with leaders in finance and technology. Each with deep expertise and passion, and an understanding that there is much more work to do to unlock growth in small and medium businesses:

  • Capital One, a leader in small business credit cards. A current customer of Enigma’s data, Capital One has seen firsthand how better data about small businesses leads to growth.
  • Third Point, an investor in Enigma and one of the early investors in the revolutionary consumer lending platforms Upstart and SoFi. Third Point was pivotal in building the core business and developing the securitization programs, and will bring that expertise to Prime.
  • Customers Bank, a super-community bank that emerged as one of the largest lenders of the Paycheck Protection Program. True to its “high touch, high tech” value, Customers Bank is a pioneer shaping the future of small business banking, evidenced by how they’ve embraced the possibilities of fintech and cryptocurrency.
  • NEA, a global venture capital firm and early investor in Enigma. NEA has partnered with founders on initial go-to-market strategy for many successful platforms like and Coursera.

Today we are announcing that Prime has received initial funding of $49M to build out its core team and product offerings. I will act as interim CEO of Prime until we transition Prime over to a new leadership team over the next two quarters.

We are excited about what the months ahead will look like, knowing Prime’s mission is to unlock growth and lending for all kinds of communities. We have been quite busy at Enigma on all fronts, and it’s been exciting to see how focusing on data has allowed us to be more creative in how we approach partnerships in our ecosystem writ large.

-Hicham Oudghiri
Chief Executive Officer
Enigma Technologies Inc

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