Investors are bombarded with big sets of data, and it’s a difficult and tedious process to dissect large data sets and transform it into actionable information. dv01 solves this challenge for the consumer lending industry through its end-to-end data management, reporting, and analytics solution built specifically for the needs of the mortgage and consumer lending capital markets. Clients receive real-time updates with the most recent available loan-level data throughout the course of the deal and external parties involved in the deal including originators, investment banks, and lawyers can access centrally access the data as well.
AlleyWatch sat down with founder Perry Rahbar to learn more about dv01’s trajectory, recent funding round, which brings its total funding amount to $28.3M, and to talk about the best pizza in New York.
Who were your investors and how much did you raise?
We raised $15M in Series B funding.
The series was led by Pivot Investment Partners. Other participants include a new strategic investor, Regions Financial Corp., as well as existing investors, including Quantum Strategic Partners Ltd., Jefferies Financial Group Inc., Illuminate Financial Management, and OCA Ventures.
Tell us about the product or service that dv01 offers.
dv01 is the world’s first end-to-end data management, reporting and analytics platform offering loan level transparency and insight into lending markets. dv01’s mission is to modernize the mortgage and consumer lending markets through technology and delivering all stakeholders an incredible user experience that values transparency, efficiency, and intelligence.
What inspired you to start dv01?
Working in mortgage-backed securities trading for Bear Stearns and J.P. Morgan, I had a front-row seat to the inefficient workflow and fragmented data in mortgage and consumer lending capital markets and how it contributed to the ’08 global financial crisis. The technology providers that offered data analytics were way behind, and there was a huge gap in the market to serve a $20T+ industry.
Working in mortgage-backed securities trading for Bear Stearns and J.P. Morgan, I had a front-row seat to the inefficient workflow and fragmented data in mortgage and consumer lending capital markets and how it contributed to the ’08 global financial crisis. The technology providers that offered data analytics were way behind, and there was a huge gap in the market to serve a $20T+ industry.
Why does there need to be a separate market intelligence platform focused on lending that cannot be addressed with other more broad offerings?
Current underserved market participants spend hundreds of millions of dollars on a uniquely fragmented, inefficient, and mediocre workflow. The current securitization process and infrastructure has not changed in over 20 years, especially when it comes to reporting and analytics. This systemically fragmented data workflow was a major cause of the ’08 financial crisis, and we want to prevent a repeat rendition. dv01’s focus on consumer and mortgage lending data allows us to provide granular and actionable insights for specialized investors that constitute a major part of the American economy. These investors have specific issues and needs that are unique from other investment fields.
Large datasets can be burdensome for investors to handle, both from a data cleansing, normalization, and a reporting standpoint. Answering complex questions around loan performance, prepays and defaults, and comparing across originators or loan characteristics, can be extremely difficult. dv01 makes big data simple for investors in a super user-friendly web application that can be accessible to anyone in the organization. A process that used to take days now takes seconds.
How is dv01 different?
Amongst our competitors, services offered include structuring tools, collateral reporting, managed databases, 3rd party integrations, advanced cashflow analytics, and alternative data. While our competitors each offer one of these functions, dv01 is the only markets data platform to offer all of them, and the only one to offer market surveillance at all.
Uniquely, dv01 has also created the role of loan data agent (LDA) in securitization deals. dv01’s reporting and analytics portal provides investors with the most recent available loan-level data throughout the length of the deal.
This data is accessible through dv01’s web app, and all parties involved in the deal including investors, originators, investment banks, or lawyers can access the data – free of charge. dv01 is paid directly out of the waterfall for its role as LDA. The same level of transparency that is available for market surveillance is available for all LDA deals as long as you have participated in the deal.
What market does dv01 target and how big is it?
dv01 is focused on data analytics for mortgage and consumer lending capital markets, which amount to $20T+.
What’s your business model?
In summary, dv01 is a service provider and receives overall revenue from its core suite of offerings, through a combination of bps on collateral balance paid out of deal waterfall, bps on portfolio size and annual contracts.
What was the funding process like?
Funding was very much seamless due to our round leader, Pivot, being very familiar with the business. Their style is to put small investments into young companies and then invest larger funds when they are on the verge of a breakout, and that’s exactly what happened to dv01. They’ve been with us for roughly 3 years and were ready to put full faith in our business. Other participants were also very familiar with the business, and the one new strategic partner was, in fact, a highly satisfied client. All in all, this was a pretty smooth process and I’m really grateful for it because I know it’s rare.
What are the biggest challenges that you faced while raising capital?
Since we were working with an existing investor that was familiar with the business, we didn’t encounter the usual challenges of explaining all facets of your business from the beginning.
Instead, with Pivot, the biggest thing we had to all think about was what our exposure to a recession looks like, how much would it impact our business and what stress testing our model looks like. That’s definitely a conversation that people weren’t having the last few years.
Instead, with Pivot, the biggest thing we had to all think about was what our exposure to a recession looks like, how much would it impact our business and what stress testing our model looks like. That’s definitely a conversation that people weren’t having the last few years.
What factors about your business led your investors to write the check?
dv01 is solving for core and systemic issues in a huge market with capabilities that surpass competitors. In their own words:
“dv01’s distinctive platform provides much-needed analytic insights and transparency to consumer loan assets. We have been tracking the company closely for the past couple of years and are proud to be leading this growth capital round alongside a distinguished group of investors. We see substantial opportunity for dv01 to continue to innovate for the benefit of all participants in the lending markets.” Dinkar Jetley, Pivot Investment Partners
“We are excited about furthering our relationship with dv01 through this investment. The platform has transformed our ability to analyze segments of our consumer unsecured loan portfolio and we see significant growth opportunities as they expand within the regional banking space.” Jamie Gregory, Head of Corporate Financial Strategy, Regions Financial Corp.
What are the milestones you plan to achieve in the next six months?
For the next few months, dv01 is working to roll out a new CRT Suite, Fannie Mae and Freddie Mac surveillance, a data pipeline upgrade, new portfolio management tools, and third-party data integration.
What advice can you offer companies in New York that do not have a fresh injection of capital in the bank?
Be very disciplined and make sure your business model is sound. As we head into tougher markets, with the potential of a recession, funding won’t be as available as it was the last five years. A great business will continue to get funded, but a lot of others won’t.
Where do you see the company going now over the near term?
We continue to focus on expanding into newer assets classes, like mortgages and eventually autos, as well as building out new workflow and data offerings. Additionally, hiring will be a huge focus for us as we continue to build out our team. We’re currently at 60 employees and have ambitious goals for this year.
What’s your favorite restaurant in the city?
Sauce Pizzeria, but I’m a bit biased because I own it with my best friend. He convinced me to start a hospitality group with him and we have four restaurants now.
