- General Catalyst co-led a $16M investment in Nova Credit
- Immigrant credit scores provide $600B in new lending opportunities
Former American Express (AXP +1.13%) CEO Ken Chenault is using his experience with credit to lead venture capital firm General Catalyst. The firm co-led a $16 million investment in Nova Credit. This startup takes the credit history of immigrants in their home countries and translates it into credit scores they can use in the U.S. What will Ken Chenault bring from his American Express background to the world of venture capital?
Why This Matters: Access to credit is a longstanding challenge for black people. Across all income levels, 41% of black respondents to a Federal Reserve survey reported their credit applications as denied. This is more than any other ethnic group in the U.S. At General Catalyst, Chenault has an opportunity to make multiple bets on startups that could move the needle on the black community gaining greater access to capital. For example, Nova Credit creates a $600 billion lending opportunity for financial services firms who wouldn’t lend to immigrants because of their lack of having a credit score. As of 2016, there were 4.2 million black immigrants living in the U.S.
During his last two years at American Express, Chenault was under pressure to turn around a business that had been a cash cow for decades. Competitors like J.P. Morgan (JPM -0.54%) and Visa (V +1.70%) launched premium credit cards that rivaled the benefits American Express offered. As a result, American Express had to make a concerted effort to move into digital through partnerships with the likes of Airbnb and Facebook.
Those last two years may prove key as Chenault navigates the startup world, providing context on digital players. He will be able to draw on his experience at the top of a multi-billion dollar business and a deep network to provide needed perspective for startups which offer access to credit services.
Situational Awareness: General Catalyst’s portfolio companies include fintech darlings like Digit, Stripe, and Circle. The firm also has legacy institutions like Admirals Bank in its portfolio. Look for Chenault’s fingerprints on their future product offerings as he settles further into his role.
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