According to a Bloomberg report, blockchain startup Figure Technologies has cut 20% of its staff despite being profitable and growing revenues. The rationale is to improve profitability in preparation for listing its lending business early next year. The CEO and founder of Figure is Mike Cagney, who co-founded SoFi.
Initially the company focused on home equity lines of credit or HELOCs, but it has since expanded its product base. It started offering HELOCs direct to consumers in an automated fashion to kickstart usage of the Provenance blockchain, a public chain founded by Figure, on which the mortgage transactions are logged. Unlike most public blockchains, access to most contracts is restricted. By the end of 2022 Figure had originated $5 billion in HELOCs and added another $900 million during the second quarter.
According to Cagney’s July letter to investors and partners, the company has generated $83.5 million in revenues during the first half and a $2.7 million adjusted profit. It expects a $2.5 billion valuation for LendCo when it goes public. Its last venture fundraising in 2021 was at a $3.2 billion valuation for the whole business, not just lending. According to the Provenance blockchain, the current valuation of Figure stock is $3.49 billion. To date the company has raised around $430 million in venture funding and another $1.3 billion plus in debt financing for the HELOCs.
Given that $6 billion plus in HELOCs were advanced, one might expect more debt financing. However, that’s arguably part of the business model. Figure operates a lending market on the Provenance blockchain allowing it to re-sell the HELOCs. In 2020 it issued its first $149 million asset backed security (ABS), and this April issued its first credit rated HELOC ABS, receiving a AAA credit rating from DBRS Morningstar for the Class A notes. Jefferies, JP Morgan and Goldman Sachs underwrote the latter one.
Figure is now selling a service to other lenders who can use its HELOC system to originate loans.
Apart from HELOCs, Figure has since launched a digital currency payments solution Figure Pay and is the technology partner to the USDF consortium for bank deposit tokens. It works with asset managers such as Hamilton Lane and Apollo and is a licensed operator of an Alternative Trading System (ATS) for tokenized equity and funds.
As with any startup, there have been some ups and downs, particularly with regulators. It wanted to register as a bank for Figure Pay, but couldn’t get authorization. It had a deal to merge with mortgage lender Homebridge, but didn’t receive regulatory approval. And the USDF Consortium is struggling to get a regulator greenlight for its bank deposit token scheme. It has already adapted to using a private permissioned blockchain in an attempt to satisfy regulators.
