#TBT Throwback Thursday: Why CommonBond Failed → N2 Technology

Throwback Thursday: Why CommonBond Failed

It’s Throwback Thursday, and today we’re taking a look at the story of CommonBond, a student loan startup that was once on the rise but ultimately failed. Founded in 2011 by David Klein, Michael Taormina, and Jessup Shean, CommonBond aimed to provide affordable student loan options for university graduates. However, the pandemic hit the company’s core business hard, and despite attempting to pivot to residential solar panel loans, CommonBond was unable to recover and announced that it would be shutting down in September 2020.

David Klein

Co-Founder & CEO

Co-Founder & CEO of CommonBond, ex- American Express, McKinsey & Co. Wharton Business School, 2012. Middlebury College, 2002.

Mike Taormina

Co-Founder & CFO

Co-Founder & CFO of CommonBond, ex- J.P. Morgan. Wharton School, University of Pennsylvania, 2015.

Jessup Shean

Co-Founder & COO

Greenhill & Co, Fried Frank, JPMorgan. Brown University BA 2004, The Wharton School MBA 2012

Backstory:

CommonBond’s founders met while attending the University of Pennsylvania’s Wharton School MBA program and were frustrated with the lack of affordable loan options available to fund their own graduate school education. They decided to start a company to address this issue, and after raising $3.5 million in funding, they launched CommonBond in November 2012, initially focusing on lending to MBA students and recent graduates at the Wharton School. The company quickly expanded, and by September 2013, it was offering its services nationally.

What problem did CommonBond set out to solve:

CommonBond set out to solve the problem of expensive and difficult-to-obtain student loans for university graduates. The company aimed to provide a more affordable and user-friendly option for students looking to finance their education.

Timeline of events:

November 2012: CommonBond is founded and begins lending to MBA students and recent graduates at the Wharton School.

September 2013: CommonBond expands its services nationally.

2019: CommonBond has raised over $1.1 billion in funding.

2020: The COVID-19 pandemic hits the student loan refinance market hard, and the pause on student loan payments reduces demand for solutions like CommonBond’s offering.

September 2020: CommonBond announces that it will be shutting down its operations.

What worked and what didn't:

CommonBond initially saw success by focusing on a niche market (MBA students and recent graduates at the Wharton School) and then expanding its services nationally. However, the pandemic had a devastating impact on the company’s core business, and despite attempting to pivot to residential solar panel loans, CommonBond was unable to scale and raise new funding quickly enough to make it work.

The Results Analysis:

The pandemic ultimately proved to be too much for CommonBond to overcome, and the company was forced to shut down its operations in September 2020. While the company had experienced success in the past, the sudden and dramatic shift in the market proved to be too much to handle.

Conclusion and takeaway for Startup founders:

The story of CommonBond serves as a cautionary tale for startup founders. It’s important to have a solid business plan and to be prepared for the unexpected, as even the most successful companies can be vulnerable to external factors like the pandemic. It’s also crucial to have a plan B in place and to be able to pivot quickly when necessary.