Founder Story: Percent by Nelson Chu

Today we have interviewed an amazing startup called Percent, which has revolutionized the private credit marketplace with its cutting-edge technology.

Founded in 2018, Percent is streamlining how investments and loans are managed in the private credit sector. Their platform brings the efficiency of public markets to the previously traditional and manual private credit market.

Percent simplifies the entire process of private credit transactions, from sourcing and structuring to syndication, surveillance, and servicing. This comprehensive approach has quickly positioned Percent as a leader in the field of asset-backed and corporate lending.

Already, their platform has powered nearly $2 billion in transactions, making significant inroads into the multi-trillion-dollar industry of private credit.

Stay with us to learn more about how Percent is transforming the way investors, borrowers, and underwriters operate, making transactions quicker and more cost-effective.

Let's Hear from them directly.

My name is Nelson Chu, and I am the founder and CEO of Percent, the leading private credit marketplace. I founded Percent in 2018 after witnessing the inefficiencies in private markets firsthand through my experiences working with the top companies in the space.

Percent is modernizing how transactions occur in the asset class and connects the full private credit ecosystem of accredited investors, borrowers, and underwriters on a single platform that offers unparalleled transparency and efficiencies.

We are the only firm expanding access to the highly sought-after private credit market through tailor-made software and infrastructure solutions.

Percent is revolutionizing the private credit market with its cutting-edge technology platform that simplifies and enhances the efficiency of private credit transactions.

Founded in 2018 by Nelson Chu, Percent addresses the inefficiencies in a market ripe for technological innovation, particularly in privately negotiated loans and debt financing.

The company's platform serves a growing market expected to reach $2.3 trillion by 2027, offering a modern solution during a time when private credit is increasingly critical due to tightening lending practices and a decrease in venture capital investments.

Percent's infrastructure supports the complete lifecycle of private credit transactions, from sourcing and structuring to syndication, surveillance, and servicing, establishing new standards of transparency and access in private markets.

With a successful track record of facilitating over $1.2 billion in transactions as an underwriter, Percent leverages its deep industry knowledge to deliver tailored software solutions for borrowers, investors, and underwriters.

The company's strategic focus on balancing supply and demand has propelled it to the forefront of the private credit sector, enabling it to scale operations and innovate continuously.

As private credit gains prominence, Percent is well-positioned to lead the transformation of this essential financial service.

Private credit is an asset class of privately negotiated loans and debt financing from non-bank lenders. It is a market expected to reach $2.3T by 2027. Unlike public markets, private markets were often misunderstood and ripe for tech innovation.

Percent saw the opportunity and created a unique platform for private credit deals. Last year marked its golden moment as the banking crisis put private credit in the spotlight.

Amid bank failures and tightening lending practices, this asset class is achieving high risk-adjusted returns for investors as well as funding startup growth amid an environment of low VC investment.

By bringing a modern solution forward, Percent is providing unparalleled access and transparency to what is becoming the fastest growing asset class in private markets.

Percent has taken both a measured and methodical approach to growth out of necessity. Building an infrastructure solution takes time. To move things forward, we had to first build up the marketplace of borrowers and investors to facilitate transactions.

Our focus was on providing a compelling value proposition for both sides that was exponentially better than any other existing alternative. For investors, that meant providing the lowest minimum and shortest duration investments in the market.

For borrowers, that meant providing the most flexible and dynamic source of capital possible for them to grow on their terms. We step-laddered the growth of the supply (borrowers) and demand (investors) to ensure that they were perpetually in balance so that no one side was dominating the other while still maintaining growth.

By doing over 400+ transactions and $1.2B+ in volume ourselves as the underwriter, we gained an extensive amount of experience around what it takes to structure, syndicate, and service private debt transactions.

This knowledge fed into every feature and product we shipped, solving the biggest pain points to create a software suite for each member of the three-sided private credit market.

Once the software became comprehensive enough to run transactions from end to end, we opened up the market to bring the final market participant into the fold. Underwriters would solve our own biggest limitation to scale - resource constraints.

Providing each group with the necessary tools, workflows and resources has enabled us to expand our revenue streams one step further, from investors to borrowers and now underwriters. It’s important to recognize that success does not happen overnight.

It takes careful planning and a keen understanding of the unique attributes of each market and their respective participants to know when to push and when to pause and reassess whether the business is performing the way you expected in order to keep momentum moving forward.

Credibility and believability, especially when creating a multi-sided marketplace, is one of the most challenging hurdles to overcome. To establish trust at a time when you have not earned it requires sales skills and empathy to convince every side of the market that you can deliver what you’ve promised.

As traction begins to pick up, the need to oversell begins to wane, as you can point to performance as the key indicator of their success.You also need to invest in things that will not pay dividends for a long time but require constant and consistent effort to nurture and build.

Brand and content are some of the most underinvested things, especially at an early stage company, yet they have the best ability to accelerate your growth in the months and years ahead.

By capitalizing on organic reach through the reputation of your brand and the SEO you’ve accumulated over the years, the company will be able to acquire customers far more cheaply than if they had to pay for acquisition every time. Doing these little yet important things early on lays the foundation for success when you need it most down the line.

The ability to separate hype from reality. We’ve seen this time and time again, and the current environment is far better as there’s a bit of a return to normalcy, but cycles come and go, and what goes up very quickly comes down equally as quickly.

Whether it’s fintech, crypto, or now AI, history repeats itself, and there’s a graveyard of companies that over-raised, tried to ride the hype cycle, and ended up not being able to deliver at the level that was promised.

In fairness, it would have been nearly impossible to live up to those expectations and valuations and the onus is on not just the founders but the VCs as well to remember the fundamentals.

I would encourage founders to build for the sake of making an impact in the world, not because it seems easy to raise money and it’s the trendy new thing.

From the outside, it may seem as if we have been successful in fundraising. In 2021, we raised $12.5 Million in a Series A co-led by White Star Capital and B Capital.

This round was followed by an oversubscribed $30 Million Series B in 2023, which was led again by White Star Capital and brought Percent’s total funding to over $48 million.

Each successive round has demonstrated the increasing demand and need for private credit, which skyrocketed amid bank failures and tightening lending practices, creating positive tailwinds for Percent and the industry at large.

Over time, investors have realized the growing potential of this market and have supported our goal of building the first-ever vertical SaaS solution for the previously analog private credit industry.

Behind the scenes, though, it was an arduous process as the need to educate investors on the market and then demonstrate traction while also helping lead them to the vision required a number of mental leaps that gave many VCs pause over the years.

An investor is usually trying to find ways to say no as they cannot invest in every deal, so the less red flags you have as a company, the better.

Unfortunately for us, it wasn’t until recently that we were able to dispel many of these red flags, as it took the necessary time for the market, the product, and the vision to begin to coalesce after all these years.

Securing the capital for Percent has come with no shortage of challenges, especially early on. VCs often struggle to understand the nuances of capital markets and the scope of what it entails, even if the opportunity set is so large.

I personally sunk $80K into Percent in the early days to first prove out the vision and demonstrate enough traction to make it possible.

We had the vision for Percent early on in the process, but we had very little to show for it. When you tout that you’re an infrastructure for a market and you have only first built a marketplace with little tech to speak of, it becomes hard for investors to grasp exactly how it will come together.

It requires a leap of faith by the VCs to trust the team and trust that the market will come to us, which is a tall order. To get to the finish line, it became simply a numbers game.

Speak to enough investors, and at some point, you will have enough who are willing to make that bet on you. The first round took more than 100 conversations, the second round over 150, and the most recent Series B, which started in 2022 and finished in mid-2023, took over 450 conversations, given the difficult fundraising environment.

Still, with each successive round where we had more technology to show for it the need to suspend disbelief on the investors’ part became less and less.

We started first by building a marketplace in order to learn what it would take to do transactions in this market at scale. $1.2B in volume and 400+ transactions later, we managed to build out a comprehensive software suite for every market participant - borrowers, underwriters, and investors.

By 2023, we opened up this marketplace for other underwriters to join and leverage our software to run transactions with their borrowers and our investors. This line of business alone will be able to help turn us profitable within the next few quarters.

The next phase of the company is going to entail opening up not just the marketplace, but the software suite altogether. Rather than having underwriters bringing just their borrowers, they can onboard both their borrowers and their investors to run private market transactions using our software suite.

Workflow tools to help structure, syndicate, or service a deal can be used to make them more efficient than ever before. This transition and evolution from being a marketplace to a SaaS solution will be transformational for the future of the company and bring us one step closer to becoming the de facto infrastructure for private credit markets.

With multiple predictions that private credit will continue to grow exponentially in years to come, we are excited to be right in the middle of private credit’s moment in the spotlight.

When we founded the company, we had a hypothesis that there would be a time when private credit would shine, we just did not know when it would happen or what the catalyst would be.

With the rise in interest rates and the banking crisis of 2023, we are seeing exactly what happens when liquidity is tight and how private credit can fill the gaps.

The asset class has struggled historically to innovate, given how archaic and analog it is and we are thrilled to be developing a technology solution to deliver greater transparency, more efficiencies, and more standardization and empower the asset class in a new way.

If we realize our vision, the infrastructure that we built will be able to make transactions faster, happen more frequently, and be more profitable, all of which will help spur the exponential growth of the asset class in a way that has never happened before.

There are very few mistakes you can make as a startup, especially early on, that will make or break your company. It’s the accumulation of mistakes and delays that lead to either stagnation or failure.

Act quickly, think rationally, eliminate emotion from the equation, and move forward. The biggest pitfall that most founders face is that they took too long to decide (strategy, pivots, hiring/firing, fundraising, etc.), and by the time they did, it was either too late or it had lingered too long that the negative consequences were going to be unavoidable.