Today's Leaders, Tomorrow's Legends

In celebration of Black History Month, we are proud to spotlight Black founders who are making history and shaping the future of their industries. Today, we focus on three standout Collab Capital portfolio companies – Loanwell, Nectar, and FilmHedge. These companies are forging new economic mobility and inclusivity avenues across their respective industries.

These companies improve workflow inefficiencies and bridge the capital access gap within their respective industries. Fintech innovation has made meaningful strides in recent years, including fintech infrastructure within emerging markets such as Africa and Latin America. However, many niche players, like community lenders, still use manual processes and archaic systems. Loanwell provides them with vertical fintech offerings to help them deploy more capital more efficiently.?

Loanwell

The Financing Gap

The average small business loan is $663K, while 57% of SMBs apply for loans less than $100K. SMBs must apply to multiple lenders to find a lender that will approve their capital request, which takes excessive time due to outdated application processes. More than 10.5 million new business applications were processed in 2021 and 2022. Women and people of color are leading the way in this historic small business boom, as entrepreneurs of color are more likely to apply for small-dollar loans of less than $100,000. However, a growing small business financing gap threatens to derail this influx. The market for these loans has evaporated since the Great Recession because they are less cost-efficient for banks than larger loans.?

Community lenders like CDFIs (Community Development Financial Institutions) are working hard to close this gap. They are limited to scaling their lending to SMBs because there is no proven secondary market to recapitalize the CDFI portfolios. This liquidity creation helps the CDFIs continue to lend to more SMBs and provides a repeatable way for larger financial institutions to invest CRA dollars in local SMBs.

Enter LoanWell?

Enter LoanWell, a B2B fintech platform co-founded by Bernard Worthy, a passionate entrepreneur dedicated to democratizing access to capital and fostering generational wealth within these communities. With his extensive experience in software development, Bernard envisioned a solution that streamlines the lending process and fosters inclusivity. LoanWell is a B2B fintech platform that modernizes community lending to enable equitable access to affordable capital for all. LoanWell was founded to provide a white-label, end-to-end automated lending platform (intake, origination, underwriting, closing, servicing, and reporting) for community lenders in the United States. Serving over 50 financial institutions, LoanWell has provided over $450 million in capital to thousands of small businesses in the last two years. The platform provides a common interface where a network of CDFIs can join for loan applications, matching, reporting, program management, and the recapitalizing of loans by outside banks.

LoanWell is solving for economic mobility by providing small businesses with access to the capital they need to grow. This can lead to job creation, economic development, and increased wealth for business owners and their communities.

LoanWell's platform makes it easier for small businesses to find the funding they need by connecting them with a network of CDFIs dedicated to lending to underserved communities. The platform also automates many of the tasks involved in the loan application process, making it faster and easier for small businesses to get the funding they need, giving them more time to focus on growing their businesses.

Nectar is another company in our portfolio that uses a unique financial inclusion approach.

Nectar

What is Nectar?

The founders of Nectar are no strangers to the real estate market. Derrick Barker is a Harvard graduate and former Goldman Sachs trader who built a $450 million+ real estate portfolio with over 4,500 units, so he’s our resident (no pun intended) real estate expert. Co-founder Brittany Mosley, also a Harvard graduate, teamed up with Derrick on several real estate projects. Most notably, she oversaw the acquisition, asset management, and operations of a 120-unit co-living and short-term rental portfolio. While amassing their impressive real estate portfolios, Derrick Barker and Brittany Mosley encountered the same problem repeatedly. There are no good options for working capital to grow your real estate portfolio, prompting them to start Nectar.

Nectar, a marketplace pioneering working capital advancements for professional real estate investors, has carved out a niche that significantly contributes to economic mobility for real estate entrepreneurs. Traditional banks have historically provided financing solutions for a broad spectrum of real estate businesses. Still, their offerings cater to relatively straightforward deals, leaving out the more intricate and complex ventures. Conversely, institutional financing sources are geared towards high-level, large-scale projects, leaving a void for businesses between these extremes.

Bridging the Gap

Nectar enters the scene as a cash-flow-based financing tool, bridging the divide between traditional bank financing and institutional investment. This segment comprises experienced small and medium-sized real estate businesses with $1M to $50M properties or $10M to $500M portfolios that require access to substantial capital for their ventures but are deemed too complex for traditional banks and too modest for institutional financing sources. These investors typically own sizable apartment complexes and multifamily units in middle- to low-income areas. To date, Nectar has deployed over $12 million to real estate entrepreneurs, and that number continues to grow.

Traditionally, smaller-scale investors in this sector have faced difficulties accessing preferred equity to expand their portfolios, limiting their ability to scale. This gap exists because it takes a lot of time and effort to underwrite a deal—the same effort to underwrite a larger deal—so financial institutions don’t bother underwriting small deals. However, with the proliferation of generative AI, this can occur in a fraction of the time. Nectar's inclusive approach gives these investors the financial resources they need to seize opportunities and grow their wealth. This inclusivity directly translates to greater economic mobility for overlooked real estate operators who have historically faced barriers to entry.

Let’s look at a different industry: film and TV.

FilmHedge

The tides are shifting in the media industry. Consolidation tightens its grip, writers' strikes disrupt production, and filmmakers break free from traditional studio financing. However, this newfound independence comes with a price: the need for alternative funding solutions. In this evolving landscape, private credit emerges as a powerful force, and FilmHedge steps onto the stage, ready to fill a critical gap in film financing.

The story of FilmHedge begins with a successful exit in 2017. With fresh capital, Jon Gosier explored various investment avenues and asset classes. A lucrative return on a sci-fi film, SKYLIN3S, planted the seed. In just 7 months, his money was returned with 15% interest. He saw the potential for private credit to revolutionize film financing, empowering filmmakers while offering attractive returns to investors. Thus, FilmHedge was born.

What is FilmHedge?

Filmhedge is a lending platform that provides short-term, senior-secured loans to qualified TV and film production companies. They target projects with pre-sales from credible domestic and international distributors, offering investors unique access to a previously untapped asset class with shorter investment horizons: collateralized film debt.

But FilmHedge doesn't stop there. They go beyond simply providing financing. Their team leverages their extensive industry expertise to conduct rigorous due diligence. They maintain a vast data warehouse, analyzing the financials of over 300 productions annually—10–15% of all films released annually. This robust data informs their rigorous risk management practices, ensuring 125% over-collateralization against high-grade liquid collateral and bank-grade underwriting. The team has gained a deep understanding of the market to ensure their loans are well-positioned for success.?

This data-driven approach and robust risk management practices have yielded impressive results. FilmHedge boasts a zero-default record, having financed 35 productions featuring A-list talent and budgets ranging from $5 million to $35 million. Their films have found homes on major platforms like Hulu, Netflix, and Apple, showcasing the impact of their innovative approach.

Shifting the Industry

But FilmHedge isn't just about numbers; they're passionate about transforming the industry. They see themselves as pioneers, leading the way in converting TV and film production into an institutional-grade, collateralized asset class. Focusing on debt financing allows filmmakers to retain ownership and maximize profits. They offer advances of up to $20 million based on pre-sales, distribution agreements, or tax incentives, providing the liquidity needed to bring their visions to life.

The FilmHedge team itself is a force to be reckoned with. They are co-led by Josh Harris, the former head of Entertainment Finance at Citi National Bank, who managed a $1 billion loan book and earned the nickname "the Bank of Hollywood." The team's combined expertise has delivered over $101 million in loans to capital partners, generating over $113.8 million in net returns. Their average loan size of $10.1 million is quickly repaid within nine months, demonstrating their focus on efficiency and agility.

At Collab Capital, we share FilmHedge's vision for a future where diverse voices are amplified and Black creators have the resources and capital to tell their stories. How content is produced, distributed, consumed, and financed is changing, and Black creators must be at the forefront of these evolutions. Jewel's recent support for Ava DuVernay's film "Origin" exemplifies this commitment. Jewel and her friends, Dr. Lakeysha Hallmon and Dr. Joy Bradford Harden conducted a private film screening to fellowship with the community and support the film. In a landscape where traditional studios lacked the courage to partner on such a powerful film exploring complex themes, Collab Capital and FilmHedge stand together, ensuring that stories like these have the opportunity to shine.

As we celebrate Black History Month, it's crucial to recognize not just those who laid the foundations but also the torchbearers of today, the innovators and entrepreneurs actively carving out new paths that will inspire generations. At Collab Capital, our commitment goes beyond financial investments; it's about investing in an ecosystem where Black founders are not just participants but leaders and legends in their own right. By supporting companies like LoanWell, Nectar, and FilmHedge, we're opening doors to a future where our success stories are not exceptions but rather expectations.