No. of Recommendations: 5
I LOVED Upstart. (I know I'm not supposed to.) In my mind, it was a great idea -- applying AI to loans. They were early so had much more data than any new competitors, or even large individual banks that might want to do it alone. They could replace FICO scores with something so much better. In my mind, FICO was a significant worry, but otherwise it seemed like they could have lots of runway for a long time as they entered new lending segments.
Then came the earnings call when they said they had retained loans on their books not for improving their models as in the past, but because they'd been unable to sell loans they'd made. I felt I had been utterly betrayed. I sold my enter stake that day and was so disheartened I stopped following them entirely.
I get that the credit markets seized up in a way they hadn't predicted. Their mistake, but entirely understandable and forgivable. Book the loss, make adjustments so it doesn't repeat, then carry on. But instead, they changed their business model entirely -- and for the worse. Previously they had been small and limber. They sold loan models/information. Overnight they went from limber to lumbering, something more akin to a bank than an AI tech company with a great edge.
