First Stage Investor

Lendsnap Has Shut Down; Here’s What You Need to Know

Lendsnap Has Shut Down; Here’s What You Need to Know
By Andy Gordon
Date January 16, 2020

When we recommended Lendsnap in the spring of 2015, it had great promise. Lendsnap’s website and smartphone app gave users a quick and easy way to fill out a mortgage application.

It was a smart idea backed by proven technology. But in the end, it didn’t catch on. Lendsnap couldn’t convince enough lenders to use its technology. As a result, it was forced to shut down in 2019.

The biggest problem, says founder and CEO Orion Parrott, was lender expectations. They wanted more and more features and customized integration. And while Lendsnap’s system was designed to accommodate most loan origination processes, the startup couldn’t convince lenders to give it a test run.

Making things worse, lenders wanted to own their own technology rather than to license or rent it, which is the software as a service – or SaaS – model that Lendsnap had adopted.

In the meantime, increased competition limited Lendsnap’s ability to get clients to pay to develop the additional features they wanted.

All this led to a defining moment in 2019, when the top five lenders who had verbally committed to a paid pilot with Lendsnap (with 50 of their brokers) decided not to approve the trial.

When the company didn’t get the traction it expected last year, Parrott began searching for an acceptable exit. But he came up short.

“Throughout 2019,” he said, “I searched for a suitable company to purchase Lendsnap assets and carry forward the mission of making mortgages easier for everyone. After having discussions with more than 40 companies, we could not find a suitable partner.”

So with a final “thank you for your support,” Lendsnap shut its doors for good.

Lendsnap investors will not be compensated for their investment. So it’s not a happy ending. But as an early investor, you need to recognize that these things happen. Startups fail. It comes with the territory. The important thing is to invest in a large number of startups – we recommend 20 to 25 at least – to give yourself the best shot at big winners that will more than make up for the losers.

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