December Connect2Capital Partner Update

As the COVID Emergency became the COVID Era, Connect2Capital, the team behind it, and its partners leaned in the best way we knew how—by providing critical access to credit and high-quality technical assistance. These measures ensure that the small businesses who sustained our communities before and during the COVID Era will have every chance to continue their work in whatever version of the world comes next.

Looking back at this year, as with so many of our partners and communities they serve, there was no shortage of triumphs or tribulations for us at Connect2Capital. In the spirit of transparency, we wanted to share some of the most significant developments our team has grappled with over the last year.

The Good

2021 was a banner year for Connect2Capital. Continued deployment of recovery funds in New York and California, and the launch of recovery funds in Washington and the Southeast US fueled a jaw-dropping 42,863 small businesses newly matched to CDFIs in our network. In total  $157.6 million in loans were funded and a host of new partnerships and friendships were established. (As of December 12, 2021)

Private sector partnerships also flourished in 2021 for Connect2Capital. New referral programs are now in place with multiple traditional financial institutions who will be routing customers whom they are unable to serve through Connect2Capital for the opportunity to be served by participating CDFIs. In fact, as of mid-December, more than 65,000 small businesses have completed a Connect2Capital application in 2021. And while we must continue to strive to serve everyone who finds their way to the Connect2Capital platform, over 65% of these businesses matched with a product being offered by a platform partner.  

The recovery funds received national press attention as Connect2Capital was highlighted in a World Economic Forum article, and our SVP of Strategy Patrick Davis co-authored an article published in the Stanford Social Innovation Review. This exposure is monumental for Connect2Capital and will help us serve our partners and small businesses even better in years to come.

The Less Good

Beyond these top-line successes, however, Connect2Capital also grappled with unexpected challenges in 2021.

In May, a sophisticated group of malicious actors spammed multiple access points for Connect2Capital. In part, this attack was a result of our elevated visibility – both C2C and the CDFI sector more broadly – but the spam attack was a huge challenge for our platform and our partners that we hadn’t anticipated.  We are grateful for all the collaboration with our partners on the platform who were patient and accommodating for our team as we confronted this attack.

This did lead to us implementing, with the help of cybersecurity experts, an industry-leading machine learning model and IP quality scoring protocol that has reduced the number of fraudulent leads by over 95% since launching in June of this year.

We also know that, outside of the public/private recovery funds, conversion rates on Connect2Capital continue to be an opportunity area for improvement. The recovery fund model addresses some key challenges CDFIs face with liquidity, demand generation, and operational support. However, we know too much friction remains for platform CDFIs and small business owners to achieve success at scale. We also know that connecting applicants that aren’t yet loan-ready to technical assistance and facilitating referrals/second look programs between CDFIs remains difficult for platform partners and small businesses. In the coming months, we will be rolling out new features that will help solve these challenges and ensure every business has an option to connect with resources that meet them where they are on their small business journey.

The Road Ahead

Connect2Capital launched in 2017 with the promise of bringing a “fintech solution” to mission-driven lenders and small businesses often left out of traditional lending ecosystems. Over the last 4+ years, the platform has evolved and adapted in ways almost impossible to predict. The primary success story for Connect2Capital to date involves CDFIs and partners responding in an unparalleled way to a global pandemic and its resulting economic challenges. We hope to continue to facilitate impact with this peerless group of partners, many of whom are now friends. We are grateful for your partnership and service to our shared communities, and we look forward to more impact in 2022.

Internally, two new team members have come on board in the last month (and will be writing next month’s post!). Externally, we see an evolving landscape where public and private sector stakeholders appear poised to make additional investments in CDFIs and the small businesses they serve.

We can’t wait to share more on what we’re cooking up in 2022 and we look forward to continuing to find ways to provide value to our partners, small business, and the communities they are working to make spectacular.

See you in 2022!

Webinar: Writing a Business Plan

If you are applying for financing, a solid roadmap becomes especially important as it is the best way for a lender to get a feel for you and your business.