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I’m a former $Affirm employee. Here’s my take on Affirm’s upcoming IPO & growth so far.
TL;DR below
Full blog in my bio on Substack.
https://shelleyolivia.substack.com/p/affirms-going-public-honest-financing
(All info discussed is publicly available. Most can be found in its 300 page S-1)
TL;DR below
Full blog in my bio on Substack.
https://shelleyolivia.substack.com/p/affirms-going-public-honest-financing
(All info discussed is publicly available. Most can be found in its 300 page S-1)
1/ 
Traditional credit needs reform.
The average American owes $6.2k in credit card debt. At an average 17% APR, this means $1k+ in interest alone. Total, Americans owe $1T in cc debt and $121B in interest, $11B in overdraft fees, & $3B in late fees. We need better options.
Traditional credit needs reform. The average American owes $6.2k in credit card debt. At an average 17% APR, this means $1k+ in interest alone. Total, Americans owe $1T in cc debt and $121B in interest, $11B in overdraft fees, & $3B in late fees. We need better options.
2/ 
What is honest & transparent credit?
Honest credit should profit from adding value to a customer instead of profiting from a customer’s mistakes or inability to pay exactly at the 30-day mark. Interest rates keep increasing & fine-print sections get more complex.
What is honest & transparent credit? Honest credit should profit from adding value to a customer instead of profiting from a customer’s mistakes or inability to pay exactly at the 30-day mark. Interest rates keep increasing & fine-print sections get more complex.
3/ 
What is Affirm?
Affirm creates honest financial products. 3 are credit products & 1 product is a high-yield savings account. It is a market leader in the US:
- $4.6B in transaction volume
- $500M in revenue (93% growth since last year)
- 6.2M customers
- 6.5k merchants
What is Affirm? Affirm creates honest financial products. 3 are credit products & 1 product is a high-yield savings account. It is a market leader in the US:
- $4.6B in transaction volume
- $500M in revenue (93% growth since last year)
- 6.2M customers
- 6.5k merchants
4/ 
Affirm’s strengths || part 1
(a) Strong delinquency & approval rates - delinquency is 1% vs the 5% of credit cards. It approves 20% more customers
(b) Affirm is run in a cash efficient way - Affirm doesn’t need a lot of its own cash b/c it partners w/ origination banks.
Affirm’s strengths || part 1 (a) Strong delinquency & approval rates - delinquency is 1% vs the 5% of credit cards. It approves 20% more customers
(b) Affirm is run in a cash efficient way - Affirm doesn’t need a lot of its own cash b/c it partners w/ origination banks.
5/ Affirm strengths || part 2
(c) Merchants - Affirm acquire customers w/o discounting or hurting brand equity.
(d) Customers - 46% of loans are 0% interest. The UX is well-designed & mobile-optimized.
(e) Network effects - more merchants = more customers & vice versa.
Affirm strengths || part 2(c) Merchants - Affirm acquire customers w/o discounting or hurting brand equity.
(d) Customers - 46% of loans are 0% interest. The UX is well-designed & mobile-optimized.
(e) Network effects - more merchants = more customers & vice versa.
6/ Affirm strengths || part 3
(f) Talent - pretty much everyone I worked w/ was amazing. Top colleges & past job experiences.
(g) Key partnerships - It just acquired 1 of Canada’s biggest “buy now, pay later” companies. Also, Shopify is an investor with a 3 yr contract.
Affirm strengths || part 3 (f) Talent - pretty much everyone I worked w/ was amazing. Top colleges & past job experiences.
(g) Key partnerships - It just acquired 1 of Canada’s biggest “buy now, pay later” companies. Also, Shopify is an investor with a 3 yr contract.
7/ Affirm strengths || part 4
(h) P&L strength - many revenue streams keep it diversified. Also, it decreased its net income as it doubled sales.
(i) Unit economics - merchants are charged about ~11% of the transaction value. Customers are charged 0% to 30%.
Affirm strengths || part 4(h) P&L strength - many revenue streams keep it diversified. Also, it decreased its net income as it doubled sales.
(i) Unit economics - merchants are charged about ~11% of the transaction value. Customers are charged 0% to 30%.
8/
Affirm’s risks || part 1
(a) Peloton - 30% of sales are from Peloton. They do have a 3 year contract though, ending in Sep 2023.
(b) Bank dependence - Cross River Bank funds most of the loans. They also have a 3 year contract so the chance of disruption is low.
Affirm’s risks || part 1 (a) Peloton - 30% of sales are from Peloton. They do have a 3 year contract though, ending in Sep 2023.
(b) Bank dependence - Cross River Bank funds most of the loans. They also have a 3 year contract so the chance of disruption is low.
9/Affirm’s risks || part 2
(c) Regulation - when it comes to lending, there are so many federal & local laws as well as political dynamics and data privacy regulations.
(d) Competition - it’s a crowded space. But only a few companies will survive.
Affirm’s risks || part 2 (c) Regulation - when it comes to lending, there are so many federal & local laws as well as political dynamics and data privacy regulations.
(d) Competition - it’s a crowded space. But only a few companies will survive.
10/Affirm’s risks || part 3
(e) Star CEO - Max Levchin is part of the “PayPal Mafia” group that created PayPal. If he weren’t CEO, this would be a blow to Affirm’s perception.
(f) Dual-class structure - execs w/ Class B shares have 15:1 voting rights. Hard to remove.
Affirm’s risks || part 3(e) Star CEO - Max Levchin is part of the “PayPal Mafia” group that created PayPal. If he weren’t CEO, this would be a blow to Affirm’s perception.
(f) Dual-class structure - execs w/ Class B shares have 15:1 voting rights. Hard to remove.
11/ 
Competition in this space is heating up. Not all “buy now, pay later” companies are equally transparent & honest.
Affirm, Afterpay, & Klarna are the top 3. Affirm is just starting to expand outside the US. I could see someone betting on all three.
Competition in this space is heating up. Not all “buy now, pay later” companies are equally transparent & honest. Affirm, Afterpay, & Klarna are the top 3. Affirm is just starting to expand outside the US. I could see someone betting on all three.
12/ 
Fortunately, this market has lots of room to grow.
By 2023, online sales will be 22% of the ~$6T US retail market. 3% of sales will be paid via “buy now, pay later” ⇒ This is ~9x larger than Affirm’s $4.6B in transactions today. Worldwide, the opportunity gets bigger.
Fortunately, this market has lots of room to grow. By 2023, online sales will be 22% of the ~$6T US retail market. 3% of sales will be paid via “buy now, pay later” ⇒ This is ~9x larger than Affirm’s $4.6B in transactions today. Worldwide, the opportunity gets bigger.
13/ 
I’d categorize this stock as a buy. But am cautious of the price around IPO.
A good company & an overvalued valuation aren’t mutually exclusive. I’m impressed w/ its growth & the opportunity ahead though.
(Opinions are my own.)
I’d categorize this stock as a buy. But am cautious of the price around IPO. A good company & an overvalued valuation aren’t mutually exclusive. I’m impressed w/ its growth & the opportunity ahead though.
(Opinions are my own.)
14/ 
IPO valuation & timing
- IPO Valuation: $10B to $12B
- Price / share: $50 / share
- Timing: early 2021
(These are my estimates. Read my rationale in my blog)
IPO valuation & timing - IPO Valuation: $10B to $12B
- Price / share: $50 / share
- Timing: early 2021
(These are my estimates. Read my rationale in my blog)
15/ 
Fun facts
- Offices: in the ~2 years I was there, we moved offices 3x. What 600% growth looks like!
- Meeting rooms: in each office, we had thematic names for meeting rooms. One office had coffee drink names, another had plant & tree names.
- Exec compensation:
Fun facts- Offices: in the ~2 years I was there, we moved offices 3x. What 600% growth looks like!
- Meeting rooms: in each office, we had thematic names for meeting rooms. One office had coffee drink names, another had plant & tree names.
- Exec compensation:
16/ 
All feedback welcome.
Follow me for more posts and subscribe to my substack. Thank you for reading & for your support!
All feedback welcome. Follow me for more posts and subscribe to my substack. Thank you for reading & for your support!
