Live Oak: The Small Business Bank - [Business Breakdowns, EP.143]

This is Matt Reustle. Today we are breaking down Live Oak Bank. Our guest is Stephen Vafier, the Founder of Storri Labs Capital Partners. Live Oak is a bank that received a charter right before the financial crisis. It does not have the a 100+ year histories of many of the banks that we know so well today, JP Morgan, Goldman Sachs, and the other too-big-to-fail banks. This is a new story with very interesting DNA in terms of how they built up this bank. They targeted specific industries and the SBA loan program and they had technology in their inception. Live Oak has done some unique things to build assets on the balance sheet to build equity in this bank and really build a name within a sector that is incredibly difficult to break into. This is an interesting case study on how you can think about out-dated industries, which seemingly have massive barriers to entry. Please enjoy this breakdown of Live Oak Bank. For the full show notes, transcript, and links to the best content to learn more, check out the episode page here. ----- This episode is brought to you by Tegus. Tegus is the modern research platform for leading investors, and provider of Canalyst. Tired of calculating fully-diluted shares outstanding? Access every publicly-reported datapoint and industry-specific KPI through their database of over 4,000 driveable global models handbuilt by a team of sector-focused analysts, 35+ industry comp sheets, and Excel add-ins that let you use their industry-leading data in your own spreadsheets. Tegus’ models automatically update each quarter, including hard to calculate KPIs like stock-based compensation and organic growth rates, empowering investors to bypass the friction of sourcing, building and updating models. Make efficiency your competitive advantage and take back your time today. As a listener, you can trial Canalyst by Tegus for free by visiting tegus.co/patrick. ----- Business Breakdowns is a property of Colossus, LLC. For more episodes of Business Breakdowns, visit joincolossus.com/episodes. Stay up to date on all our podcasts by signing up to Colossus Weekly, our quick dive every Sunday highlighting the top business and investing concepts from our podcasts and the best of what we read that week. Sign up here. Follow us on Twitter: @JoinColossus | @patrick_oshag | @jspujji | @zbfuss | @ReustleMatt | @domcooke Show Notes (00:02:16) - (First question) - The unique market opportunity that the founders saw when starting this business (00:04:39) - How Live Oak differentiated its approach to make a more successful business model (00:06:03) - How they approached the SBA loan program differently (00:09:04) - The Live Oak sales strategy (00:10:06) - Their strategy for trading partially guaranteed government-backed loans (00:12:12) - Overcoming challenges to attract clients to specialized loans (00:15:44) - A brief history of Chip Mahan’s career (00:20:23) - Chip’s technology-centric approach without relying on physical locations (00:22:49) - Traditional banking security with high-upside ventures, contrasting with neo banks (00:27:51) - The balance between the traditional lending business and technology-focused ventures (00:31:48) - How Live Oak intends to scale the business (00:36:52) - How the surge in SBA programs during COVID impacted Live Oak (00:40:02) - Handling the effects of the Silicon Valley Bank collapse (00:42:32) - The strategy for deposit growth and how pivotal is it for the bank's competitiveness (00:46:13) - How Live Oak navigates threats from entities employing similar strategies (00:53:36) - The significance of Chip Mahan's role and his influence on the organization's future (00:56:43) - Potential risks that Live Oak faces (00:59:44) - Lessons learned from researching Live Oak