As a former chief privacy officer and privacy wonk, I understand and appreciate the value of data, privacy, compliance, and governance. The Fair Credit Reporting Act of 1970 (FCRA) is a favorite law of mine (for those of us that collect favorite pieces of legislation). The FCRA wisely refrains from restricting the availability of data, but rightly restricts its use for certain sensitive decisions, like those involving credit, housing, insurance, and employment — the famed FCRA permissible purpose. It is truly a landmark piece of legislation that has stood the test of time.
That’s why I’m excited to announce our investment in Teller, which is on a mission to decentralize lending markets, offering both secured and unsecured loans. Teller has developed a data-driven limit order book model to facilitate third-party decentralized lending — one that doesn’t rely on overcollaterization.
Overcollaterization is a key reason why DeFi loans have not gone mainstream — why borrow money if you already have several times the amount you want to borrow? The Teller protocol is a decentralized platform — effectively a marketplace — for assessing consumer credit risk, which unlocks on-chain unsecured lending for consumers. The unlock is done by facilitating direct consumer provisioning of financial data. The Teller protocol provides flexibility for lending marketplaces launched atop Teller’s software to fit within FCRA compliance requirements. For example, to support an FCRA permissible purpose, the flow of off-chain data is appended to a loan request by the borrower. Marketplace owners can then enable said borrowers to opt-in to retrieve data about their profile from an API endpoint and can share it with a lender.
What’s so compelling is that the Teller team is building a much-needed infrastructure link between traditional finance and decentralized finance (DeFi) by facilitating the use of established scoring systems to determine credit worthiness. Teller’s protocol efficiently integrates with data providers to provide access to money markets, as well as other DeFi applications — all built on the Teller protocol.
Essentially, Teller is bridging “off-chain” credit scoring to “on-chain” DeFi transactions. It’s somehow both logical and inevitable that Teller, a DeFi startup, is disrupting traditional finance products with traditional finance tools. By incorporating risk assessment, the Teller protocol is able to facilitate a marketplace for unsecured loans without a collateral requirement, as well as secured loans requiring collateral but a lower interest rate depending on credit worthiness. With this flexibility, the Teller protocol greatly increases consumers’ accessibility to DeFi loans. What’s more, borrowers can offer deposits and earn interest from repaid loans.
Based in San Francisco, California, Teller is led by CEO and founder Ryan Berkun, an Andreessen Horowitz cryptocurrency fellow and a successful serial blockchain entrepreneur. To accelerate Teller’s mission, Ryan has assembled a first-class team of industry experts from companies such as Coinbase, TD Bank, Consensys, CitiBank, Tesla, IBM and others.
Part of our Toyota Ventures Frontier Fund, this investment in Teller marks our first foray into fintech, which is one of the newest areas of our recently expanded thesis. We’re excited to explore this new territory with the Teller team by participating in the company’s strategic round, alongside lead investor Blockchain Capital, as well as Franklin Templeton, Bessemer Venture Partners, Upstart Network, Signum Capital and United Overseas Bank. Visit the Teller website or the Toyota Ventures portfolio page to learn more.