For years now as I speak with peers and the broader financial services industry, the topic of digital banking is front and center. The consumer side is more mature as we have seen our share of exits (Simple to BBVA) and mega raises (Chime, N26, etc) but the commercial and small business side is just getting started. I have talked to banks and fintechs alike who were waiting for the day when SMB banking would become a reality. Well, that day has finally come and in a big way. Meet Judith Erwin, President & CEO of Grasshopper Bank, the first digital commercial bank in the US.
Judith’s career journey began in 1982, a time of deep recession. At that time, this recession was the worst downturn since the depression. Interest rates were at a record high level, peaking at 21.5%, and banking was in very bad shape. Taking a job in a branch, Judith started at the very bottom of the hierarchy. Over the years to come, Judith took on new opportunities whenever they were presented and began the course of building a career.
In early 2016, Judith was approached to start a new venture bank based in NYC. Judith agreed with one caveat: it needed to have a differentiated technology strategy. After 35 years in banking, she knew exactly what was broken in commercial banking and knew it was time to make significant changes in the industry that had served her so well.
After raising an initial seed round of $15MM, the bank successfully closed on its capital round with more than $116MM, quietly opening its virtual doors in May 2019. The strategy was to build a bank from “scratch” providing a superior user experience with the most current technologies available. Judith and her fellow Grasshoppers are seeking a number of firsts: first US digital commercial bank, first new bank in NY in ten years, record-breaking bank fundraise.
Grasshopper ultimately seeks to democratize access to high-quality financial services while greatly improving the client experience. The bank’s focus is on small businesses and entrepreneurs. This historically under served segment has seen innovations roll out to consumer accounts and is hungry for a modern experience in business banking. Small businesses are also historically reliant on branches for face-to-face interactions, but Grasshopper has a plan for this — an individualized service channel where the customer and banker are on a first-name basis.
There is much more of the Grasshopper, and the larger digital commercial story, to be told. For now, I hope you enjoy this interview as much as I enjoyed making it.
Tell us more about what you do and how you moved into your space
I spent 35 years in commercial banking with the last 25 in venture banking and products. I really got into this field because I love to support entrepreneurs and investors.
What role do you play in the tech ecosystem and why is that role important?
The role I play in the ecosystem is a connector. I connect founders to funds and vice versa as well as shine the light on ecosystems that have traditionally been under served. I seek to amplify a lot of the amazing work by founders, funds, and ecosystems that are often not on people’s radar.
How has technology impacted your industry and why is this important?
Technology has leveled the playing field in many ways and democratized access to industries that were previously controlled by gatekeepers. As a result, it is now easier than ever to start a tech-enabled company. At Grasshopper, we seek to continue to move the needle forward by making it easier than ever to start your own tech venture.
What do you believe is the most exciting tech trend for 2020?
The evolution of machine learning and its ability to play a large role in reducing the time it takes to make better and faster lending decisions and providing added value through data is super exciting.
Who is a person that inspires you in the space and why?
My daughter, a new entrepreneur focused on sustainability.
What advice would you give for someone who wants to get into your space?
Start making contributions to the space as soon as possible. The industry is entering a time where it is more accepting of critical feedback and building solutions that will empower their clients.