Business Venture

Zest AI Raises $15M From Insight Partners

Illustration of piles of gold coins to represent money

Zest AI, a company that makes software for credit underwriting, has raised $15 million in a round led by Insight Partners.

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The idea behind Zest AI is to apply better math to credit underwriting. Most financial institutions are using math developed in the 1950s, CEO Mike de Vere said in an interview with Crunchbase News. By applying better math, financial institutions can optimize for fairness. Zest’s software uses artificial intelligence and machine learning to help financial institutions determine who is a trustworthy borrower.

“Through better math, you can actually start solving some pretty important problems in our society beyond just helping companies do well,” de Vere said.

The company says that banks, credit unions and companies using Zest have seen an average 20 percent increase in approval rates with risk staying the same. That means more money for the financial institutions, more people receiving the loans they apply for, and more inclusivity when it comes to lending.

Zest, which was founded in 2009 and is based in the Los Angeles area, also provides explanations for consumers about why a decision is made. So if a consumer is denied a loan, they can know exactly why.

With the new funding, Insight Managing Director Lonne Jaffe will be joining Zest’s board of directors and Insight Vice President Jon Rosenbaum will be joining as a board observer, according to a statement from the company.

Jaffe has been interested in the area of “explainable AI” for a while. For many applications, there’s no need for an explanation for why a machine made a certain decision. That’s not the  case for credit underwriting and providing loans. 

“You need to be able to show your work,” Jaffe said. “You need to be able to say ‘These are the features that resulted in the machine learning making these decisions.’” 

The process of determining creditworthiness was “weirdly simplistic,” Jaffe said. He was attracted to Zest because it was specifically tuned to loan underwriting and had the potential to make lending more equitable and inclusive.

Other investors in Zest include Lightspeed Venture Partners and Matrix Partners.

Illustration: Li-Anne Dias

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