Think Finance and Sequoia Capital: A Risky Relationship

Think Finance, formerly known as TC Decision Sciences, was a fintech company that operated in the subprime lending space. They offered a variety of financial products, including payday loans, installment loans, and lines of credit, often targeted at individuals with poor credit histories. Their business model relied heavily on online marketing and data analytics to reach potential borrowers. Sequoia Capital, a renowned venture capital firm with a long and successful track record of investing in technology giants like Apple, Google, and PayPal, invested in Think Finance. This investment initially appeared to be a strategic move, leveraging Sequoia’s expertise to help Think Finance grow and disrupt the traditional lending market. Sequoia’s involvement provided Think Finance with credibility, access to capital, and valuable mentorship. However, the relationship between Think Finance and Sequoia Capital ultimately proved to be problematic and detrimental to Sequoia’s reputation. Think Finance’s business practices came under intense scrutiny from regulators and consumer advocacy groups, who alleged that the company engaged in predatory lending practices. These allegations centered around high interest rates, hidden fees, and deceptive marketing tactics that trapped vulnerable borrowers in cycles of debt. The legal battles mounted, with Think Finance facing lawsuits and regulatory investigations in multiple states. These actions alleged violations of state usury laws and consumer protection regulations. The company faced claims of operating as a “rent-a-tribe” scheme, partnering with Native American tribes to claim sovereign immunity and evade state regulations on payday lending. Sequoia Capital’s association with Think Finance became a major source of criticism. The venture capital firm, known for its ethical investing principles, faced accusations of overlooking or downplaying the ethical concerns surrounding Think Finance’s business model in pursuit of financial returns. The reputational damage for Sequoia Capital was significant. The association tarnished their image as a responsible and ethical investor. The controversy raised questions about the due diligence process employed by Sequoia and their commitment to responsible investing. Ultimately, Think Finance filed for bankruptcy in 2017 amidst the legal and regulatory challenges. The bankruptcy proceedings revealed further details about the company’s questionable business practices and the extent of Sequoia Capital’s involvement. The Think Finance and Sequoia Capital saga serves as a cautionary tale about the importance of ethical considerations in investment decisions. It highlights the potential risks associated with investing in companies that operate in ethically questionable sectors, even if the potential for financial gain is substantial. The case underscores the need for venture capital firms to conduct thorough due diligence, not only on the financial viability of a company but also on its ethical standards and compliance with relevant regulations. The experience likely prompted Sequoia Capital and other venture capital firms to re-evaluate their investment criteria and prioritize ethical considerations in their investment decisions.