Daily Tech Snippet: Wednesday, November 18

• Earnest, Fueled by Growth in Student Loans, Raises $275 Million: At the start of this year, Earnest was an intriguing but small entrant in an emerging field of start-ups using new tools of data and software to analyze credit risk and make consumer loans. Its loans were typically a few thousand dollars for things like relocation expenses and professional training. But today, the lender, based in San Francisco, is growing at a torrid pace, and on Tuesday it announced a $275 million round of debt and equity to fund further expansion. Already this year, Earnest has made 50 times as many loans as last year, and it is lending from $2 million to $5 million every day, said Louis Beryl, a co-founder and chief executive. In this round, $75 million is equity investment, and $200 million is debt funding. The debt portion is led by New York Life. The new financing brings the total raised by Earnest, founded in 2013, to $325 million. Earnest now employees 165 people, up from 30 at the start of this year. Mr. Beryl says he plans to hire about 200 more employees over the next year, especially technical people like software engineers, data scientists and user-experience designers. The long-term goal, he said, is to “build a platform for the next generation of consumer financial services.” The financial service that has carried Earnest so far is refinancing student loans, which it began at the end of January. It is by far the largest part of the company’s business, and Earnest’s success points to the opportunity in services to ease the burden on the nation’s debt-laden students and recent graduates. Student loan debt is more than $1.2 trillion, growing by about 10 percent a year. Student loans are held by 40 million Americans. Earnest is focusing on the more indebted recent graduates. The size of its average refinancing loan is $70,000. The start-up says the average saving, on its refinanced loans, is $18,000, typically over 10 years. Other online lenders, like SoFi and CommonBond, have also done well in the market for refinancing student loans. But Earnest says its approach is particularly data-intensive, which it says allows it to tailor rates to individual circumstances. It asks its customers for digital links to their bank, credit card and retirement and investment accounts, and information on all their loans. “They are willing to share their data for a better consumer finance experience,” Mr. Beryl said. Earnest says it has read-only access to the information. It pledges not to store personal data or sell it. Earnest has made individual loans of more than $250,000. Traditional credit scoring, Mr. Beryl said, tends to punish high student debt loads. But such Earnest borrowers, he said, are in fields like brain surgery and dental surgery, where education is lengthy and costly. “These are people with great jobs, great educations and great earning potential,” he added. Earnest borrowers average a bit over 30-years-old — young people with slender credit histories and thus charged higher rates by traditional banks. Mr. Beryl said Earnest has had no delinquency problems on its student refinancing loans. And Mr. Beryl, 34, is one of those prompt-paying customers. Having attended Princeton, Harvard Business School and Harvard‘s Kennedy School of Government, he had $100,000 in student loans at the start of the year. He has paid down some, but still holds student loan debt, he said.

• Latest Craze for Chinese Parents: Preschool Coding Classes: Wu Pei began teaching her 6-year-old son to code this year, thinking he’d enjoy learning a skill that might boost his future job prospects in an increasingly digitized world. Now, she runs classes in Nanjing, China, and is helping more than 100 parents introduce their children to coding. The 35-year-old former computer programmer with Foxconn Technology Group is tapping growing demand from parents intent on preparing their preschoolers for a world in which Oxford University researchers predict half the jobs in some countries may be eliminated by robots and computers. Similar classes are taking off across China. Reynold Ren has taught about 150 primary school-age children in Beijing to use Scratch, a project developed by the MIT Media Lab and Arduino, which enables users to create interactive objects such as robots. In Hong Kong, about 2,500 students have taken courses that Michelle Sun runs at her First Code Academy. “Teaching the next generation coding is something that should be elevated to a strategical national importance,” said Wang Jiulin, the Xi’an-based creator of Kidscode.cn, a website that shares free information and courses. “Even today, the majority of programmers in China can only perform very basic-level tasks and there’s huge demand for top notch coders.”  

• Lyft executive says on track to hit $1 billion in gross revenue: Ride-hailing app Lyft, Uber's biggest competition in the United States, expects to reach $1 billion in gross annual revenue, the company's co-founder told Reuters. Hitting a $1 billion run rate suggests privately owned Lyft has increased market share in some U.S. cities, despite competition from Uber, a larger and better-financed ride-hailing app. Lyft's net revenue was estimated at $130 million in 2014, according to company financial documents cited by Bloomberg. By comparison, Uber's gross bookings are projected to rise to $10.84 billion this year and $26.12 billion the next, according to a presentation for potential investors seen by Reuters earlier this year. Based on those figures, Uber's 2015 net revenue would be $2 billion. Lyft, founded in 2012, calculated its $1 billion run rate from its gross bookings in October, when the company made about $83 million off of 7 million rides. That did not include Halloween, Zimmer said, which will be counted in November's figures and is one of the ride-hailing industry's busiest nights of the year. Lyft has more than a 40 percent market share in San Francisco, its hometown, and in Austin, Texas, Zimmer said. The majority of rides in San Francisco and New York City are through the Lyft Line service, a carpool feature that brings several passengers together to share a car, Lyft co-counder and Chief Executive Logan Green said last week. However, Lyft's continued growth also hinges on its ability to tap investors for money. A recent pullback in late- and mid-stage investing and the cooling IPO market are expected to make capital tougher to raise for high-priced companies.

• Microsoft sheds reputation as easy mark for hackers:  Microsoft was once the epitome of everything wrong with security in technology. Its products were so infested with vulnerabilities that the company’s co-founder, Bill Gates, once ordered all of Microsoft engineers to stop writing new code for a month and focus on fixing the bugs in software they had already built. But in recent years, Microsoft has cleaned up its act, even impressing security specialists like Mikko Hypponen, the chief research officer for F-Secure, a Finnish security company, who used to cringe at Microsoft’s practices. “They’ve changed themselves from worst in class to the best in class,” Mr. Hypponen said. “The change is complete. They started taking security very seriously.” Microsoft estimates that it now spends more than $1 billion a year on security-related initiatives, including acquisitions. It acquired three security start-ups in the last year alone, and the number of security employees at the company increased 20 percent during that time. Soon after he became Microsoft’s chief executive in February 2014, Mr. Nadella instituted a monthly meeting with security leaders from across the company. They meet to discuss industry trends and analyze threats. He also altered how Microsoft watched the Internet for hacker attacks, an effort that had been splintered among different product groups and other divisions within the company. Microsoft now pays hackers more when they find and turn over a security hole.