College of Science & Engineering Alumni Newsletter

Spring 2000

From Physics to Credit: a Tale of Entrepreneurship in Cyberspace
How two former physics classmates built one of the most valuable online finance properties and defied the IPO craze is known as “the leader in online credit”. The first company to design, develop and successfully market secure consumer credit reports over the Internet has provided its customers with personalized tools to manage their individual credit online since 1997. The firm is a pure Internet play, yet you cannot find its stock on the NASDAQ.
    With thousands of affiliates and co-brand partners, including Yahoo! and Microsoft, runs the largest online financial services affiliate network, built in less than 16 months, reaching a massive number of consumers with offers for individual credit reports, credit information, credit management tools and loan referrals. It maintains long-term exclusive relationships with such Internet financial services leaders as DaimlerChrysler Services (debis) AG, Ford Motor Credit, Mellon Bank, First Union Corp., Digital Insight and E-Loan.
    The company has won numerous industry and media distinctions, including Smart Computing's Web's Best Bank and Investment Sites Award, the Top 20 Financial Services Innovators list from the Online Banking Report, and Yahoo! Internet Life Incredibly Useful Sites.
    Behind are two 29 year-old San Francisco State University former physics classmates, I.O.A. "Ike" Eze (BS ’92, Mechanical Engineering) and Arash Saffarnia (BS ’91, Physics; BS ’94, Mathematics and Computer Science). They started in October 1996 with a simple, but powerful idea: provide consumers with their credit information before they begin shopping for such big-ticket items as a home or car, or searching for an apartment.
    "We wanted from the beginning to revolutionize how consumers think about credit," says Eze, co-founder and Chairman. "The idea was to make it easy for everyone to confidentially access, monitor and use their personal credit information with a few clicks of a mouse."
    Previously, this information was difficult to acquire, and often entailed days of waiting for a credit bureau to send a written report. The situation proved particularly frustrating for consumers who were denied credit but wouldn’t immediately know why. telescoped that process down to a few minutes and extended the service with such innovative features as an online credit analyzer providing a free projection of consumers' credit status and borrowing potential.
    A key factor in immediate success was proprietary, a multi-step authentication that protects consumers from having unauthorized persons gain access to this highly personal information. Just one day after launching a competing online credit reports service in August 1997, credit bureau Experian pulled its service from the Web because of technical glitches that resulted in more than one customer receiving someone else’s credit report. The episode and ensuing public criticism over privacy concerns left the entire credit industry scrambling for cover, giving an undisputed leadership in the online credit space.
"Credit reports contain significant information on more than 190 million Americans, every adult in the United States," adds Saffarnia, co-founder and Chief Operating Officer. "Our early challenge was to carry that information to the entitled recipient over a secure connection in seconds."
Arash Saffarnia   Saffarnia's previous endeavors had indeed prepared him for such a challenge. The native of Iran and recipient of three B.S. degrees -- computer science, applied mathematics and astrophysics -- was working towards a Ph. D in physics when he landed a coveted internship at Lawrence Berkeley Laboratory’s (LBL) Advanced Light Source group and was asked to do some research on the Internet. His next job left Saffarnia well suited for developing the software that would provide QSpace customers with a secure environment to conduct their transactions.
     After leaving LBL, Saffarnia became a software engineer at Hughes Itek Reconnaissance Systems, where he developed custom applications for U.S. military communications satellites and for commercial clients worldwide.
     Saffarnia also worked on custom software and hardware developed to transmit secure data across T1 and T2 high-bandwidth telecommunication lines. In addition, he was responsible for porting large industrial-grade applications from MS-DOS to the UNIX/Solaris environment and worked closely with Cisco Systems and Silicon Graphics to upgrade their communications backbones.
I.O.A. Ike Eze   In the meantime Eze, an Osberg Scholar, had landed his first job as Special Project Engineer at Pacific Bell. There he developed a novel procedure for predicting the risk of failure on operation-critical switching and building systems, which Pacific Bell still uses at its central offices throughout California.
The Nigerian-born Eze received his introduction to the Internet on a special assignment for Bechtel Corp., where he went to work as a Marketing and Business Specialist, overseeing construction projects and developing strategies for demilitarization in Eastern Europe and China, after leaving Pacific Bell. His analysis showed the Internet could provide Bechtel National’s Marketing and Business Development Group with a competitive advantage in contract management.
     The two college chums stumbled onto the burgeoning world of e-commerce almost by accident. Intending to return to graduate school after their first professional exposure, they were looking to start a portable business they could run on campus from a laptop computer. One day a friend complained about the frustrations of paying for too many credit checks while looking for an apartment.
“We thought ‘wouldn’t it be great if you could somehow go on line and get your credit report’,” Eze recalls. “It just seemed like exactly the type of service the Internet was designed to provide.”
    They went to work within weeks, putting together the blueprint for a secure document delivery system over the Internet. The next step was to convince credit bureaus that the procedure would work flawlessly. They successfully went live in July 1997 after raising $100,000 from a private investor, 18 months of intensive lobbying, and a few technical improvements. The speed and ease of use of captured the attention of the e-commerce world like a storm.
    Eze and Saffarnia immediately knew they had a successful service, but no business. They decided to build one. Over a year of talks with the credit bureaus had convinced them that they should address the fundamentals of establishing a strong company, instead of succumbing to the attractive proposition of instant wealth, which was the prevailing culture amid the rapid fire of IPOs. Rejecting several buyout offers and the "built-to-flip" mind-set advocated by VCs, they kept on adding tangible value around their service, bringing together a world class team, working diligently to build strong partnerships, improving customers' experience, and keeping their eyes on the bottom line in order to conserve cash.
    This strategy paid off in the summer of 1998 when Bill Melton and Steve Crocker, the founders of CyberCash, injected $2.5 million of their own money into, the only time the company substantially raised cash since its creation, and Yahoo! agreed to provide online credit reports to its users in an exclusive multi-year deal that was ranked by the Online Banking Report among the top 10 online financial services milestones of 1998. It didn't take long for the news to spread like wildfire, spurring demand for similar partnerships from dozens of Websites. was prepared to respond with a scalable Web architecture that allowed its technical team to automate the creation of co-branded sites. Officially launching its affiliate program on December 1, 1998, the company has multiplied its online partners over 100 times since January 1999, broken the million users ceiling and introduced several new services.
    Now employing 35, rates as the best overall online credit site; mainly because of its intuitive Website, strong customer service which can answer all consumer e-mail complaints within 24 hours, up front offers and individual customer profiles allowing users to repurchase credit reports or apply for loans with a single click. A monthly newsletter informs consumers about credit in general and the institutions that store credit information, as well as credit fraud and protection. Online Loan Referrals provide a side-by-side comparison of loan offers from some of the nation's leading Internet lenders such as E-Loan, iOwn, CarFinance and NextCard.
    On the business side, chose the wisdom of pursuing a goal of profitability from its inception. Proceeds from its lucrative credit reports business were utilized to develop a loan decisioning engine which will be used by hundreds of community banks and expand the reach of its core service. Shying away from the expensive advertising that characterizes the marketing of Internet companies, the firm saved millions of dollars in equity and patiently built a strong distribution network that positions its services in front of Web surfers who are the most likely to need it better than any competitor.
Who said the laws of physics and business are so different? Business velocity is a function of displacement in a certain direction over a certain period of time. IPO? Eze and Saffarnia don't say no to the option. For now, their company has clearly made the significant contribution they set it to achieve back in 1996 and inspired a few copycats in the process -- millions of Americans ordered their credit reports online in 1999. They continue to build to withstand competition and deliver sustained value, with a commitment for a long-term view and allegiance to the customer.

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Updated by Lannie Nguyen-Tang on August 3rd, 2000