A fall from grace is never easy, but you’d be hard-pressed to find a better example of this than Better.com. Once lauded as a rising star in the startup sector, the online mortgage company descended into the depths of controversy kickstarted by CEO and Founder Vishal Garg less than a year ago.
While the company has struggled this year, the chief executive has remained out of the spotlight after infamously firing hundreds of employees over a Zoom call. Garg recently broke his silence in an Insider interview as he tried explaining his missteps and the recent hurdles the startup has suffered.
“Obviously, I blundered the execution of some of the downsizing,” Garg told Insider, admitting that he’s still prone to “put his foot in his mouth.”
That appeared evident in the days following his December wave of layoffs—and at points during the Insider interview.
Garg was lambasted for how he handled the wave of firings and his actions after the incident, including accusations that he made on an anonymous professional network that hundreds of the fired employees were “stealing” from the company.
According to initial Fortune reports, Garg said at least 250 people terminated worked an average of two hours a day.
“They were stealing from you and stealing from our customers who pay the bills that pay our bills. Get educated,” Garg wrote at the time, according to the reports.
The hits didn’t stop there after a leaked video of a town hall meeting that immediately followed the Zoom-Call layoffs showed the Better.com boss explaining to remaining employees why he axed their colleagues.
“We should have done what we did today, three months ago,” Garg said in the video that circulated media outlets like Fast Company and Tech Crunch on April 7.
Better.com hasn’t fully recovered since Garg’s December incident, which ultimately led him to take some time away from the company as it weathered the media storm.
Over the past nine months, the company has shed thousands of positions in the U.S. and overseas.
Aside from its botched layoffs, the online lender has also found itself on the receiving end of a whistleblower lawsuit filed by Better’s former head of sales and operations, Sarah Pierce, in June.
The lawsuit, which alleged that Garg made misleading statements regarding Better’s financial standing and market forecasts, sparked the SEC to investigate Aurora and Better’s operations, related-party transactions, and “certain matters relating to certain actions and circumstances” of the startup’s CEO.
Garg and the company have denied the allegations made in the suit, and the Better.com boss called them “baseless” in his interview.
“At a human level, I’m sad that people who started with a company right out of school in their early 20s and were able to make millions or tens of millions of dollars in cash and stock over time would go out of their way to hurt something that helped them so much,” he said.
According to Insider’s report, Garg singled out Pierce’s lawsuit while bypassing two other significant cases he is embroiled in. The report indicates that Garg is accused of defrauding a group of Cayman Islands investors by using their funds for his endeavors, including launching Better.
A voting proxy agreement with SoftBank suggests these lawsuits could affect Garg’s control of the company.
Despite the headwinds, Garg seemed hopeful that he could still lead Better.com out of the “stormy waters” and back to greener pastures.
The New York-based company announced Monday that it surpassed the $100 billion mark in loans funded since it launched seven years ago, a milestone that Garg celebrates in a recent statement.
“We are committed to building upon this so that we can ultimately make every American family’s homeownership journey cheaper, faster, easier, just plain Better,” he said in the Monday press release.
Undoubtedly, that accolade is mainly due to Better’s success over the past two years of hyperactive homebuying and refinancing activity under record-low mortgage rates, resulting in a surge in hiring and production.
The online mortgage lender struck gold during the pandemic, growing from roughly $4.9 billion in loans granted in 2019 to $58 billion in loans in 2021. It also quadrupled its workforce from approximately 2,000 employees to almost 10,000.
That proved to pay dividends, as Garg told Insider that the company had almost $1.23 billion in revenue—up 41% from 2020. While a mark of success, the rapid growth proved to be a bit much for the Better.com boss.
“To be absolutely blunt, I’ve never managed more than 10 people in my life,” Garg told the outlet, admitting to being out of his league running Better.com as it ballooned.
This proved to be a problem for the mortgage company, according to Garg.
“We lost our way,” Garg said. “It became more me than we.”
An optimistic Garg told the outlet that he still considers himself “the right leader for this company” despite the struggles the company has experienced.
While he acknowledged in the Insider interview that selling Better.com would have been an easy way out amid the company’s despair, Garg indicated that he had no intention of giving up the helm of the startup.
Instead, the Better.com CEO said he has been trying to turn things around for the startup and himself. He said he enlisted an executive coach’s help to improve his leadership skills and mitigate future mistakes.
He said the company is looking to expand its offerings with plans of building a home-auction site that would allow pre-approved mortgage holders to bid on and buy homes while skipping broker fees.
Garg thinks it could become a $100 billion segment for Better.com.
The company is also holding onto its public offering aspirations.
The digital mortgage lender has been working on going public through a SPAC merger with blank-check firm Aurora Acquisition Corp since May 2021. The deal, valued at $7.7 billion, has suffered several hurdles, including market shifts and Better’s public image calamity.
Better and Aurora recently extended the deadline for the deal from the end of September to March 2023, and Better indicated in an August SEC filing that it is also weighing other possible options that could make its public offering happen based on an August SEC filing.
While Garg’s interview with Insider may have been an effort to clear the air, some in the mortgage lending industry were left asking more questions.
“Garg’s messaging seems to be even more disconnected than ever,” says Paul Hindman, managing director at Grid Origination Services, a business process outsource firm that provides mortgage operations solutions that assist brokers, bankers, and lenders nationwide.
“Deploying endurance tactics is about change for the better and less about justifying behaviors after the fact,” Hindman adds.
In an emailed response to RISMedia, Hindman questioned Garg’s decision to wait to seek assistance until the company started struggling.
“ so many lives and livelihoods hanging in the balance, even a novice must seek advice on the vast differences in managing 10 versus 10,000,” he says. “Even when success falls out of the sky, it requires safeguarding to endure.
“Given the complexity of mortgage lending, in my opinion, any learned expertise is wasted on disconnected leaders that seem to view human resources as company property,” Hindman continues. “Think about it this way: those that join the ranks of the mortgage industry that ‘love it’ will stay the course. Need proof? Look no further than the average age of industry professionals. My point: the industry needs to support leaders that understand the irreparable harm resulting from thoughtless tactics.”
