Despite the fact that the main hype in the media abroad cause online and P2P credit services for individuals (like Lending Club and Kreditech), over the last few years has grown strongly (and from the point of view of the growth potential of this sector is much more capacious) market for alternative lending for businesses. Now a range of tools is wide enough. Now our Foundation is preparing a new edition of our well-known industry study “future of Money” — especially for vc.ru we will share key findings from it (before the official publication in English). This article focuses on the alternative business financing.
If we talk about services online SME lending, in the beginning it can be noted that three of the major American player — OnDeck, Kabbage and CAN Capital have formed an Alliance ILPA, which deals with the standardization of processes and industry regulations, regulations for companies wishing to invest in debt and has launched its Smart box, compare prices and conditions on these kinds of sites. Industry consolidation is an urgent issue, and we must pay tribute to these three players for the game ahead. OnDeck, which went IPO in 2014 (however, since then the share price has fallen from $20 to $4-5), loans to SMEs as of the balance sheet, both as a marketplace, expanding the partnership with banks (JPMorgan Chase, Credit Suisse provided $ 200 billion, and small banks).
Kabbage (raised $240 million of investments, issued $2 billion of loans) is also actively working on connecting banks-partners and exploring the market of consumer lending through its subsidiary service Karrot. CAN Capital ($6 billion provided by capital in the form of 170 thousand credits for 70 thousand merchants) also focuses on partnerships with banks. Online factoring as an alternative source of capital for SMEs is also actively developing.
This kind of services are you buying the accounts receivable from its balance sheet or sell its partner banks, or the marketplace-intermediaries for the sale of it to any other participants of the market (or give credit on your balance or how the marketplace on security of accounts receivable). According Fundbox (capitalization of $325 million) in the United States over the past 12 months was not paid bills on $825 billion. And this problem is not only the United States (there is still Hijro, Fluent Network and other companies). There is and there are many services in the UK (Tungsten, Black Platform, in Due Course, MarketInvoice) and other countries (Indian Kredx, Singapore Springboard Capital, an Australian Waddle, InvoiceBazaar from UAE).
Small banks such platform (and credit, and factoring) is interesting as the possibility of placing capital and technology to automate work with SMB clients, as they cant compete with the big banks in this direction. This direction (factoring) is very complimentary for companies to automate supplier management (accounting, expenses, online billing). Taulia (drew D round from BBVA and other investors were going to IPO, but postponed it for next year), Tradeshift (850 thousands of customers, dozens of them from the list Fortune500, $10 billion of transactions per year, raised $200 million round from PayPal and other investors in assessing $500 million), even for the old business networks, Ariba (two million companies, $1 trillion of transactions that are now actively entering China) The Interface Financial Group (the old company is now actively looking for new niches for development in a rapidly changing market).
The marginality of the business associated with the automation is rather low, but the customer base is very large — which opens up great prospects not only for partnership, but also to mergers and acquisitions. Not to mention services online accounting like Xero and QuickBooks from Intuit (the majority of new services make decisions on the basis of data from these companies). Disrupt yourself — so it would be possible to characterize the challenge that now faces these giants. One gets the feeling that soon they will begin to “slip” under the weight of its own baggage.
Successful are niche offerings for specific target audiences. For example, as online lender BlueVine (raised $49 million in a D round from Citi Ventures and other investors, a portfolio of $200 million, has recently launched a related product — provision of credit lines under the brand Flex Credit), which focuses on F&B companies. Or FastPay (portfolio of $1.5 billion, has also attracted the round from Citi Ventures and other investors), which has launched a product for Enterprise FastPay for the digital media sector.
An interesting example of a company C2FO, which sells online service-factoring and opportunity, algorithms and processes of motivation (through discounts or bonuses) of your partners to pay receivables faster. The service works in 70 countries and “demotiviruet” $1 billion “early payments” (attracted the round from Citi Ventures and other investors). A number of companies allow you to automate and better manage purchasing. Basware Oyj (a public company with capitalization of € 527 million), Coupa (is recently, market capitalization $1.3 billion), beginners type Procurify.
Great prospects for the use of the blockchain. Not only for transactions but also for storage, verification, signing transactions, compliance and verification contractors, and many other related processes. And also the online insurance for such transactions, suppliers, and contractors and their debt. Actively grow services for P2B-lending like Funding Circle (over £1 billion of loans) and the Nucleus (a lot of SME products — from an overdraft to a factoring point for different segments), in the UK.
Despite the abundance of services, approaches to solving client requests, technology markets Asia, Australia, Middle East and Africa is not represented from the point of view this kind of startups. Singapore platforms such as Funding Societies, MoolahSense, Match Capital and New Union are experimenting with partnerships with major banks (DBS) to provide through their funding too small for the Bank customers and then “reselling” them when they grow to the appetites of a traditional giant. Interesting results Lendix French (became a leader in the country, having absorbed a competitor Finaquare, and it appears now even the Spanish market) and Indian Loanzen (SMEs finds that are associated with their large networks of partners as suppliers).
In addition to the well-known project in the direction of investing — AngelList (SecondMarket and SharesPost is difficult to call start-UPS), all the other projects around the world are small or medium compared to him. The upsurge of activity in this direction in Asia comes from Malaysia — this country first began to issue licenses for credinvest (Crowdo, CrowdPlus, FundedByMe). Singapore also began after Malaysia to show interest in the direction and licensed FundedHere, Crowdo and is a (in this Israeli startup also invested in the Singapore UOB Bank).
Continues to gain momentum as an independent direction, credinvest real estate. Besides well-known RealtyMogul it should be noted the new American player RealtyShares, Malaysian EthisCrowd (investments based on the rules of Islamic banking) and Chinese Dvocaitou. Interesting partnerships of this kind with exchanges as a tool for pre-IPO or stock trading technology companies with a small capitaliza relative to the main Board of the stock exchange.
SyndicateRoom c LSE and a number of Singaporean startups with the SGX (now in Asia, many startups prefer to reside on ASX). Gaining scale interaction crowdfunding platforms and large companies — Amazon opened a separate platform for trade only in goods created as a result of crowdfunding campaigns, IndieGoGo beginning of a partnership with General Electric, Harman International Industries, Hasbro and Shock Top. The giants now can in a more interactive manner and through the services that come into contact with the most open of all the innovations of users to test their new ideas and technologies. Platform get major new customers and engage their audience.
The platform begins to build around itself an ecosystem of complementary services. IndieGoGo is in equity crowdfunding (credinvest), Tilt in online transfers, bought a KickStarter crowdfunding startup for musicians and artists Drip (in this niche also has a Patreon, Show4me). However, despite the purchase of the KickStarter, to talk about consolidation in this market through M&A is too early, although judging by the number of startups in this sector is a logical step for development.
Many of them often cannibalizing each other, fighting for the same customers. The big question is the ability and plans for scaling most crowdfunding services. In addition to KickStarter, which is after Hong Kong and Singapore, is now present in 18 locations and other companies yet to show a bad level scaling. PayPal has reignited interest in the market of crowdfunding two news.
The company cancelled the guarantee for the refund of the money when buying goods via crowdfunding — which says that the market attracted a lot of attention and this constitutes a significant share of transactions for a giant, and that in this vertical, the cases of defaults in the production and delivery of the promised and prepaid products. The second was news of a rumor — about the potential purchase of one of the leaders. GoFundMe (turnover of $3 billion, market capitalization of $600 million, 25 million users). An interesting trend, when the platform attract private capital through crowdfunding or crowd-investing as, for example, CoAssets is situated on ASX (it is in fact more credinvest than the classic IPO) or CrowdCube has attracted £8 million 300 thousand of its users.
Now, many countries (including Russia) are anxious to support and accelerate the development of startup ecosystems (in particular focal in vintage), and it would be logical to place their financial support for the market not directly, but through this kind of site. For example, countries such as Singapore, Malaysia, Hong Kong, Korea, Japan provide a large number of grants and sainvesticio programs for startups. If they were given automatically when achieving any positive results from participants of the market, it would simplify market processes, making it more market-based and transparent, but also accelerated the development of ecosystems.
For example, this partnership now thinks Indonesia is implementing in Israel the project iAngels, and the Bank Santander provides a 5050 co-financing on the platform CrowdFunder.