Kabbage
Definitely good for health, the American online SME lending platform Kabbage has received a 6th round investment in August 2017 at an amount of 250m USD from Softbank, a Japanese mobile communication service and network provider who also creates content for mobile internet and sells mobile phone headsets. Softbank has been investing in several Fintech companies in the recent past including SoFi in USA and Paytm in India.
Kabbage founded in 2009 by Rob Frohwein, Kathryn Petralia and Marc Gorlin, to offer an automated way of lending money to small and mid size businesses and consumers, has provided since then to more than 100,000 small businesses in USA 3,5b USD of funding.
With more than 40m USD of revenues a year and 150+ employees, Kabbage has changed the rule of the game by shifting the manual application for loans to automated procedures for businesses and consumers, using their digital data from Ebay accounts, tracking real time revenues, UPS shipping movements and social media identification such as Facebook. By using artificial intelligence and big data analysis, they combine several data resources to identify the borrowers and define their credit risk in less than 10 minutes. This is quite revolutionary given that traditional banks will ask the borrowers to fill myriad of papers and wait sometimes weeks to make a decision on their application.
SMEs are considered as the backbone of both American and European economies. For instance, in USA 30 million SMEs account for nearly 2/3 of net new private sector jobs in recent decades. So financing SMEs is one of the key drivers to revive and sustain struggling economies worldwide. Kabbage is certainly at the right space now.
The company had in total 6 investments rounds cumulating their investment resources to almost 500m USD in 2017. The company is valuated to more than 1b USD market cap this year. Recognized for its innovative business model and technology by Forbes, CNBC and Fast Company two years in a row.
Celtic Bank, a Utah-chartered lender provides the loans for Kabbage. The bank securitizes loan repayments keeping credit risks on the loans and reserving 6% in each dollar for bad dept. Kabbage has already partnered with Santander, ING, Reverence Capital Partners and Scotiabank, which invested in the company and use their technology and reach to broaden their lending activities. Kabbage is exposed to the same regulatory standards as the incumbents and help incumbents to deliver new services.
Watching the journey of Kabbage will be very exciting in the near future, hoping that SMEs space will not be as bubbly as the P2P lending given that we have lots of lessons learnt blowing in the Fintech wind.
