Small business lending platform Kabbage secures $250 million from Softbank – TechCrunch

Cabbagea company with some 115,000 customers and $3.5 billion in loans that built an automated platform to lend money to small businesses and individuals using a large set of data points to determine the score of credit from a customer, announces a large cabbage unique to him today.

SoftBank Group is investing $250 million in Kabbage — funding that co-founder and CEO Rob Frohwein said the company plans to use to expand its US business; launch even more analytics tools to provide lending to specific verticals; expand into new markets such as Asia; and explore acquisitions to add new products to its business, such as payments.

The investment, a Series F, brings Kabbage’s total raised in equity financing to $500 million (in addition to approximately $3.5 billion in securities) and will boost the valuation of more than $500 million. billion-dollar company.

For some context: in 2015, when it raised $135 million in Series E, Kabbage entered the so-called “unicorn” startup tier with a $1 billion valuation. In an interview with TechCrunch this week, CEO and co-founder Rob Frohwein declined to name a specific number, but said this latest investment was at a “significant amount” which was over $1.25 billion. but not quite $2 billion.

Founded in Atlanta in 2009, Kabbage pioneered the concept of using big data analytics to underwrite and monitor loans: the company leverages hundreds of information sources, from from a company or individual’s public social media profiles and a company’s QuickBooks accounts, to larger macro datasets, to decide whether or not to lend money (and how much to lend ).

At a time when a number of other online small business lenders like On the bridge and Can capital stumbled under questionable business models, amid a wider upheaval in the online lending industry as a whole, Kabbage grew. Frohwein attributes this directly to its big dataset, which collectively processes some 1.5 million data connections to help make decisions.

“When the proverbial shit hit the fan in the online loan space a while back, the folks at Kabbage were nervous. All I said was “Finally! ‘” recalls Frohwein. “What happened is we now have some separation between companies that weren’t focused on creating differentiated solutions and companies that were trying to do something different. We are past the swelling stage. A little a handful of companies have differentiated themselves and I think Kabbage is one of them.

He said Kabbage is profitable in its lending business, but not yet in its platform operation – the latter is a new division launched in 2015 that essentially powers other lending businesses, alongside Kabbage’s own operation. Kabbage detail. (Clients include Kabbage itself, which has a Karrot consumer loan business, as well as major banks like ING, Santander and Scotiabank.) “As a business, we will be profitable in the fourth quarter by one point. from a GAAP perspective,” he said.

While Kabbage’s big data formula is used by several other fintech companies today – they include Kreditech (which focuses on helping build credit scores for the “unbanked” and is supported by Peter Thiel and Naspers), Fundbox (also with a long list interesting investors including Jeff Bezos) and BlueVine (supported by Citi Groupamong others) – Kabbage plans to take its own dataset to the next level.

One area will be lending for specific sectors or types of businesses: the idea here is that if you are a construction company or a restaurant you are likely to have very different cash flows, so Kabbage would like to develop ways to make loans more personalized and less full of defaults and frictions that can easily be avoided if the lender knows more about the borrower.

Today, Kabbage already boasts greater customer loyalty than many other lenders: Frohwein said that on average his customers borrow 20 times from Kabbage over three to four years: he claimed that for comparison, the industry average is 2.2 times.

We also need to keep an eye on the company’s acquisitions and greenfield product launches. Some have suggested he might try to buy OnDeck as part of a consolidation play, but our sources say that was just speculation and a more likely scenario would be to acquire companies to add new services to the platform, rather than as a game of consolidation between similar competitors.

Asked about this, Frohwein didn’t specify which new product launches or acquisitions might come first, but he did point to payments as an interesting area.

“To look at how PayPal and Square went from payment companies to small business lenders,” he noted. “There is a clear connection between how companies view these two areas of business, so it’s not a giant leap of faith for us to consider this.”

While SoftBank has been making major waves in the investment world lately with huge investments from its new $100 billion Vision Fund, this latest effort with Kabbage comes straight from the SoftBank Group (and in a way or another, $250 million suddenly seems small when you think of $100 billion). From what I understand, this could potentially be integrated into the Vision Fund later, but for now, this represents very interesting strategic opportunities for Kabbage.

These could take two general forms. First, there’s the expansion of Kabbage’s retail and platform business further into Asia (where it has so far only worked as a white-label platform partner) .

Second, there’s the ability to work with a myriad of SoftBank portfolio companies. Nothing announced so far on that front, but remember that SoftBank’s various holdings include Sprint (which has a large number of small business customers); Lyft and a number of other ride-sharing startups (another line of business that relies heavily on very small businesses: sole traders); SoFi; and much more.

In this regard, SoftBank’s investment looks like a smart bet placed on a company it thinks can operate in an attractive way across its network.

“SoftBank invests in market-leading companies that dramatically improve customer experiences and expand markets through breakthrough technology and data capabilities,” SoftBank Chief Executive David Thevenon said in a statement. “We invested in Kabbage because their unique automated lending platform leverages open data networks and best positions them to empower small businesses around the world.”

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