July 9-10, 2013
San Francisco, CA

Tickets On Sale Now

The Samwer brothers just invested in Kreditech, a German startup that uses thousands of data points to determine how creditworthy you are.

This is the first known investment Oliver (pictured, above) and Marc Samwer, founders of the Rocket Internet incubator, have made since launching Global Founders Capital. Founded in March 2013, the firm’s €150 million fund is aimed at startups around the world.

Kreditech is a credit-scoring and micro-lending company aimed at emerging markets; it competes with UK-based Wonga. According to the website, Kreditech has grown to 30 employees, and has also procured funding from the Rocket Internet startup incubator program.

Global Founders Capital co-invested a “mid-seven digit” sum (the exact figure has not been disclosed) in the company alongside existing investors Blumberg Capital, Point Nine Capital, and Bigpoint founder Heiko Hubertz.

“This team moves faster than just about any team I have seen,” said Blumberg Capital’s Jon Soberg, who led the firm’s investment in Kreditech. “Despite that, there are countries with different regulations and customer patterns.”  Kreditech just launched in the Czech Republic and is making its way across Europe.

“It is only fitting that Oliver [Samwer] is investing in Kreditech — they scale businesses at his pace,” Soberg continued.

The Samwer brothers are controversial figures in the startup ecosystem. Serial entrepreneur Jason Calacanis tweeted the investors are “despicable thieves,” referencing the brothers’ habit of imitating high-growth web companies, from Airbnb to Pinterest, and selling the businesses back to the founders with the original idea.

Incorporated in February 2012, Kreditech isn’t the only company in the credit-scoring space. But it appears to be one of the most successful — the company said in a statement that it is already “profitable.”

Top image of Oliver Samwer via Rocket Internet

A handful of startups are taking on traditional banking structures, and providing working capital to small businesses and individuals in need.

LendUp, Lenddo and others provide small-dollars loans to individuals that are traditionally denied by Main Street’s banks. Meanwhile, Kabbage, On Deck Capital and others are focussed on small businesses — they provide capital to online retailers so they won’t need to put personal assets on the line, like a house or car.

What these startups have in common is that they use publicly available data sources — social media data, sales and credit histories, demographic information and so on — to get a better picture of the borrower.

Kabbage monitors how merchants are interacting with their customers on Facebook, selling on UPS, or managing their finances in Quickbooks (Intuit’s accounting software for SMBs), as well as their transaction data from sites like eBay, Amazon and Etsy, to determine whether to give out a loan.

CEO Rob Frohwein explained in an interview that the engineering team is analyzing all the data to make “educated guesses” about a loan applicant’s future growth. Ideally, they are looking to fund merchants who are making about $1000 a month through their online store.

“When we tap into the data, we can see how you [an online merchant] were doing six months ago and project how you might fare a year from now,” he said by phone. Kabbage provides funding to about 80 percent of the small businesses that approach them — the big question, Frohwein admits, is how large the loan should be.

Due to its data-driven approach, the Atlanta-based company beat out hundreds of applicants to be named the winner of VentureBeat’s CloudBeat Innovation Showdown competition in late Nov.

on Soberg, a financial technology-focused investor at Blumberg Capital has been keeping a close eye on the company since it launched in 2009. Kabbage is providing “a really valuable service, and the market is underserved,” he explained. In my opinion, this is one of the iconic financial technology startup companies.”

Kabbage has continued to grow — and this week, announced an expansion to the UK, its first market outside of the United States.

Marc Gorlin, chairman and cofounder, said banks are “just as challenged” at providing cash to small businesses in the UK, “as they are here.” He added, “It doesn’t hurt that it’s also the biggest e-commerce market in Europe [and] is also Ebay’s fastest growing marketplace.”

Kabbage charges an interest rate of between 2 percent and 18 percent, depending on how long the advance is unsatisfied.  Merchants can use the working capital for as short as one month to six months. Kabbage lent about $7 million to small businesses in 2011, and “about ten times that” in 2012, according to Frohwein.

The company is pulling in north of $10 million in revenues on an annualized basis.

Just like any startup, Kabbage’s executive team need to fundraise to ensure they have a pool of money to lend. They have succeeded in raising about $60 million in equity and $15 million in debt to date, and expect to close another round in the coming months.

“We are still a small business feeling the pain of needing capital to grow,” Frohwein admits. “But we’re seeing a huge growth ramp,” he said.

Kabbage has received venture capital backing from Thomvest Ventures, Mohr Davidow Ventures, BlueRun Ventures, the UPS Strategic Enterprise Fund, and SV Angel, among others.

Small business loan image via mangostock // Shutterstock 

July 9-10, 2013
San Francisco, CA

Tickets On Sale Now

Granola doesn’t often enter the sphere of venture capital, but trends in investment and consumer goods are taking granola out of the bowl, and onto the cap table.

Online investment platform SecondMarket is partnering with CircleUp, a crowdfunding platform where accredited investors can make equity investments in up-and-coming consumer product businesses.

“For crowdfunding to work, it has to be done properly with expertise, curation, and due diligence,” said SecondMarket’s senior director of sales Bill Siegel in an interview. “CircleUp is vertically oriented in the consumer goods space and know how to find good deals. With this partnership, investors will have the opportunity to look at really unique niche brands, many in the artisanal food movement. The coolest part is investors can go to a store, eat and enjoy a product,  and think its awesome. Now they can go online and bet the rest of the country will enjoy it too, and that the business will grow and become profitable.”

CircleUp combines the popularity surrounding small-production, high-quality products with the momentum of crowdfunding. VentureBeat reported in January that the platform helped five food-related businesses raised over $5 million by connecting them with investors. By getting featured on the site, these companies were able to the small companies the capital they needed to expand their production and distribution. Products included healthy fruit snacks, granola, all-natural butter alternative spreads, and kale chips.

SecondMarket is a registered broker-dealer that connects investors with investments. While investors may be interested in backing consumer goods companies, they probably don’t have expertise in this field. The partnership with CircleUp will make it easier for investors to find promising opportunities, because they are only presented with a selection of vetted, curated businesses.

“Right now, CircleUp is fielding inquiries from tons of consumer goods companies,” said Siegel. “They know where to source these deals, whereas most people have no background in this. Generalist crowdfunding platforms wouldn’t know how to originate these types of transactions that only comes with industry specialization. The second part is diligence to ensure the companies can execute and scale.”

This partnership is part of SecondMarket’s ‘investment education months’ initiative, which is designed to educate the members about “under the radar” asset classes. SecondMarket provides educational tools such as webinars and white papers, and if interested, the investors have access to investment opportunities within those classes. February is “early stage consumer goods month.” Other themes include health and education.

When asked if SecondMarket would continue to form partnerships like these, Siegel said it would only be with platforms or programs that are similarly dedicated to a specific vertical. The idea is to create specialized “stores” to shop for investments. Like shopping at a boutique rather than Walmart.

Back in November, SecondMarket announced a one-of-a-kind partnership with AngelList, a network and subscriber-base of angel investors, to let accredited investors fund startups for as little as $1000. These strategic partnerships support SecondMarket’s efforts to sustainably build out both side of its marketplace.