Kabbage
has taken root in the U.S. and UK markets as a platform where small
businesses can quickly apply for and receive working capital loans —
with Kabbage making fast decisions about eligibility through a mix of
smart algorithms and online and offline data sources. Now the startup is
growing its business on two fronts. It’s kicking off a new white-label
offering where third parties will power loan services using Kabbage’s
technology. And through its first white-label partner, it is expanding
to a third market, Australia, its first in Asia Pacific.
The service in Australia will be offered through a new service called Kikka Capital that
will launch in May. Kabbage — named after a slang term for money — says
Kikka will license its platform to onboard customers, as well as
underwrite and monitor the loans. Kikka, meanwhile, will be responsible
for marketing, funding, loan servicing and other operations. The loans
will be up to $100,000 and be over a term of one to six months.
The expansion to Australia and more generally the Asia
Pacific region was something that Kabbage hinted would be coming last
year, when it raised a $50 million Series D round led by Japanese investor SoftBank Capital.
Overall, Kabbage has raised more than $460 million
in a mix of debt and equity. A large portion of that going towards
providing the capital upfront for SMBs to borrow on its platform. CEO
Rob Frohwein tells me that to date, Kabbage has loaned out $700 million
and is on track to loan out $1 billion to SMBs this year — in addition
to its newer consumer business Karrot. Altogether, the company currently
has over 40,000 active customers.
(The Karrot business, meanwhile, is growing, too: Frohwein
says it is “on track to do $250 million in loans this year and aiming
for $1 billion next year.”)
This is not the first time that Kabbage has worked in
partnership to scale up its business. In the U.S., the company has also
been partnering with banks to provide loan services; and earlier this month it announced a deal with MasterCard to power a small business loans service that MasterCard will be offering through its merchant acquiring banks.
CEO Rob Frohwein tells me that Kabbage will be making two
similar announcements along the lines of the MasterCard deal in the next
four weeks. “These deals have exclusivity and bring us into banks and
closely related financial services companies such as merchant
acquirers,” he said.
(This means that in theory, an SMB in the U.S. can now get
Kabbage loans directly through Kabbae’s own retail portal, a bank, or
through their credit card services supplier — most commonly a bank
again.)
What’s different about the Kikka service is that it will
be the first time that Kabbage is rolling this out internationally, and
also giving up its branding and involvement in the financing side of the
business to another startup, acting only as the tech partner — not
unlike what Paydiant, recently acquired by PayPal, provides in its mobile wallet services with CurrentC.
The white-label structure also means that Kabbage
can expand more rapidly to other markets. Indeed, when Kabbage announced
its $50 million Series D round and its plans for Asia nearly a year
ago, Frohwein pointed out that the expansion would not be immediate:
“Obviously many international markets pose not only regulatory
hurdles but also technology challenges,” he said at the time. “We tend
to focus on markets where there’s a strong technology infrastructure for
small businesses and where data is meaningfully available
electronically.”While this may mean that Kabbage’s own cut of the commission on these loans is smaller, it has lower costs in other areas. For example, by swapping to a white-label model, Kabbage is able to bypass some of the licensing and financing that it might have needed to undertake were it to launch a full offering, leaving these parts to local providers.
“Working with Kabbage gives us a tremendous opportunity to
bring their breakthrough lending technology platform and seamless user
experience to small businesses across Australia,” said David Brennan,
Kikka Capital founder and managing director, in a statement. “Launching
on the Kabbage platform allows us to dramatically accelerate our entry
into small business lending and to manage risk effectively by
underwriting businesses in real time, throughout the entire lifecycle of
a business.”
That Kabbage platform’s unique selling points are based
firmly around data. The company currently bases its eligibility for
loans on an applicant’s track record and data across a lot of different
services. Originally developed first for online businesses, it’s heavy
on using data from sites like eBay, Amazon, and Etsy where these SMBs
may already be doing business, plus several other sources such as
accounting software from the likes of Xero and Intuit.
Ultimately, Kabbage claims that its mix of data sources
and how it is able to parse the information gives it a more accurate
reading of suitable loan candidates and helps make it more certain that
what gets borrowed also gets repaid (a thorny issue that has foxed other online loan providers).