That last 365 days or so have been fast time for alternative lenders, particularly those that service the small business marketplace. After years of struggling in the aftermath of the financial crisis and credit crunch, firms of varying descriptions have rushed in to fill the vacuum — often with very highly visible and profitable results.
Among the latest ships to find itself at sea in the alternative lending blue ocean is iwoca, one of what has been described as “a cluster of high profile U.K. tech startups” based in London. But, according to CEO Christoph Rieche, they are getting ready to take on the world.
Founded by two former investment bankers – Rieche (from Goldman Sachs) and CTO James Dear (from Deutsche Bank) – iwoca will offer SMBs loans up to £100,000 (~$150,000). And though they’ve been growing fairly fast over the last year, they haven’t gotten much in the way of attention — yet.
“We have a very clear pricing policy — we just charge interest, no fees. No underwriting fees, no retaining fees. This gives great flexibility for our customers and they appreciate that a lot,” CFO Michael Elalouf told BI.
iwoca is not a platform lender, meaning it does not connect SMBs looking for funds with those looking to invest via small business loans. Instead, iwoca directly proffers the loans itself after evaluating the borrower with their proprietary underwriting tech that combines information it gathers from a marketplace (like Amazon and eBay) and data it nets from a relationship with banks and payment networks like Sage Pay and PayPal.
The business has grown rapidly – over 250 percent in the last year – but quietly enough that they firm is still be described by some as “under the radar.”
“We go beyond the traditional credit scoring and gather a wealth of other sources, such as banking data and industry-specific data. If you look at the eBay traders of this world, we gather data from them that would enable us to get a better credit view of our customers,” Elalouf noted.
And that idea is shaping up to be pretty popular — most recently among investors, who kicked off August 2015 with a $20 million buy-in to the lending service that some estimate have skyrocketed its total valuation into the hundreds of millions.
The big Series B round saw participation from the VC arm of Germany’s CommerzVentures, Acton Capital Partners, the Munich-based private equity and VC firm Redline Capital – all of which were previous investors.
As part of the investment round, Frank Seehaus, Managing Partner at Acton, will be joining the board as a non-executive director.
“We are impressed by iwoca’s technology platform which has the power to fundamentally disrupt the SME finance market,” Seehaus noted in a statement when the funding was announced. “With their European reach and strong execution capabilities, iwoca [is] set to become the European market leader.”
“We’re aiming to offer a flexible finance option to all of Europe’s 20 million small businesses,” Rieche noted when the funding was announced. “Raising investment from Acton and CommerzVentures is a vote of confidence in iwoca and a sign of the growing interest not only of financial investors but also of leading banks in alternative FinTech lenders.”
Interestingly, iwoca’s CEO offered that statement on his firm’s $20 million pickup from “the road.” At the time Rieche was traveling with British Prime Minister David Cameron, reportedly on an Asian tour bent on promoting the U.K. as an emerging FinTech hub.
And for its own part, iwoca says it is looking to continue growing.
“This fundraising enables us to issue $150 million (£96 million) worth of loans across our geographies and allows us to help thousands of small businesses grow thanks to our product,” Elalou said
iwoca is also reportedly looking to expand the number of nations it serves, and France and Ireland appear to be up next.