Alternative lending was the golden child among investors around 2015, but lately, the industry seems to have fallen out of favor thanks to regulatory uncertainty and questions over the viability of some business models.
This week alone saw two examples of those concerns in action: One U.S. lawmaker, Rep. Emanuel Cleaver II (D-Mo.) sent a letter to five alternative small business lenders operating in the country, inquiring about their business practices.
“While FinTech lending can create the opportunity for more small business credit, I’m concerned that some FinTech lenders may be trapping small business owners in cycles of debt or charging higher rates to entrepreneurs of color,” Cleaver wrote, adding that he would like to know more about how these companies protect borrowers and fight discrimination.
This week also saw one alternative lender in the U.K., DueCourse, fall into administration. While the firm said it is closing one of its companies “as part of a planned restructure,” and assured that customers wouldn’t be affected, the news did raise concerns over its financial health.
All of this makes it even more surprising that alternative lending startups, by far, secured the greatest amount of investment this week – pushing half a billion dollars, in fact. It’s not all venture capital, but the investments do suggest that the FinTech industry, and its backers, aren’t quite ready to let go of the promise of alternative finance.
PYMNTS breaks down the major AltFin investment rounds below, plus covers the other B2B FinTechs that were able to secure new funding.
China-based Dianrong has a hand in both consumer and small business finance, recently striking a partnership with FnConn to launch Chained Finance, a blockchain-based supply chain finance platform. This week, the firm said it raised $220 million from investors. The round, led by Singapore fund CIG with participation from CMIG Leasing and Simone Investment Managers, will be used for R&D purposes, as well as to help Dianrong explore expansion throughout Asia. According to co-chief executive Soul Htite, Dianrong is already in talks to step into Indonesia, Singapore, Hong Kong, Taiwan, Vietnam, Malaysia and Cambodia.
Surpassing even Dianrong’s investment was Kabbage, which announced Thursday (Aug. 3) that it secured $250 million in equity funding from a subsidiary of SoftBank Group. Marking the largest equity raise for the online small business lending industry, the investment will be used to help Kabbage expand its line of loan products and explore the launch of other, non-loan services for its small business clients.
“SoftBank invests in market-leading companies that dramatically improve the customer experience and expand markets through breakthrough technology and data capabilities,” said SoftBank Managing Director David Thevenon. “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.”
Rounding out the alternative lending investments of the week is India’s Lendingkart, which announced $10 million in debt financing from Kotak Mahindra, Aditya Birla Financial Services, Tata Capital and other backers. Reports Thursday said the company plans to use the investment to expand across India into more than 700 cities as it works to bridge small businesses to lending solutions. In a statement, Lendingkart cofounder and CEO Harshvardhan Lunia said the investment will also be funneled into its loan book, and that he is “confident that our relationship with these companies will help us collectively work towards empowering SMEs through seamless availability of working capital.”
Founded by former Morgan Stanley executives, BlueteamGlobal has emerged as the newest player in the corporate cybersecurity space. Along with its launch, the company announced $125 million in funding as it looks to target North American and European enterprises with its cyber threat intelligence and managed security solutions. Reports stayed mum on where the funding came from, however.
This U.S. software-as-a-service company offers businesses software for project- and information-management specifically for architectural, engineering and construction projects, focusing on document management and cost effectiveness. Newforma said this week that it raised funds from Battery Ventures, though it didn’t say how much. The company said in addition to the investment, Battery General Partner Michael Brown, and Battery Vice President Sanjiv Kalevar, will be joining Newforma’s board.
Supply Chain Management
Kenya’s Twiga Foods offers a B2B food supply platform that caught the attention of venture capitalists with $6.3 million in Series A funding, coupled with $4 million in debt instruments, reports this week said. Wamda Capital led the round, while Omidyar Network, DOB Equity, Uqalo, 1776, Blue Haven Initiative, Alpha Muni and AHL also participated. Twiga said it will use the funds to expand its food supplier base, diversify its product portfolio and introduce additional services to those suppliers on its platform that helps businesses connect with business buyers.
Also based in the U.S. is this artificial intelligence-powered cloud management firm, Biometric, which helps businesses optimize their existing cloud computing services. The company raised $3 million in Series A funding this week led by Blume Ventures. While the company said it will use the funds to expand across North America, Biometric also has a presence in the Asia Pacific region, in which it hopes to expand as well with the funding.
Primary Data garnered interest in the industry when it created the world’s first metadata storage engine for enterprises, reports said, and this week the company landed $40 million from Pelion Venture Partners, Accel, Battery Ventures and other strategic investors. VCs provided $20 million, while the other $20 million came in the form of a line of credit, with the investment going toward sales acceleration, new product releases and more industry partnerships, reports said. In an interview with eWeek, CEO Lance Smith said, “The days of manual data management are coming to an end.”