Kabbage, which provides working capital to online merchants, is announcing that Scott Thompson, CEO of ShopRunner, former President of PayPal, and former Yahoo CEO is joining its board of directors. Considering Thompson’s experience in the payments and financial services world, this is a big win for Kabbage.
Thompson is currently the CEO of ShopRunner, a shopping network that offers an Amazon Prime-like service to merchants. Thompson joined ShopRunner shorty after he resigned from his position as CEO of Yahoo. Prior to ShopRunner, he was CEO of Yahoo. Thompson left Yahoo in May for personal reasons, amidst controversy over claims in his resume and experience. And Thompson was previously the President of PayPal from 2008 to early 2012, and prior to that he was PayPal’s Chief Technology Officer.
For background, the Atlanta-based company, which just nabbed $30 million in funding from SV Angel, Thomvest Ventures, UPS Strategic Enterprise Fund, Mohr Davidow Ventures, and others, is essentially a way for online merchants and sellers on marketplaces like eBay, Etsy, and Amazon to get capital they otherwise wouldn’t qualify for at a bank. Many small businesses and online merchants can’t receive financing from traditional banks and don’t want to risk using personal assets like a house to qualify for business loans. Kabbage is disrupting this space by providing a painless way to help these sellers access cash quickly and easily.
Kabbage uses dozens of data sources to determine seller business performance, and provides funding to businesses in fewer than seven minutes. In fact, the startup has been granted several patents for its data-crunching technology.
In terms of data analysis, Kabbage will analyze online merchants’ sales and credit history; customer traffic and reviews; and prices and inventory compared to competitors. And merchants can proactively add information to their Kabbage accounts to immediately increase their access to capital. Most recently, Kabbage started using UPS shipping data from merchants, including volume and transactional information, to decide whether a merchant qualifies for working capital. Kabbage currently supports merchants that use eBay, Amazon, Yahoo, Etsy, Shopify, Magento, and PayPal.
“Kabbage is rapidly reshaping the small business financing space in the same way that PayPal reshaped the payments space over the last decade,” said Thompson. But it’s in analyzing this data, he says, where Kabbage is doing something revolutionary. He explained to TechCrunch in an interview, “Kabbage is the next generation use of data, science and technology to get a better answer for underwriting risk than the banks use today,” he says.
In fact, Thompson compares Kabbage’s uniqueness and potential to disrupt the lending business to BillMeLater, which PayPal acquired back in 2008 for $945 million. “When we bought BillMeLater, the idea of doing transactional underwriting of consumers was very different from traditional underwriting. Kabbage is doing the exactly the same thing for small business and online merchant lending but with better data, and more immediate signals from nontraditional sources,” Thompson says.
Kabbage, which is currently only available in the U.S., has grown fairly rapidly since launch two years ago and now fuels more than $800 million in annual sales for its small-business customers. Kabbage customers also take an average of 10 advances per year to help them grow.
Thompson also highlights the huge opportunity Kabbage has with the current state of the economy and the fact that banks have pulled back on small business lending over the past year. “Kabbage is building a
set of tools for small businesses in a organized, thoughtful way and providing other options for small merchants that were not previously available,” he adds.
Kabbage plans to launch a lending service in the UK later this year and is exploring new ways to get data on both the online and offline merchant. The company faces competition from Amazon, On Deck and Capital Access Network.