Wonga.com, the startup that has started to change the face of short-term lending in the UK, has closed a $22.25m round of funding led by Accel Partners and Greylock Partners, with the support of its existing investor, Balderton Capital.
Founded by Errol Damelin and Jonty Hurwitz, Wonga provides cash advances to UK consumers, helping solve occasional cash flow problems. It’s provided nearly 100,000 flexible cash advances of up to 30 days since it launched eleven months ago.
The killer USP is that Wonga is the first consumer finance company to fully automate the lending process, providing a completely online credit solution around the clock. Via a Web interface applicants select exactly how much cash they need, up to £750. They can then determine their own price by then selecting how many days they want the money for. The company’s risk and decision technology means applicants receive an instant answer, and if they’re successful, Wonga deposits cash into their bank account within an hour, at any time of day or night. However, it’s not cheap. Interest on a £100 loan for 10 days costs £1 a day. So including fees, a £100 loan for 10 days would have to be repaid at £115.91. APR is generally more than 2,000pc. The maximum loan is £750 and the maximum term is 30 days.
Damelin attributes Wonga’s rapid profitability to its technical innovation and desire to “amaze” its customers. He says Wonga has been built to scale, and plans to expand very rapidly now that the funding is in place.
Accel has a track record of backing some of the fastest growth companies of the last two decades, Facebook included, while Greylock Partners is a long-term investor. Between these approaches, we can expect to see rapid development of the service offering, and expansion into global markets.
Given the global economic situation and the need for a collective rebooting of the lending models that make the world turn, it’s good to see VCs supporting a disruptive lender that makes no bones about focusing on responsible lending and a sustainable business model.