Kreditech, the consumer finance startup that focuses on lending money to “unbanked” consumers with little or no credit rating, is today announcing a hefty line of funding that it will use to expand its business. It is getting a $200 million credit line from Victory Park Capital, one of the largest in the history of online lending services.
Kreditech is not disclosing its valuation but as an estimate, we know that the company is preparing in March/April to raise a Series C round at a $750 million pre-money valuation (and as a point of comparison of growth, its $40 million Series B was at a $190 million valuation). The longer-term aim is for an IPO in two to three years, after the current pace of expansion slows down.
Indeed, the credit line comes at a time of rapid growth for Kreditech, currently at a rate of 500% in the last 12 months and 60-80% per quarter, according to its CFO Rene Griemens. “We don’t see any resistance in the market,” he says. “The appetite for the product we offer from the perspective of a relatively small startup is unlimited.”
As a measure of how significant this current credit line is as boost to the company’s service, prior to this Kreditech had only raised credit lines totalling $30 million, using its own profits to loan money out for a total run ate of $130 million. In other words, this latest injection from Victory Park is nearly ten times the amount Kreditech has ever raised in credit.
Kreditech, based out of Hamburg, Germany and co-founded by people with expertise in machine learning and aggressive e-commerce expansion (via stints at Rocket Internet) has to date built its service out mainly in Europe and says that it is profitable in those markets that it has targeted early on.
These include Spain, Poland, Czech Republic, Russia and Mexico. Going forward it has its eyes set on more growth in its established markets, but also building out in to new ones such as Brazil. In all, it estimates that its target user base is close to 4 billion users, but that
For now, the U.S. is not among that list: “We have down prioritized the U.S. because there are so many other players there. It’s a strategic de-priortization, but it’s huge opportunity so I wouldn’t rule it out.”
Similar to other consumer finance startups like Kabbage (which also raised its last $75 million credit line from Victory Park), Kreditech has built its business, and its standing with investors, on a big data approach to lending.
In the case of Kreditech, the company uses some 20,000 data points to assess a person’s suitability as a loan candidate, ranging from single lines in bank account statements to behavioral info such as a person’s interactions with web sites and also social data.
These data points are then grouped into clusters — several hundred of them — which determine how likely it is that someone will pay back a loan, before that person is approved. This rigorous process keeps the acceptance rate relatively low — 80% of applicants can be refused — but success in recouping money high.
Originally developed by the two co-founders, those algorithms are now honed by a team of engineers. In a staff of about 200 over half are programmers, Griemens tells me, while the rest are focused on business development and marketing.
The business development is an interesting area to watch: today the company is very direct-to-market but the aim will be to make more strategic partnerships in the future to target more consumers. These could involve investments and partnerships with the very banks that Kreditech is disrupting with its loan and financing offers, or potentially others that have already established relationships with consumers who are spending money.
While those potential partners do not include Amazon — Griemens says it’s not active enough (yet) in the markets that Kreditech has targeted to date — they will include “other large e-tailers who are.”
Interestingly, Amazon came up in the conversation for another reason. Griemens describes the company ambitions to become the ”Amazon for consumer funding”, positioning it as a one-stop shop for financial services.
To that end, it has just this month acquired a company out of Poland to expand its tools for consumers and its own credit rating services. “It will be a whole new experience for our customers,” he says. “What Amazon has done for commerce, we would like to do for how you manage your own finances.”
Victory Park Capital has a strong track record backing finance startups that need credit facilities, with others including Borro and Kabbage.