Tuesday, March 1, 2016

Tech startup investor David Jackson launches P2P fintech platform FundX

Prominent Sydney-based venture capital investor David Jackson has branched out from advisory positions and founded FundX to help small and medium-sized businesses get funding.

Mr Jackson, was an early stage investor in businesses such as Ingogo, Hey You, Crowd Mobile and Drive My Car and is well known in the local tech start-up industry. He is part of fintech incubator Stone & Chalk, tech accelerator BlueChilli and a board member of angel investment group Sydney Angels

Despite only being in beta testing since October, his peer-to-peer lending site has processed $1 million in loans and rejected another $5 million. FundX uses big data, machine learning and predictive algorithms to assess the risk of funding SMEs, which may have failed to secure financing from banks.

The launch follows news last November that Tyro Payments had acquired a banking licence and raised $100 million from prominent investors including Atlassian's Mike Cannon-Brookes and Tiger Global in order to take on the banks in small business lending.

Mr Jackson told The Australian Financial Review he was inspired to start FundX after finding the loans process frustrating at his 10-year-old business S2M Recruitment.

"[As well as full-time employees], we put a lot of contractors out and you have to pay them each week. We were growing a large book of contractors and we kept having to look at the cash flow in the business," he said.

"We wanted to reinvest in the business and expand into Asia, so I spoke to GE Money and realised the process in Australia is very archaic.  It was time-consuming, they wanted a lot of information and it just seemed to take a long time. If we were in a difficult cash-flow position it wouldn't have helped solve my problem."

There is a Difference Between Giving Up And Starting Over

Funding loans

It is these situations, where businesses have a good receivables book but they're waiting on cash from debtors and need money quickly, that have caused the rise of the invoice-discounting, or factoring industries.

This practice of loaning money based on the amount of income that the business is waiting to collect is not common in Australia. But Mr Jackson said it was used by about 30 per cent of small businesses in Britain.

To fund the loans, FundX raises money through sophisticated and institutional investors. But rather than let the investors pick which loans to fund, it pools the money and then decides on the loans based on a predictive risk algorithm developed in conjunction with KPMG.

Mr Jackson said there was a large opportunity for start-ups to capitalise on the banks' failure to provide short-term loans to strong small businesses.

He said Reserve Bank of Australia data demonstrated about 25,000 small business loans valued about $20 billion were being rejected needlessly by Australian banks each year. He said this was because banks did not know how to adequately assess the risk profile of the companies.

Banks struggle

"The banks are well-placed to service consumer loans and big businesses, but they struggle with start-ups," he said.

"Fintechs have two unique selling points – we use data a lot better than banks and we have a frictionless customer experience."

The FundX loans must be paid back in instalments over a maximum of 12 weeks.

The high demand from small businesses for these loans has meant that Mr Jackson has had to turn down some large deals until he raises more capital and the platform officially launches in March.

"We're talking to some high net worth individuals and family offices at the moment to organise a $10 million facility to fund the loan book," he said. "In six months we think we'll have hit the $5 million mark in loans."

It is also embarking on a capital raise to expand its small team.

FundX charges anywhere from as little as 1.5 per cent interest up to 4 per cent, based on the risk assessment.

The money is in a client's account within 24 hours and the process is automated, with the FundX platform linking directly with all major accounting platforms such as Xero, MYOB and Reckon. It has also partnered DocuSign so all contracts can be signed digitally.

"We're funding healthy businesses, we're not a last-resort lender," Mr Jackson said.

Disclaimer: Following article come from AFR

No comments:

Post a Comment