Private investors are continuing to plow hundreds of millions of dollars into alternative-lending startups at valuations of more than $1 billion, despite the public shares of competitors in the same sector trading below IPO prices.
Kabbage Inc. is the latest to secure backing, raising $135 million at what a source familiar with the deal told The Wall Street Journal was a valuation of more than $1 billion.
Reverence Capital Partners, a private investment firm focused on financial services companies, led the Series E round.
“Kabbage has been able to triple the size of their business during the past few years while bringing down the cost of customer acquisition,” said Reverence Managing Partner Milton Berlinski, who has agreed to join the Kabbage board. He said Kabbage has been able to reduce loan origination fees to less than $1,000 and, thanks to some announced joint ventures, will soon be able to slice that number to just a few hundred dollars.
“They are the Amazon of tech-enabled lending for small businesses,” said Mr. Berlinski.
Like competitors SoFi Inc. and Funding Circle Ltd., which have both raised late stage rounds at valuations of more than $1 billion this year, and OnDeck Capital Inc. and Lending Club Corp., both of which are trading below their IPO prices, Kabbage uses big data and automated underwriting to extend loans more quickly and easily than many traditional lenders.
For Kabbage, which says it is on track to generate more than $100 million in revenue this year, almost all its business is from small and medium-size businesses. By pulling data from social networks, accounting data, online sales, shipping and dozens of other private and public sources, Kabbage extends loans ranging from $2,000 to $100,000 to businesses in as little as seven minutes.
To read more about Kabbage’s funding, including its growth plans, read the full article in Dow Jones VentureWire.