By Yolanda Redrup for AFR
Fintech start-up Bigstone has raised $3 million from a range of investors, including ASX-listed diversified investments and venture capital firm CVC, to grow its small business lending marketplace and offer an alternative to the big banks.
The seed funding round is the first capital raised by the start-up, which connects small businesses wanting to borrow up to $250,000 with non-bank lenders.
Other major investors in the round were the founders of Bangkok-based fund Lighthouse Venture Partners Paniti Junhasavasdikul and Narith Phadungchai, in addition to private investors.
Bigstone co-founder and chief executive Boyd Pederson said the capital would be used to fuel expansion, grow its marketing team and to continue developing the marketplace.
“Our aspirations are high, but we have to prove that we can underwrite loans first … so the focus is on marketing, hiring people … expanding our reach and growing into advisory channels. For the next 12 months we expect to be building the bulk of the business here,” Mr Pederson said.
“We have aspirations to grow this business beyond Australia [to south-east Asia]. The working capital funding gap for small businesses amounts to $2.4 trillion worldwide and that’s growing.”
Small businesses using the platform receive a rate within minutes of applying, approval or rejection within hours and funds within two days.
The lenders on Bigstone have to be proven sophisticated or wholesale investors and they are able to build up their own portfolios, reflective of their risk appetite.
To generate revenue, Bigstone takes a percentage, ranging from 1-5 per cent of the total amount loaned to a borrower, and a 1 per cent cut of the total earnings an investor makes on a loan. This is only paid once the investors and borrowers receive the money.
“We want to provide information symmetry between borrowers and lenders. We want to grow it into a liquid market for supply and demand of funds for small business,” Mr Pederson said.
“We offer two things – a simple, fast loan which is funded by us matching small businesses with lenders that have better risk-adjusted loans, and the second is we do a better job in analysing the risk and risk worthiness of borrowers, so we make sure they get a rate that is custom fitted to the business.”
The business only launched in June, but already Bigstone has received about $6 million in loan requests and it has signed up a number of online brokers to act as “introducers”, wherein they will get a share of the proceeds at a low rate.
By the end of the year, Bigstone is hoping to have financed $10 million worth of loans to more than 200 small businesses.
CVC has previously invested in listed companies such as Cellnet Group and Villa World Group and in 2007 provided seed funding to Concise Asset Management.
CVC chief executive Sandy Beard said she was first attracted to Bigstone by its leadership team. It consists of a team of five, who have worked across companies such as Microsoft, Boston Consulting Group, NAB, Westpac, Deloitte and Linklaters.
“It’s not often you find a team as strong and committed to a long-term goal as this, with the necessary experience to successfully execute their strategies,” she said.
“CVC makes long-term patient capital investments, and there is a significant opportunity for Bigstone to take advantage of a market that is being disrupted by marketplace lenders and rapidly grow their business.”
A University of Sydney and KPMG study released earlier this year found that Australia’s online alternative finance market grew by 320 per cent in 2015 to $460 million, making it the third largest market in the Asia Pacific behind China and Japan.
But operating in a fast-growing market means that Bigstone faces some fierce competition from other fintech start-ups providing access to small business loans such as Valiant, Moula and ThinCats.
Mr Pederson said the $3 million raised would last the company for at least 12 months.
First appeared at AFR