Deals: Online lender Kreditech closes out Series C at $103M after getting $11M from the IFC
By Ingrid Lunden for techcrunch.com
Kreditech — the German startup that offers loans and other financial services to consumers who have little or no credit history by using some 20,000 data points online to assess their suitability — has added another $11 million (€10 million) to its Series C round of funding.
This brings the total raised by Kreditech in this round to $103 million, after first announcing $92 million (€82.5 million) in September 2015.
Other investors already in the round include PayPal co-founder Peter Thiel, Amadeus Capital Partners, Värde Partners, HPE Growth Capital and Blumberg Capital. The round was led by U.S.-based private equity firm J.C. Flowers. Kreditech’s valuation remains the same as it was previously for the Series C — between €250 million and €300 million ($279 million-$335 million), according to a source close to the company. The company has raisedaround $150 million.
This latest tranche is notable because of its origin: it comes from the International Finance Corporation (IFC), a division of the World Bank group that focuses on economic development in emerging countries by financing private enterprises whose businesses can spur that development.
Other recent investments made by the IFC include a $19.3 million investment in Supermarket Grocery Supplies Private Limited, a wholesale grocery distributor in India that is also the key supplier for (and IP licensor) to BigBasket, which itself announced a $150 million raise this week.
While Kreditech is probably best known for its online lending products, this round, and the IFC funding in particular, is getting used to help grow one of its newer products, Monedo. This is a platform — and app — that not only helps people apply for and receive loans or credit, but also provides a larger set of banking products to those users. For example, in addition to the loan, Monedo is essentially a digital wallet or account where that money can be stored.
As with Kreditech’s loan platform, Monedo assesses a consumer’s suitability for credit not through traditional credit checks, but by vetting the individual online — a key process considering that many of these consumers do not have a credit history.
Rene Griemens, Kreditech’s CFO, said that this is an area where the company will also be investing to improve the climate for lending for users from emerging markets, both in terms of risk assessment and subsequently lower interest loans; and in terms of making the whole process transparent and fair.
Kreditech and the IFC are also making an effort to promote the idea of financial inclusion, helping write guidelines on responsible lending.
The IFC endorsement, and working with it on better practices, is also very significant, considering that one of the biggest criticisms of the company has been its lack of transparency both on interest rates for its loans and the product in general — practices that Kreditech seems to try to be improving as it grows.
“Most of our customers are not able to obtain credit at traditional banks,” said Alexander Graubner-Müller, Kreditech’s CEO and cofounder. “These institutions lack proper credit scoring for this segment and are unable to assess the customer risk. Through Kreditech’s technology we can perform a more precise credit rating to offer credit at fair and riskweighted conditions. With the new funding, we will continue advancing our scoring technology to continuously improve and expand our product offering.”
Part of the logic of 20,000 data points, Griemens says, is that if you have a large pool, then it gives you a better shot of a more accurate picture with data in one area offsetting a lack of information in another, which he says makes its products more accurate than that of its many competitors in the online lending and financial services space.
Kreditech today does most of its business in Poland, Spain, the Czech Republic, Mexico and Russia, but given the remit of the IFC will likely expand elsewhere.
Griemens said that 2015 revenues were €41.3m, representing growth of 100% compared to 2014.
Most of the funding round will be going towards equity in Kreditech, with a small portion of finance loans. Most are financed with debt, securitization — and a previous loand of $200 million from Victory Park.
Kreditech is also in the process of raising another very large debt round, we understand, with that round likely to close around the end of Q3.
Image: BRIAN A JACKSON/SHUTTERSTOCK
The article first appeared in Techcrunch.com