Australian alternative-lending startup Capify has secured a $135 million credit facility from Goldman Sachs, to reach more SMEs and take its business to the next level.
Launched in 2008 as one of the first alternative-lending startups in Australia, Capify has since executed more than 7,500 business financing transactions for Aussie SMEs.
The startup has about 50 staff members in its Australian offices, plus about 70 in its sister business in the UK.
But US-based founder and chief David Goldin tells StartupSmart this batch of capital is pegged to kick-start Capify’s next stage of growth, allowing him to “scale and grow the business to new highs”.
The partnership with Goldman Sachs came after Capify’s previous credit provider wound down its fund.
“Our previous provider couldn’t grow with us,” Goldin says.
And with an average transaction size of $30,000 — the majority of which are short-term loans — there’s room for Capify to grow to meet the new credit facility.
“Money is our inventory,” Goldin adds.
The funds will primarily be put towards initiatives to help “increase our partner and distribution network,” he says.
The startup will be working with brokers and partners, and ramping up its vendor financing business, he adds, with a goal to deploy $100 million in capital over the next 12 months.
A shifting landscape
As one of the first alternative lending providers to enter the Australian market, launched over 10 years ago, Capify has seen the landscape change around it.
New competitors such as GetCapital, Timelio and the lately-troubled Prospa have sprung up, and last year Capify was among six fintechs to sign a code of practice, committing to a series of best practices when dealing with SME customers.
Back in 2008, “nobody knew about alternative lending at all,” Goldin says.
“The word ‘fintech’ didn’t really exist.”
However, he welcomes new entrants into the space, saying competition has its up-sides, bringing increased awareness of what they’re trying to do.
“The vast majority of SMEs still aren’t aware that alternatives lenders or fintech exists,” he says.
Having more players helps, as “we’re all promoting the product to get the word out collaboratively”.
“Your day of reckoning will come”
Goldin hasn’t been on the Aussie alternative lending scene for over a decade without learning a thing or two, but the most pertinent piece of advice he has for other fintech startups is to keep your eye on the prize — and on profitability.
“You have to really focus,” he says.
“At some point, your day of reckoning will come, and your company has to be profitable. I’ve seen too many fintechs go out of business because they run out of money,” he adds.
At the end of the day, any business has to have people willing to pay for what they’re offering.
“There’s always the exception to the rule, but most of the time you need paying customers, and enough of them to really support the overhead of the infrastructure,” Goldin says.
Equally, and crucially, startups should not underestimate those estimates.
Rolling out new software can take longer than expected, he warns, and with technology changing so quickly, often “just when you’ve spent a lot of money to roll it out, it’s time to bring out the next version,” he adds.
“Technology can get very expensive very quickly.”