A Sydney-founded startup aiming to disrupt Australia’s multibillion-dollar debt collection industry has secured close to $1 million in a seed round led by Westpac-backed venture capital outfit Reinventure.
Angel investors including Invoice2Go chief executive Greg Waldorf and Spotcap Australia managing director Lachlan Heussler also participated, as did investors Mike Zimmerman and Craig Carroll.
InDebted, founded by Josh Foreman in 2015, uses technology to help businesses, including SMEs, get “paid quickly and efficiently”.
“Indebted is a technology platform that facilitates and manages debt collection for businesses of all sizes,” Foreman tells StartupSmart.
In addition to providing a “primary mercantile service” of contingency-based debt collection services for SMEs, Foreman says InDebted uses a “platform-as-a-service” model for larger companies and lenders.
“We’re building a platform that is trying to reinvent the way debt collection is done,” says Foreman.
InDebted’s goal is to give the debt recovery process for debtors a more “personal touch”, says Foreman.
“We’re approaching the market in a different fashion,” he says.
“It gives us a lot of data, we heavily focus on [that].”
This data will be used to build profiles about debtors and the best way to approach them to get debts repaid, he says.
“In six to 12 months, we’ll harness that data from machine learning and AI [artificial intelligence to deliver] tailored and customised collection strategies at scale,” he says.
Indebted claims to have collected debts for “thousands” of customers, with customers using the platform to collect debts ranging from just $16 to $250,000.
But the annual $2 billion industry driven by Australian debt collection companies is not where business ends for InDebted, says Foreman.
“The platform-as-a-service market is likely significantly higher than that,” he says.
“One of the unique things that we’re doing is focusing on debt outside this market too to help other companies [with] items [like] fuel theft and recovery … we’re also having a strong focus on debt that’s written off as well,” he says.
Foreman believes there are many small businesses in Australia that don’t have the time and resources to recover micro debts because they’re “too hard to collect”. He wants to help this section of the market pursue these in a way that’s profitable.
“There’s $3 billion of debt that’s written off every year by small businesses sin Australia,” he says.
“That’s just one fragment of it.”
Reinventure general partner Kara Frederick says InDebted is offering a “tech-centric” solution for an industry that is ripe for change.
“The multibillion-dollar debt management industry today is highly fragmented, somewhat archaic, and still reliant on manual processes,” Frederick said in a statement.
“From snail mail to phone calls, numerous niche providers use outdated models for debt collection.”
The “number one” tip on fundraising
Foreman says InDebted initially secured $200,000 from high net worth individuals, including friends and family, to get started but this seed round is the first “larger scale” investment round he’s completed with an established venture capital firm.
“It’s a stressful process to go through … the number one advice I picked up is not looking at it from a money perspective, but really considering the investors you’re bringing in and [their] value,” he says.
When ambitious startups embark on the fundraising process, Foreman says the priority should be on building a board of investors and directors who align with the company’s vision.
“The better approach is assuming you can get the money, think about who can push your business to the next level,” he says.
Also critical, he says, is knowing whether external investment is the right strategy instead of bootstrapping.
“Consider why you need to raise capital and whether that aligns with business that you have,” he says.
During the fundraising process, Foreman says investors asked “typical questions” around “who are your customers” and “the vision for where the product is going” in terms of sectors.
“The most challenging question was on lifetime value of the customer for us,” he says.