Kabbage recently announced receiving $250 million from SoftBank Group. This Series F funding brings the total raised by Kabbage in equity funding up to $500 million and will help bump the company’s already billion-dollar-plus valuation. This marks the largest equity investment in a lender outside of China up to this time.
SoftBank has already jolted the venture capital world lately by investing billions into late-stage startups offering technology based in robotics, virtual reality, ride hailing, and new farming methods. This new deal only pushes that farther, with a stake in online lending. SoftBank had previously invested in Kabbage in 2014 and also backed consumer lending platform Social Finance Inc. in 2015.
Kabbage was founded in 2009 in Atlanta, Georgia where it was an early adopter with the concept of using big data analytics to monitor and underwrite loans. The company uses hundreds of sources of information, including social media profiles, QuickBooks accounts, and larger macro data sets to decide whether to loan money and how much to loan.
When a number of online business lenders, such as Can Capital and OnDeck, stumbled under their business models and there were larger problems in the loan industry as a whole, Kabbage continued to grow. Co-Founder Rob Frohwein believes that is based on big data play, which now crunches 1.5 million data connections to help aid in making decisions.
“When the proverbial shit hit the fan in the online lending space a little while back, people at Kabbage were nervous. All I said was, ‘finally!'” Frohwein recalled. “What’s happened is that now we have some separation between companies that were not focused on building differentiated solutions and those that are trying to do something different. We’ve gotten past the point of puffery. A small handful of companies have differentiated themselves and I think Kabbage is one of those.”
Kabbage is profitable in its loans, but not yet in platform operation, which is a new division launched in 2015 that powers other lending businesses. Kabbage plans to keep their own use of data to higher levels. One area will be in loans for specific types of businesses. The loans would be more personalized for an industry and less full of friction and defaults.
Kabbage will be using the money acquired to expand its small business lending products. Provided there is demand, they may also offer new products like payroll services and insurance. The company also plans to expand into Asia. There are current talks in place in China, India, and Japan to license its technology, according to Chief Executive Officer Rob Frohwein.
Kabbage will also be spending the next year positioning the company for a potential initial public offering. Expected revenue for 2017 is at least $200 million, which is double what was generated in 2015.
Kabbage is currently backed by Reverence Capital Partners LLC, ING Group NV, Bank of Nova Scotia, and Santander InnoVentures. Other investors have included Thomvest Ventures, BlueRun Ventures, and UPS Strategic Enterprise Fund.