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Most Indians can’t access credit from formal financial institutions because they don’t have a credit score of any form to prove their creditworthiness.
As an alternative, they look at informal institutions such as pawn shops or more recently, apps that offer loans without any paperwork but could charge interest rates as high as 1,000% and threaten anyone in your phone’s contact list in case of delays in repayment.
(Google caught wind of this recently, and last month removed hundreds of such apps from the Play Store in India. But it wasn’t until several people committed suicide in the country in an attempt to save themselves from embarrassment from family, colleagues and society.)
Deepak Abbot and Nitin Misra, two former executives of Paytm, India’s most valuable startup, believe that this problem can be solved for many by using an asset that has been sitting idly in nearly 200 million homes in the country: Gold.
For generations, Indians across the socio-economic spectrum have preferred to stash their savings — or at least a part of it — in the form of gold. In fact, such is the demand for gold in India (Indians stockpile more gold than citizens in any other country), that the South Asian nation is also the world’s third-largest importer of this precious metal.
But once most Indians have bought gold, they don’t really do much with it other than hoarding and getting it off circulation, thereby dragging down the economy. According to estimates by the World Gold Council, Indians have stashed 25,000 tons of gold, whose value today is over $1.4 trillion.
Monetizing even a third of it can add 2% to the GDP growth rate, analysts say. Banks and other financial institutions love gold as it’s a great secure asset whose value has only grown over the decades.
New Delhi has made several efforts, too, to get stashed gold back in circulation through initiatives such as the gold monetization scheme, but it hasn’t had much success with it so far.
The core challenge with convincing people to part ways with their gold is that it’s an emotional asset, said Misra and Abbot in an interview with TechCrunch. Gold jewellery is a show of strength and pride in India, and families pass on their reserve to future generations.
“Irrespective of your state, religion, community, in India, gold has a certain auspicious sentiment attached to it. You worship it. Even when tax concession and premium price is offered to someone, they can’t fathom the idea of their necklaces and other jewellery being melted and going away,” said Misra.
The other challenge is that even when someone absolutely needs to sell their gold, which is often their last resort, to attend a family emergency or other urgent and unavoidable cause, the process of selling it is an awkward and embarrassing experience for many because of the stigma of pawning their family’s precious property.
In recent years, a handful of firms and startups — in collaboration with banks — have attempted to remove this stigma by visiting the customer at their doorstep to some success.
Abbot and Misra, pictured above, think they have a better approach and broader idea.
Many people in India keep their gold stash and other precious items in a safe locker at a bank that can charge as high as $65 a month for this service. (Banks require customers to pay the fee annually, however.) There are some downsides to using a bank’s locker: Accessing this locker is a long-process and can easily take half of your day, if not more. There’s also no insurance protection on items people keep in the locker. Customers are also required to put up a security deposit of a few hundred dollars to avail this service — and, there is also a long-waiting period before people can even avail this service.
Through their newfound startup indiagold, Abbot and Misra are offering customers a similar locker service for as little as $1.36 a month, which also includes full insurance coverage. The idea, the duo explained, is to make it easier and convenient for people to secure their previous metal reserve.
“You sign up on indiagold app, our agents come to your house, inspect and weigh the gold, and put it in a tamper proof bag. We also attach an RFID sticker to the bag, which once scanned, can detect if there was any attempt to open it. They then put the bag inside a steel box, which is locked by the customer with their fingerprint. And all of this is being captured through a body camera by one of our agents, which is streaming the feed in real-time to the customer as they leave the premise to the designated vault location,” said Misra.
With crime rates going up, very few people bark at the idea of securing their jewelries and especially when they know that their property is being insured, the duo said. Once they have deposited their gold stash with indiagold, the startup displays the real-time value of their property and offers a line of credit that could be accessed within seconds.
“It’s fine if the customer doesn’t want a loan, but should they ever need it, they have a zero-touch option available. They know that their gold is secured in a locker with their fingerprint, so their jewellery is not going to be melted or broken. If they ever need a line of credit, they can avail it in 30 seconds without talking to anyone, or even having someone quietly visit their home,” he said.
“If they have deposited multiple jewellery items, they can avail loan against just some of them. Say if the person knows that they need to use some necklace in an event soon, they can take a loan against other items in that case. And we charge at max 1% interest rate on the loan,” he added.
This is just part of the problem that indiagold, which kickstarted its operation late last year, is trying to address.
It has built a platform that determines the credit worthiness of its customers, and provides APIs to banks and other lenders who are trying to reach this untapped market.
The startup, which is currently operational in Delhi-NCR, recently raised $2 million in a financing round led by Leo Capital, with participation from high-profile investors including Kunal Shah of Cred, Amrish Rau of PineLabs, Kunal Bahl and Rohit Bansal of Snapdeal, Ashneer Grover and Bhavik Koladiya of BharatPe, Miten Sampat of Cred and MX Player, Sameer Mehta of Boat, Ashish Sharma of Innoven Capital, Ankit Agarwal of Alteria Capital, Rahul Soota of MyMoneyMantra, Ramakant Sharma of Livspace, and Blume Founders Fund.
“We think this is the only way this huge market can really be addressed, and now we are beginning to scale our efforts,” said Misra.
Source: https://techcrunch.com/2021/02/04/former-paytm-execs-team-up-indiagold/
We talk a lot these days about the future of work and the proliferation of new and better tools for distributed workforces, but companies focused on developing fleet management software — even if they have not really been viewed as “tech startups” — have been working on this problem for many years already. Today, one of the older players in the field is announcing its first significant round of investment, a sign both of how investors are taking more notice of these B2B players, and how the companies themselves are seeing a new opportunity for growth.
BigChange, a UK startup that builds fleet management software to help track and direct jobs to those on the go whose “offices” tend to be vehicles, has closed a round of £75 million ($102 million at today’s rates). U.S. investor Great Hill Partners.
The company has built a business by tapping into the advances of technology to build apps for field service engineers and those who manage their jobs, workers who in the past might have used phone calls and paperwork to manage how they work.
“I founded BigChange to revolutionise mobile workforce management and bring it into the 21st century. Our platform eliminates paperwork, dramatically cuts carbon, creates efficiency, promotes safer driving and means that engineers are spending less time on the roads or filling out forms and more time completing jobs,” said founder and CEO Martin Port in a statement. “We are incredibly excited to partner with Great Hill and leverage their successful track-record scaling vertical and enterprise software companies both in the UK and overseas.”
BigChange said that Great Hill’s stake values the company at £100 million (or $136 million). One report points to part of that funding being a secondary transaction, with Port pocketing £48 million of that. The company has been around since 2012 and appears to be profitable. It has raised very little in funding (around $2 million) before this, at one point trying to raise an angel round but cancelling the process before it completed, according to filings tracked by PitchBook.
As the technology industry continues to become essentially a part of every other industry in the world, this deal is notable as a sign of how its boundaries are expanding and getting more blurred.
BigChange is not a London startup, nor from the Cambridge or Oxford areas, nor from Bristol or anywhere in the south. It’s from the north, specifically Leeds — a city that has an impressive number of startups in it even if these have not had anything like the funding or attention that startups in cities and areas in the South have attracted. (One eye-catching exception is the online store Pharmacy2U: the Leeds startup has been backed by Atomico, BGF and others: given the interest of companies like Amazon to grow in this space, it’s likely one to watch.)
One of the big themes in technology right now is how a lot of the action is getting decentralised — a result of many of us now working remotely to stave off the spread of Covid-19, many people using that situation to reconsider whether they need to be living in any specific place at all, and subsequently choosing to relocate from expensive regions like the Bay Area to other places for better quality of life.
There are of course other cities like Manchester, Edinburg, Cardiff and more in the U.K. with technology ecosystems (just as there have been across many cities in the U.S. for years). But when one of these, this time out of Leeds, attracts a significant funding round, it points to the potential of something similar playing out in the U.K., too, with not just talent but more money going into regions beyond the usual suspects.
The other part of the decentralisation story here focuses on what BigChange is actually building.
Here, it’s one of the many companies that have dived into the area of building apps and larger pieces of software aimed not at “knowledge workers” but those who do not sit at desks, are on the move, and tend to work with their hands. For those who are on the road, it has apps to better manage their jobs and routes (which it calls JourneyWatch). For those back in the dispatch part of the operations, it has an app to track them better and use the software to balance the jobs and gain further analytics from the work (sold as JobWatch). These work on ruggedised devices and lean on SaaS architecture for distribution, and there are some 50,000 people across some 1,500 organizations using its apps today, with those customers located around the world, but with a large proportion of them in the U.K. itself.
BigChange is not the only company targeting workers in the field. We covered a significant funding round for another one of them out of North America, Jobber, which builds software for service professionals, just last month. Others tapping into the opportunity of bringing tech to a wider audience beyond knowledge workers include Hover (technology and a wider set of tools for home repair people to source materials, make pricing and work estimates, and run the administration of their businesses) and GoSite (a platform to help all kinds of SMBs — the key factor being that many of them are coming online for the first time — build out and run their businesses). Others in this specific area include Klipboard, Azuga, ServiceTitan, ServiceMax and more.
You might recognise the name Great Hill Partners as the PE firm that has taken majority stakes in a range of media companies like Gizmodo, Ziff Davis (way back when) and Storyblocks, and backed companies like The Real Real and Wayfair. In this case, the company was attracted by how BigChange was being adopted by a very wide range of industries that fall under “field service” as part of their workload.
“Unlike niche players that focus on smaller customers and specific sub-verticals, Martin and his accomplished team have built a flexible, all-in-one platform for field service professionals and operators,” said Drew Loucks, a partner at Great Hill Partners, in a statement. “BigChange’s technology is differentiated not only by its ability to serve commercial and residential clients of nearly any scale or vertical, but also by its award-winning product development and customer service capabilities.”
It’s been a year since I covered ManoMano, the French e-commerce platform focused on DIY, home improvement and gardening products. And 2020 has been a successful years as the company’s gross merchandise volume doubled to €1.2 billion ($1.45 billion at today’s rate).
ManoMano’s sales are also accelerating as the company reported a 50% increase in 2019 gross merchandise volume compared to 2018.
When it comes to “softer” metrics, the company now attracts 50 million unique visitors per month, which represents a 70% year-over-year increase. There are 7 million active clients on the platform — that’s a 100% increase.
In addition to France, ManoMano is operating in Spain, Italy, Germany, the U.K. and Belgium. In 2021, the company plans to double down on Northern Europe (Germany and the U.K.) and improve the experience for both merchants and customers.
France still represents 60% of the company’s sales volume. And the company is currently profitable on this market if you look at this segment independently from the rest of the company.
While ManoMano operates a marketplace, it also offers a fulfillment service for third-party retailers. The company is also growing nicely on the professional segment with its ManoManoPro vertical.
The startup has raised $125 million in 2019 and $139 million in 2020. It is still actively hiring and growing the team. There are currently 650 employees and the company could work with 1,000 people at the end of 2021.
Relationships can be messy, including between startup founders and their venture investors. But in a case that takes messy to an extreme, an insurtech company in Santa Monica, Calif. called Sure is alleging that its Series A investor used privileged information to provide to a New York-based startup called Boost that the venture firm incubated and that quickly evolved into a competitor to Sure.
Sure further assets that the venture firm — 29-year-old IA Capital Group of New York — has continued to “harass” Sure over information rights that it is no longer entitled to receive. As for why the firm would bother, Sure’s founder and CEO, Wayne Slavin, suggests that it’s because its growth is outpacing that of Boost. “We’ve grown headcount almost 50% through COVID,” says Slavin. Sure now has annual recurring revenue in the “double digit millions” and is profitable, he adds. Boost, on the other hand, is “losing employees,” he insists. (According to LinkedIn, Boost, founded in 2017, has 30 employees and no job openings; Sure, founded in 2013, has 62 employees and three job openings.)
Andy Lerner, a managing partner with IA Capital who has been with the firm since 1995, disputes Sure’s characterization of events. “It’s very important that we did not invest knowingly in two companies that were direct competitors,” he said earlier today when asked about Sure’s claims.
Alex Maffeo, a former investor with IA Capital Group who sat on Sure’s board before incubating Boost, then leaving venture to become its CEO, said in response to Sure’s claims: “We have no knowledge of the situation between Sure and IA Capital, nor do we receive any information about any of the companies in IA’s portfolio. I haven’t worked at the firm for almost four years now, and Boost has been focused on the same mission to power insurtech startups and other digital distribution partners from the start. We have always and continue to wish Wayne and his team nothing but the best as both of our companies thrive in our respective lanes.”
So what went so awry here? The conflict between the two sides dates back to nearly 2017, when IA Capital led an $8 million Series A round for Sure, writing the company a $2 million check from a fund whose sole limited parter is the insurance giant Prudential.
Lerner says that at the time, Sure was a “mobile insurance distributor,” one that was focused on items in transit, including, “flight insurance, smart phone insurance, baggage insurance.”
Slavin says this is false and asserts that Sure — which sells its software as a service to large companies like Tesla, Intuit, Mastercard, and other customers that subscribe to its software-as-a-service to run their digital insurance programs — had already begun working instead on an embedded insurance API strategy soon after its seed round closed in 2015.
That Boost offers the same service today could be coincidence, but Slavin doesn’t think so.
In fact, according to both sides, a rift began to emerge soon after IA Capital, which invests solely in insuretech startups, began working on an internal program called “Project Boost” led by Maffeo.
The original idea, says Slavin, was for this would-be company to offer insurtech startups the capital needed to quickly bring new insurance products to market, and for it to raise $40 million toward this end. When a big round didn’t materialize, however, IA Capital and Maffeo pivoted and, with seed funding from IA Capital, Maffeo resigned as an investor and joined what became Boost Insurance as CEO.
The problem, says Slavin, is that without discussing these moves with Sure, Boost quickly began to “drift in our lane.”
To Slavin, this was worrisome, given that Maffeo had spent almost a full year on the Sure board and understood its prospects, some of the intricacies of its tech, and what was on its roadmap. It made the only move it could, says Slavin: it decided with its board to invoke a provision of its investment documents with IA Capital that enabled it to stop providing IA Capital with the same level of information to which it was entitled earlier. By late 2019, it stopped sending IA Capital anything at all.
That hasn’t sat so well with Lerner, who maintains that Sure and Boost “aren’t that similar,” and that, in any case, because “once in a while they overlap,” his firm hopped off the board when Sure closed its Series B round, a $12.5 million financing led by the publicly traded insurance holding company W. R. Berkley.
More, says Lerner, after a “back and forth,” IA Capital agreed to accept a more bare-bones “income statement and balance sheet, so we [could] value and report on Sure to our LPs every quarter. We didn’t ask for any sensitive information or technical information or who its customers are. We basically just wanted financial information to do our audit and value our stake, and Sure said they wanted to send us zero information.”
With some animus on both sides, what happens from here is the biggest question. While Slavin was willing to quietly endure the “nightmare that we’re living and that [IA Capital] just won’t acknowledge,” he says, a surprise letter from IA Capital’s attorneys a few days before Christmas — one that asked for private shareholder information — was going too far, he says. For one thing, earlier this week, he wrote to all of Sure’s shareholders and told them about such these behind-the-scenes wranglings for the first time.
Through Sure’s attorney, Evan Bienstock of Fenwick & West, also told IA Capital that if its own investor, Prudential, wants more information about Sure, Sure is happy to provide it to the insurance giant directly. (Prudential did not respond to a request for comment this afternoon.)
“I probably should have stood up to the bully way sooner,” says Slavin. “But it’s really hard when, as the founder, you know you might need that reference check. You might need that gatekeeper to help you along, even though they’re not necessarily looking out for the interests of the company and the interests of the other shareholders.”
Lerner meanwhile suggests it’s all been a big misunderstanding. Asked why IA Capital hasn’t responded to Sure following its response to the firm’s information request, Lerner said today that IA Capital was “preparing a response to that just two days ago,” and it remains unfinished.
He added that IA Capital wants to “have a great relationship with [Sure]. We regret that there’s a dispute. We just want them to send us the minimal information so we can audit and do our report to our LPs in the future.”
Said Lerner: “I think we’re reasonable, and we wanted to work things out. They’re an insuretech that seems to be doing well, and we’re a large insuretech VC, and we could certainly be helpful to them.”
Asked whether IA Capital couldn’t simply sell its shares to existing shareholders, or let Sure buy them back in order to resolve the situation, Lerner claimed his venture firm would be willing to sell its shares, but he said it would first “need some information to evaluate what’s a fair price.”
Yet Slavin, who says Sure has bumped up against Boost twice to win recent deals, says he doesn’t see how that happens at this point. Too much damage has been done. Besides, he says, “Andy can discern revenue run rates from a financial statement; he can figure out how big our contracts are based on what he’s asking.”
And so it drags on for all parties.
Sure has raised $23.1 million in funding to date, including from Menlo Ventures and ff Venture Capital.
Boost has meanwhile raised $17 million, including from Coatue, Greycroft, and Tusk Venture Partners.
Slavin says that IA Capital owns less than 5% of Sure. Lerner today declined to say how much of Boost that IA Capital owns.
Affirm, Afterpay, Klarna, Quadpay. These are some of the big global players in the buy now, pay later (BNPL) movement. They allow shoppers to purchase products online and pay in installments with nominal or no fees, and have become more prominent due to how the pandemic accelerated e-commerce market growth around the world.
Credit card companies have filled in this gap for a long time. But the problem is credit cards rely on exorbitant fees, leading people to debt in the long run. While the pandemic left many jobless, it taught millennials and Gen Zers — a growing demographic with more than $200 billion in spending power — the hard way of sorting out their debt issues. In turn, a number of them have become debt-averse and increased their demand for better financing options.
A 2020 poll carried out by Motley Fool surveyed 1,800+ people on why U.S. consumers use BNPL services. From the survey, 39% of the respondents said they used BNPL services to avoid paying credit card interest rates, while 16.3% said they don’t like to use credit cards and 14% said their credit cards were maxed out.
To millennials, there’s no incentive to own a credit card these days. A shift of preference to buy products on credit at the point-of-sale is on the rise; $680 billion will be spent by global consumers using online POS finance or BNPL over e-commerce channels by 2025.
Yet, as established players continue to have thousands of merchants and millions of users on their platforms, BNPL services are just picking up in Africa.
In a continent where debit cards (not credit) are prevalent, the upcoming players are primarily lending companies who have found a way to assess their customers’ credit risk via technology. Gathering data from partnerships with merchants, they use consumers’ shopping habits and purchasing power to drive their BNPL ambitions.
How these platforms assess credit risk
Last week, Nigerian digital bank Carbon introduced Carbon Zero, a product that lets customers purchase electronics and gadgets while paying in small installments at a 0% interest rate. However, before a purchase is made, a percentage of the total cost is paid upfront. After that, customers can pay the remaining price over six months.
There are different reasons why such services hardly exist on the continent. For one, the country’s credit infrastructure is still a work in progress, and most of its citizens have limited purchasing power. So how does Carbon plan to assess risk?
The company started in 2012 as a digital lender. But it has since grown to become one of the country’s few digital banks providing different financial services to its more than 659,000 customers. With extensive experience and a track record of providing loans to Nigerians (in 2020, its loan disbursement volume was $63 million), Carbon has found itself in pole position to enter the buy now, pay later market with Carbon Zero.
“We do not believe that a firm without a track record of lending can provide a similar service, except they have a significant amount of capital to burn. Carbon has been lending in Nigeria for nearly 10 years, so we have a lot of credit history of our customers, and we believe we can assess new customers very well,” Chijioke Dozie, the company’s CEO, told TechCrunch.
Dozie says Carbon Zero hopes to be the embodiment of the promise made to its customers years ago to embed finance in their everyday purchase. But there’s a benchmark to who these customers are. According to the company, Carbon Zero can only be accessed by customers who earn at least ₦200,000 ($500) monthly, representing a small amount of the population.
The case of finding a market need and product-market fit was slightly different for Egyptian digital lending platform Shahry. In 2019, co-founders Sherif ElRakabawy and Mohamed Ewis, while running Yaoota — Egypt’s largest shopping engine and price comparison website — noticed that one of the most frequent requests they got from users was the option to buy products and pay for them later. Simultaneously, the Egyptian pound was experiencing devaluation against the dollar, thereby causing inflation.
The founders launched Shahry targeting the underbanked part of its young population to pay for products in installments, going head to head with the banks that offered similar services, albeit via credit cards.
“We’re currently the only buy now, pay later app in Egypt that offers a fully online service with no physical friction or paperwork from signing up to product home delivery,” the CEO ElRakabawy told TechCrunch.
While Shahry’s model does not require a down payment, it does require that users apply for virtual credit through their mobile app, which they use to buy products from Arab e-commerce giant Souq. The company determines creditworthiness using algorithms and a credit risk review based on customer data. The company is also working on an AI model for fully automated instant decisions.
Partnering with merchants and raising capital to compete
Depending on the vertical, BNPL helps merchants drive sales, increase conversion rates and improve transaction sizes at decent percentages.
On how it makes money, Shahry takes interests and commission fees from merchants — a method Carbon Zero adopts. Via Souq, Shahry has Amazon as an online partner, and ElRakabawy says the company plans to onboard hundreds of brick and mortar, and online, merchants later this year.
On the other hand, Carbon Zero launched with merchants that are top distributors of authentic electronics and gadgets in Nigeria. Although these merchants sell competing products, Dozie says Carbon doesn’t control the prices. The company is only concerned with financing the products as other necessities like product pricing, fulfilment and logistics is between the merchant and the customer.
“We have told merchants it’s in their best interest to provide the best pricing as we will not favour any merchant over the other. Customers can choose which Zero merchant they want to use, and they will vote with their wallet,” he said.
To embark on a BNPL journey, a company must have a functioning credit system and a large war chest. This is why the likes of Affirm and Klarna have raised billions, and Afterpay millions, of dollars in investments. While Shahry and Carbon don’t have those amounts to burn, they will make do with what they have, as is usual with most African startups — case in point, despite raising just $650,000 in pre-seed investment last year, Shahry claims to have been experiencing double-digit month-on-month growth.
But ElRakabawy reckons that financing these transactions have put a strain on the business even though the company is yet to scratch the surface of what could be achieved in the Egyptian market.
“The market is huge and still mostly underserved,” he said. “The demand is so big that we’re currently only capped by the amount of loan capital we can disburse.” In the coming months, the company plans to close a second round of funding from new and existing investors to meet the growing demand for its service.
Carbon might be looking to do the same as the company gears up for a Series B in the foreseeable future. However, what is top of mind for Dozie is not fundraising; it is how to tailor the buy now, pay later service, which has become a global phenomenon, to a harsh market like Nigeria.
“We see a lot of potential in the Nigerian market for Carbon Zero. We do not believe we can blindly copy other BNPL players like Affirm or Klarna because they operate in markets that have an established offline and online retail market,” he said. “Carbon Zero will not only adapt to its environment to offer payment experience in the retail space but also in other areas where customers need to spread payments — in travel, education, and healthcare.”
