Mar
30
2020
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SMB loans platform Kabbage to furlough a ‘significant’ number of staff, close office in Bangalore

Another tech unicorn is feeling the pinch of doing business during the coronavirus pandemic. Today, Kabbage, the SoftBank-backed lending startup that uses machine learning to evaluate loan applications for small and medium businesses, is furloughing a “significant number” of its U.S. team of 500 employees, according to a memo sent to staff and seen by TechCrunch, in the wake of drastically changed business conditions for the company. It is also completely closing down its office in Bangalore, India, and executive staff is taking a “considerable” pay cut.

The announcement is effective immediately and was made to staff earlier today by way of a video conference call, as the whole company is currently remote working in the current conditions.

Kabbage is not disclosing the full number of staff that are being affected by the news (if you know, you can contact us anonymously). It’s also not putting a time frame on how long the furlough will last, but it’s going to continue providing benefits to affected employees. The intention is to bring them back on when things shift again.

“We realize this is a shock to everyone. No business in the world could have prepared for what has transpired these past few weeks and everyone has been impacted,” co-founder and CEO Rob Frohwein wrote in the memo. “The economic fallout of this virus has rattled the small business community to which Kabbage is directly linked. It’s painful to say goodbye to our friends and colleagues in Bangalore and to furlough a number of U.S. team members. While the duration of the furlough remains uncertain, please bear in mind that the full intention of furloughing is temporary. We simply have no clear idea of how long quarantining or its reverberations in the economy will last.”

Kabbage’s predicament underscores the complicated and stressful calculus faced by tech companies built around providing services to SMBs, or fintech (or both, as in the case of Kabbage).

SMBs are struggling right now in the U.S.: many operate on very short terms when it comes to finances, and closing their businesses (or seeing a drastic reduction in custom) means they will not have the cash to last 10 days without revenue, “and we’re already well past that window,” Frohwein noted in his memo.

In Kabbage’s case, that means not only are SMBs not able to be evaluated and approved for normal loans at the moment, but SMBs that already have loans out are likely facing delinquencies.

The decision to furlough is hard but in relative terms it’s good news: it was made at the eleventh hour after a period when Kabbage was considering layoffs instead.

The company has raised hundreds of millions of dollars in equity and debt, and it was in a healthy state before the coronavirus outbreak. The memo notes that the “board and our top investors are aware of the challenges we are facing and have committed to helping us through this period,” although it doesn’t specify what that means in terms of financial support for the business, and whether that support would have been there for the business as-is.

The shift to furlough from layoffs came in the wake of an announcement yesterday by Steven Mnuchin, the U.S. Secretary of the Treasury, who clarified that “any FDIC bank, any credit union, any fintech lender will be authorized” to make loans to small businesses as a part of the U.S. government’s CARE Act, the giant stimulus package that included nearly $350 billion in loan guarantees for small businesses.

While that provides much-needed relief for these businesses, the implementation of it — the Small Business Administration has already received nearly 1 million claims for disaster-relief loans since the crisis started — has been and is going to be a challenge.

That effectively opens up an opportunity for Kabbage and companies like it to revive and reorient some of its business. (Its USP was always that the AI it uses, which draws on a number of different sources of online data for the business, means a more creative, faster and more accurate assessment of loan applications than what traditional banks typically provide.) Kabbage said it is in “deep discussions” with the Treasury Department, the White House and the Small Business Administration to help expedite applications for aid.

While loans still make up the majority of Kabbage’s business, the company has been making a move to diversify its services, and in recent times it has made acquisitions and launched new services around market intelligence insights and payments services. While there has certainly been a jump in e-commerce, overall the tightening economy will have a chilling effect on the wider market, and it will be worth seeing what happens with other tech companies that focus on loans, as well as adjacent financial services.

Jul
02
2019
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Kabbage secures $200M to fuel its AI-based loans platform for small businesses

Kabbage, the AI-based small business loans platform backed by SoftBank and others, is adding more firepower to its lending machine: the Atlanta-based startup has secured an additional $200 million in the form of a revolving credit facility from an unnamed subsidiary of a large life insurance company, managed and administered by 20 Gates Management, and Atalaya Capital Management.

The money comes on the heels of a $700 million securitization Kabbage secured just three months ago and it is notable not just for its size but its terms: it’s a four-year facility, a length of time that underscores a level of confidence in the company’s performance.

Kabbage, which loans up to $250,000 in a single deal to small and medium businesses, has built a platform that harnesses the long tail of big data from across the web. It uses not just indicators from a company’s own public activities, but also sources comparative information from across a wider group of similar companies, with “2 million live data connections” currently helping to feed its algorithm.

Together, these help Kabbage determine whether to provide the loans, and at what rates. Notably, the whole process takes mere minutes, making Kabbage disruptive to the traditional route of applying for loans from banks, which can come at higher rates, often take longer to close and may never get approved.

The company was last valued at $1.2 billion in its most recent equity round from the Vision Fund in 2017, with about $500 million raised in equity to date from it and other investors, including BlueRun Ventures and Mohr Davidow Ventures. Rob Frohwein, the co-founder and CEO, confirmed to me via email that there are “no plans on the equity side right now.” We’ve asked about IPO plans and will update if we learn anything more on that front.

More importantly, alongside its equity story is the company’s business story: Kabbage has to date loaned out $7 billion in capital — amassed through securitizations and other facilities alongside that — to 185,000 businesses, and the company has seen an acceleration of business activity over the last two years. Nearly $700 million was loaned out in Q2 of this year, passing the record in Q1 of $600 million. This puts Kabbage on track to loan out between $2.4 billion and $3 billion this year.

“This transaction further diversifies Kabbage’s committed sources of funding and prepares us to meet the escalating demand for capital access among small businesses,” said Kabbage head of Capital Markets, Deepesh Jain, in a statement. “2019 has proven to be a tide-shifting year as customers accessed more than $670 million from Kabbage in Q2 2019, well surpassing our previously set record last quarter.”

While a lot of Kabbage’s business has come out of its direct consumer relationships, it’s also been expanding by way of more third-party relationships. It has white-label partnerships with banks to power their own loan offerings for SMBs, and earlier this year it was also tapped by e-commerce giant Alibaba to provide loans to its small business customers of up to $150,000 to help finance purchases, part of the latter company’s redoubled efforts to build out its business in the U.S. by way of its quiet acquisition of OpenSky.

Aug
03
2017
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Small business loan platform Kabbage nabs $250M from Softbank

 Kabbage, a company with some 115,000 customers and $3.5 billion in loans that has built an automated platform for lending money to small businesses and individuals using a large set of data points to determine a customer’s credit score, is announcing some big cabbage of its own today. SoftBank Group is investing $250 million in Kabbage — funding that Rob Frohwein, the co-founder… Read More

Mar
08
2017
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Kabbage nabs $500M for small business loans

 Kabbage, a billion-dollar startup that combines machine learning algorithms, data from public profiles on the internet and other factors to rate and then loan people money for their small businesses, is today announcing another big step up in its ambitions. The company has secured over $500 million in fixed-rate, asset-backed notes, money that it will use to expand the amount, payback… Read More

Oct
14
2015
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Loan Platform Kabbage Raises $135M At A $1B Valuation, Grows Credit Line to $900M

kabbage-money Kabbage — the online platform that loans money to businesses and individuals using a wide set of online data and algorithms to measure credit-worthiness — is growing once more. The startup based out of Atlanta has raised a Series E of $135 million, and expanded its credit facility — the money it has on hand to fulfil loans — to $900 million.
Kabbage is not… Read More

Mar
24
2015
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Kabbage’s SMB Loan Platform Moves Into Asia Pacific As A White-Label Service

white cabbage Kabbage has taken root in the U.S. and UK markets as a platform where small businesses can quickly apply for and receive working capital loans — with Kabbage making fast decisions about eligibility through a mix of smart algorithms and online and offline data sources. Now the startup is growing its business on two fronts. It’s kicking off a new white-label offering where… Read More

Sep
24
2014
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With Karrot, Kabbage Digs Into Lending Club’s And Prosper’s Consumer Loans Business

5864606684_593f2f9d8f_b Kabbage, the Atlanta-based startup that has raised hundreds of millions of dollars to build and run a money lending platform for small, online businesses, is turning over a new leaf, so to speak: today it is launching a new lending service called Karrot — its first product for consumers, is initially launching in the U.S. only. Karrot has grown (sorry) out of what CEO and co-founder… Read More

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