Kabbage, which provides fast liquidity to online merchants, has raised $30 million in Series C financing in a round led by Thomvest Ventures, the venture capital arm of Peter Thomson, director of Thomson Reuters. Previous investors, including UPS Strategic Enterprise Fund, Mohr Davidow Ventures, BlueRun Ventures, Warren Stephens and David Bonderman also contributed.
Kabbage provides online sellers on eBay, Amazon, Etsy or independent online stores the quick capital they need to stay in business. Most of these sellers can’t turn to traditional banks as the merchant cash advances tend to be small yet needed on a consistent basis. Kabbage requires the advances to be paid back in six months, and then charges an interest fee of 3 to 18 percent, depending on the risk and timeline of the advance.
The company’s secret sauce comes in the data that is uses to asses each advance. It aggregates data through a variety of online marketplaces and economic gauges, including UPS shipping data, PayPal data, and online sales information to judge the risk and opportunity of each advance.
The company is disrupting the industry by providing relatively sizable advance between $500 and $50,000 in as little as seven minutes, wired directly to a client’s PayPal account. The average advance is $8,000. The startup supports businesses doing anywhere from $50,000 to tens of millions of dollars in yearly revenue.
“Kabbage has completely redefined small business finance in less than two years,” said Thomson of Thomvest Ventures. “Its disruptive business model and technology platform is providing much needed working capital to small businesses quickly and efficiently, helping to drive the overall economy.”
Currently only available in the US, Kabbage has been growing like a weed. It currently serves over 40,000 accounts, expanding 20 to 25 percent month over month to the tune of 8 to 10 thousand new businesses on board the platform every month. The company has made over 25,000 advances, and will soon be contributing over a billion dollars to the small business economy. It stands as one of the fastest growing companies in the history of small business financing, according to Rob Frohwein, Co-founder and CEO of Kabbage.
The company will use this latest round to expand its technology and data platform, grow to serve offline business, international expansion, and hire more sales staff.
In an email interview with Red Herring, Frohwein stated that Thomvest made an ideal match due to their experience with Lending Club, the first peer-to-peer lender to register its offerings as securities with the SEC.
“The space is really heating up, and we are seeing emerging competition from many angles,” Frohwein said. “However, we believe that competition validates the space and what we are doing with Kabbage. People are realizing that small businesses truly are underserved and have been since the financial crisis. The data found in the services these merchants use is a valuable resource in understanding their businesses.”
“Online finance is the subject of a lot of interest right now, probably fueled in part to the fact that the space was ignored for so long prior to and during the global financial crisis,” he added.
Kabbage was a 2012 Red Herring Top Americas winner.