One of the invoice finance sector’s more nascent players is gearing up for growth.
GapCap has been steadily building up a unique working capital solution for small businesses in the UK. The platform has now announced the successful closing of a £1m Series A funding round. Alex Fenton, Founder and CEO of the platform, dropped into AltFi HQ to tell us more.
The £1m round has been financed by a number of private investors, led by a group of established banking and debt finance professionals. This is the first time that GapCap has taken on a significant injection of equity capital. Mr. Fenton outlined how the money will be spent:
“The money will be used to create unique and groundbreaking financial technology - the tech will be designed to make invoice finance faster, more flexible, easier and more transparent for UK SMEs. The cash will also used to take our business to UK SMEs, to educate business owners that there is a product out there to help with cashflow in a fast, flexible, easy and transparent way. I see selective invoice finance as an absolute no-brainer, it allows companies to sell with confidence and not worry about the payment terms.”
GapCap is not a marketplace lender. The platform began by funneling the money of a few high net worth individuals into unpaid invoices, but has recently added a £5m funding commitment from a family office to the capital mix. Alex will not be looking to court retail investors any time soon:
“I see a real issue when those analysing deals are not investing their own money, or at least the money of those who have analysed the risk protocols from a position of experience and recognise the inherent risks and specific nuances within, in our case, invoice finance.”
“Blinded by the double figure returns purported by some p2p platforms, people like my Grandma should not be putting their last five hundred quid into deals that may not been vetted in the same way that they would have been if the analyst were investing their own hard-earned cash!”
GapCap is playing in a sector within which MarketInvoice just crossed the £0.5 billion mark in terms of cumulative funds advanced, and Platform Black recently hit the £100m milestone, according to the Liberum AltFi Volume Index UK. But GapCap’s volumes have also been growing, as is reflected by the growth of the team – from 4 employees a few months ago, to 11 today. Alex confirmed that the emphasis whilst hiring has been on importing credit specialists and seasoned financial services veterans.
GapCap will be leveraging that experience in order to explore the possibility of moving into new product niches. Alex is especially intrigued by supply chain finance, which he believes has the potential to be more technology-driven than the platform’s selective invoice finance offering.
But whilst looking to expand in some new areas, GapCap has also been phasing out others. The platform used to feature a mentoring service for small business owners, but this has now been placed on the back-burner in order to allow the team to focus its energies on product.
The future looks promising for GapCap, which now has £1m of firepower with which to accelerate the platform’s development. But whilst overseeing the planned expansion, Alex is keen to ensure that GapCap retains what he describes as a “collaborative” culture:
“It is not about ‘breaking the banks’ - we believe that there have been, and remain inherent issues with the established institutions, particularly when it comes to helping out UK SMEs, and those that the banks let down completely, of course we are here to provide a solution. Alongside this however, we want to work closely with the banks and the AltFi community to provide the best solution for the SME. We can work collaboratively with other products, we can work collaboratively with providers of other products and of course work collaboratively with our clients to find the best solution, and often that won’t be GapCap on our own.”
AltFi is returning to Amsterdam for its second annual Summit in the city. The inaugural event last year was a roaring success, with key figures from across Continental Europe's alternative finance and digital banking sectors highlighted. These included Jeroen Broekema, managing director of Funding Circle Netherlands, and Mieke van Engelen, head of innovative partnerships at ABN AMRO's standalone lending platform, New10.