Bolstr, an SME peer-to-peer lender, has raised $1.65 million in seed funding. The amount raised was increased from the original $1.5 million target. The investors include Montage Ventures, Kapor Capital. BRW Trading Group, Merrick Ventures and Wilson, Sonsini, Goodrich and Rosati.
Bolstr was founded in 2011 by two former investment bankers, Charlie Tribbett and Larry Baker. It aims to help small business access capital from a pool of accredited investors by utilising an innovative revenue share structure. This means that the payment back to the investors is not a set interest rate and the owners of the business can maintain 100% of the equity in their business. Instead each monthly payment back to investors is sized by a set percentage of gross sales, this is obviously beneficial for the borrowers but also provides investors with liquidity early and often.
Payments from the borrowers are made until investors make a set return back on their investments. So the time frame of each loan is variable and there are no prepayment penalties. This can be extremely valuable for seasonal businesses that are investing in growth initiatives. It also provides investors with return upside as a business grows revenue and repays investors back sooner than anticipated.
Charlie Tribbett, Co Founder of Bolstr, commented:
“Marketplace lending is a $1 trillion market (LendingClub, OnDeck Capital etc.), and specifically, the landscape for small business funding is quickly shifting away from traditional banks and more so to platforms like Bolstr.”
Larry Baker, Co-Founder of Bolstr, added:
“Bolstr leverages technology and data science to approve and bund businesses up to $500,000 rapidly, with flexible deal terms, while giving accredited investors first time access to private, liquid investment opportunities.”
Bolstr differentiates itself and attracts investors via is proprietary underwriting process, which is designed to efficiently evaluate and understand credit risk for each business. Other data points they analyse include traditional factors such as liquidity ratios and credit scores but they also incorporate factors such Yelp ratings and reviews on social media.
Currently Bolstr has a good track record. Every company listed on the platform has achieved its target within five days, there have been zero defaults, and 64% of the investors within any given deal have been new investors. Bolstr does not take a transaction-based fee but charges a fee to each business that is approved to list on the platform.
