We’ve caught up with Waddle co-founder Leigh Dunsford to discuss future capital raising.
Surry Hills-based small business cash flow lender Waddle is reportedly looking to raise as much as $18 million in debt and equity, in its first bid for external funding since inception. Founded in July 2015 by Leigh Dunsford and Simon Creighton – owners of invoice factoring company Trade Advance – Waddle is an invoice financing platform, which has provided about 20 Australian SMEs with approximately $1 million in financing to date. I caught up with Leigh, who provided more colour around Waddle and its future fundraising plans.
Leigh was keen on highlighting that Waddle is no ordinary invoice factoring company. The platform offers a solution similar to factoring in some ways, but very different in others. As with factoring, Waddle provides funding against small businesses’ outstanding invoices. Unlike factoring solutions, businesses’ clients are never contacted or hassled by Waddle and entrepreneurs are able to skip on the paperwork headaches that historically plague the factoring process.
The company offers its services via cloud accounting software platforms, which include the likes of MYOB's AccountRight and Intuit's QuickBooks. Once users link up with the platform via their accounting application, Waddle calculates a "borrowing base" (the total amount of eligible collateral) based on the business’ data. The platform then establishes a perpetual line of credit to the business (typically is 80-85% of the borrowing base).
Moving onto the fundraising, Leigh outlined that the funds would be used for opening new lines of credit and will most likely come from venture capital funds. Leigh explained that the exact amount of the debt and equity required has not yet been decided. Indeed, the management team is as yet undecided as to whether or not the company needs a new equity partner – that might be useful for distributional purposes – or simply fresh capital to expand its operations.
"We are exploring a number of options due to the amount of interest we have generated from investors and will be re-evaluating any existing proposed structures with hopes to finalise the first round by the second half of 2016 including any further forecasts based on increasing run rates from new clients being experienced"
When asked about the current status of the Alternative Finance space in Australia, Leigh said that the space has recently witnessed a massive growth in the number of online lenders that provide working capital to small business. One of the reasons for this phenomenon is presumably the delay of local banks in providing unsecured loans to business, even though some are now partnering with the new wave of lenders, as the recent deal between MoneyPlace and Auswide Bank demonstrates.
"The SME market is starting to become more aware of online lending. Invoice financing has been more of a niche product in the past, whereas it is moving into the mainstream."
Leigh concluded with a note on Waddle’s technology. He argues that Waddle’s wholly proprietary technology-base makes it “a true FinTech platform”. All of the platform’s processes – from business screening to money lending – are completely automated. Its advanced technology allows Waddle to continuously monitor the financial health of its clients, while other players take only a snapshot of a user’s financial condition, when the loan application is made, without guaranteeing an on-going screening process.
"Waddle has built proprietary technology that leverages deep analytics from accounting & banking data to provide automated revolving credit lines to business. Waddle's software works by embedding itself between a client's cloud accounting software and customer invoice payments through tight integration with our partners. This demonstrates that our team has the ability to scale with our partners and develop new features and products as demand grows in whichever direction we are taken to maintain our best in class culture."