Latest / Bloomberg Intelligence / Kabbage's Petralia on Licensing Fintech to Global Banks (Audio)

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Kabbage's Petralia on Licensing Fintech to Global Banks (Audio) · Bloomberg Intelligence

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  Speaker 1: You're listening to Taking Stock with Kathleen Hayes and Pim
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  Speaker 1: Fox on Bloomberg Radio. Well, she may head up one
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  Speaker 1: of the most successful, fast growing fintech companies in the industry.
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  Speaker 1: Online learning the small business started back in two thousand
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  Speaker 1: nine a company called Cabbage. Katherine Bertalia actually was a
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  Speaker 1: graduate student in literature, John Steinbeck being one of her favorites.
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  Speaker 1: I don't know how she got from Steinbeck to fintech.
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  Speaker 1: Last you want to find out? Now? Cabbage is where
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  Speaker 1: the name of the company based in Atlanta, Georgia, and
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  Speaker 1: she's there today. Katherine, thanks for joining us. Thanks for
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  Speaker 1: having me so. First of all, your your small business
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  Speaker 1: lending is unique from a lot of other firms. You
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  Speaker 1: lend up to about a hundred thousand dollars. It's all online.
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  Speaker 1: Your your software quickly evaluates their readiness and it's directly
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  Speaker 1: to the senses themselves. That's correct. So how does it
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  Speaker 1: work so our customers are able to give us access
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  Speaker 1: to the data that they used to run their business.
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  Speaker 1: Have you've ever logged into some other website. With Facebook,
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  Speaker 1: it works much the same way. So we don't take
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  Speaker 1: the customers credentials, but they log into their check the account,
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  Speaker 1: or to quick books or UM their payment process or
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  Speaker 1: some other information UM some other site that they're using
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  Speaker 1: to run their business, and we're able to take that
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  Speaker 1: data to make a really rapid underwriting decision for them.
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  Speaker 1: Instead of having to produce and provide financial statements and
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  Speaker 1: UM bank statements and spend a lot of time gathering
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  Speaker 1: documentation for traditional loan we're able to do that work
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  Speaker 1: for them now. Catherine, taking a look at the operations
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  Speaker 1: of Cabbage, I understand that overall that the loans that
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  Speaker 1: you originated in the first half of the year rose
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  Speaker 1: in volume compared to but the pace of the growth
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  Speaker 1: has slowed. So in you originated about nine million dollar
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  Speaker 1: dollar's worth of loans, and I'm wondering what you can
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  Speaker 1: tell us so far about this year because you've got
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  Speaker 1: some competition, I mean, on debt capital loaned about one
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  Speaker 1: point nine billion. Yes, there are plenty of players in
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  Speaker 1: this space. The last six and nine months have certainly
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  Speaker 1: been interesting to watch from an outsider's perspective. I'm sure. UM.
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  Speaker 1: So there's certainly there's been some more crowding in the market,
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  Speaker 1: although that's really loosened up a little bit, I think
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  Speaker 1: in the last four or five months. UM. I think
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  Speaker 1: from our perspective, it's just a matter of being smart. Um,
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  Speaker 1: we're not trying to buy the market. We're trying to
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  Speaker 1: you know, move into new markets. And we really have
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  Speaker 1: two businesses. We have a direct lending business in the US,
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  Speaker 1: and we also license our technology to global financial stitutions
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  Speaker 1: banks like Santander and I m G and Scotia Bank worldwide.
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  Speaker 1: So we have our efforts focused in two places. How
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  Speaker 1: did you your companies based in Atlanta, Georgia? You did
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  Speaker 1: spend time in Silicon Valley. I'm interested to how you
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  Speaker 1: you ended up your headquarters on on the other side
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  Speaker 1: of the country. Uh and uh. Also we're good idea
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  Speaker 1: of this for this came from well, why Atlanta? We
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  Speaker 1: get asked that question a lot. Honestly, we lived there.
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  Speaker 1: It seems like a great it seems like a great place.
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  Speaker 1: Breast one a lot of people don't know is um
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  Speaker 1: it's there's everyone has to have a nickname with the
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  Speaker 1: word alley and of course our transaction alley, since of
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  Speaker 1: US payment transactions actually flow through it l into based businesses.
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  Speaker 1: When the Fed automated payments in the fifties, they did
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  Speaker 1: that in the Atlanta region and as a as a result,
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  Speaker 1: a lot of financial technology companies grew up in that area.
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  Speaker 1: So it's a great place to start a fin tech company. UM.
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  Speaker 1: And your other question about the name Cabbage, was that correct? Um? So,
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  Speaker 1: Cabbage is If you google cabbage with the C, you'll
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  Speaker 1: see the second definition of it is it's a metaphor
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  Speaker 1: for cash. It's a depression era term. Um. And we
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  Speaker 1: were looking for names, we um. We were struggling. Obviously,
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  Speaker 1: it's hard to find a domain name in Cabbage with
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  Speaker 1: the C with a lot cheaper than Cabbage with the K.
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  Speaker 1: So we picked Cabbage with the K. Now, Cabbage was
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  Speaker 1: founded in two thousand eight. I understand you've raised about
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  Speaker 1: two hundred and forty million dollars from companies such as
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  Speaker 1: Blue Run Ventures, Soft Bank Capital, Ups, Strategic Enterprise Fund
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  Speaker 1: UH late last year valuation of about a billion, and
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  Speaker 1: you raised more than a billion in debt capital today.
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  Speaker 1: Is that accurate? Um? We We don't comment publicly on
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  Speaker 1: the company valuation, but we do have um we have
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  Speaker 1: publicly announced the size of our debt facility, which is
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  Speaker 1: close to a billion dollars. And is there any update
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  Speaker 1: that you can give us on the launch of Carrot,
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  Speaker 1: which was the consumer lending business that was back in
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  Speaker 1: Have you decided that's not something that's not a way
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  Speaker 1: you want to go? Well, you know, the reason we
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  Speaker 1: launched Carrot was twofold. One of them was because we
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  Speaker 1: had a lot of people coming to our site who
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  Speaker 1: are actually consumers, not small businesses, so we wanted a
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  Speaker 1: product to serve them. But secondly, it allowed us to
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  Speaker 1: demonstrate sort of the flexibility of the platform. It was
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  Speaker 1: the first white label, if you will, launch that we
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  Speaker 1: had on the Cabbage platform and so as a result,
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  Speaker 1: that sort of catapuled this into the limelight from a
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  Speaker 1: from a software and technology perspective and what precipitated all
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  Speaker 1: of the relationships we have with these global banks. So
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  Speaker 1: we're excited about the way we were able to demonstrate
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  Speaker 1: the flexibility of the technology using Carrot, But that market
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  Speaker 1: is pretty crowded right now too, so we never intended
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  Speaker 1: to try to run out and compete with all of
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  Speaker 1: the consumer lenders in the in the world, Catherine, I'm
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  Speaker 1: interested to um ups of course, is also based in Atlanta.
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  Speaker 1: That was one of your first very clever partnerships back
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  Speaker 1: in twelve uh you entertaining agreement allowing small businesses to
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  Speaker 1: share their shipping histories with Cabbage. You've done so many
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  Speaker 1: more partnership Scotia Bank is one of your latest and
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  Speaker 1: how how is that one working? What's it? What does
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  Speaker 1: it mean for Cabbage? So the bank partnerships effectively allow
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  Speaker 1: um these large financial institutions to provide a a line
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  Speaker 1: of credit, a small business line of credit product to
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  Speaker 1: customers that they had a hard time serving before, not
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  Speaker 1: because of an underwriting process, but because they had a
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  Speaker 1: hard time serving small businesses who were looking for less
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  Speaker 1: than a hundred thousand dollars. Most banks spend the same
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  Speaker 1: amount of money to originative by thousand dollar loan is
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  Speaker 1: they want a five million dollar loan from a small
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  Speaker 1: business perspective. So the way the process works on the
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  Speaker 1: way to gather data makes it cost effective now for
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  Speaker 1: banks to serve really small businesses that were previously just
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  Speaker 1: checking account customers. They weren't borrowing customers. And so the
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  Speaker 1: way it works with the bank partners and Scotia Bank
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  Speaker 1: in particular is um it's their brand, it's their bank,
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  Speaker 1: but it's our technology in the back end of powering
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  Speaker 1: the loans they're making to their small business customers. I
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  Speaker 1: want to thank you very much for spending time with us.
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  Speaker 1: Katherine Petrolia is the co founder and the head of
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  Speaker 1: operations for Cabbage. They're based in Atlanta. Thank you for
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  Speaker 1: listening to Taking Stock. I'm pim Fox my co host
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