Outfund, the revenue-based finance startup that wants to help online businesses fund growth without giving away equity, has raised £37 million in a “late seed” investment. A mixture of debt and equity, the round is led by Fuel Ventures, alongside TMT Investment.
Outfund says it will use the funds to offer larger financing to more businesses, and to invest in new finance products and grow the team. It is also committing to lending £100 million to e-commerce and subscription-based businesses in the next 12 months.
Co-founder and CEO Daniel Lipinski, who previously founded and sold logistics platform ParcelBright, says existing financing solutions for online businesses are far from optimum. “[There’s] organic growth which is slow and cumbersome; bank loans which force directors to give personal guarantees and put their home on the line; or venture capital, where you have to give up control of the business and dilute your shareholding. Sadly, none of these are aligned with company goals of revenue generation and equity retention,” he argues.
To remedy this, Outfund has set out to create a fairer — and better aligned — way for online businesses to grow fast. Based solely on revenues and performance, and targeting businesses that take online payments, Outfund offers between £10,000 and £2 million of funding. Companies must have a minimum of £10,000 monthly turnover and to have been trading for at least six months. Outfund then charges a share of revenue, starting from 5 percent and factoring in projected payback time, although the fee is fixed even if it takes longer to pay back the loan.
To assess risk before deploying funding, the fintech’s algorithm pulls information from multiple data sources to determine how a company is performing. “Outfund uses live data as the backbone of our lending decisions, making us non-biased and fast,” adds the Outfund CEO. “This allows us to provide funding of up to £2 million within 24 hours. And, as we use unfiltered data sources, this helps reduce risk on our side meaning we can provide the cheapest possible fees over the longest possible repayment period”.
On direct competitors, Lipinski cites Canada’s Clearbanc, which recently launched in the U.K. “They are based in Canada, [so] it’s a real challenge for them to provide the speed and responsiveness that a U.K.-based company like Outfund can provide,” he claims. Another relatively new local player is Uncapped.
“Outfund is very different in the market in that we provide one fixed fee from 5% regardless of how you spend the funds. For example, other providers in the space charge an increased fee if you use the funding for stock as opposed to marketing. We are focused on technology to make the best lending decisions and means we can advance the cheapest fixed rates on the market regardless of how you spend it”.
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