FinTech Profile: Kabbage, the fast-growing unicorn
[image: Kathryn Petralia and Rob Frohwei]
This week FinTech Magazine looks at American fintech Kabbage, the innovative cash flow unicorn.
[image: Kathryn Petralia and Rob Frohwei]
Fintech company Kabbage is a business lender founded in 2008 by Kathryn Petralia, Rob Frohwein and Marc Gorlin. Kabbage has a particular focus on lending to small companies. The company has ascended to unicorn status after a US$1bn valuation; an achievement that also places Petralia as the 97th most powerful woman in the world. But what exactly separates Kabbage from its competitors?
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- Read the latest edition of FinTech Magazine, here!
The Forbes Fintech 50 2019-listed company uses innovative AI technology to make small business lending both more efficient and more profitable. Kabbage is capable of making loan decisions in 10 minutes, rather than the weeks that banks take. According to a survey by the Federal Reserve Banks survey on small businesses, online lender use has grown exponentially, from 19% in 2016 to 32% last year, meaning business looks good for Kabbage. Since it was formed, the fintech has lent as much as $8bn and continues to evolve rapidly as it launches new cash flow needs prediction tools. All Kabbage business loans are issued by Celtic Bank, a Utah-Chartered Industrial Bank, Member FDIC.
In an interview with Kathryn Petralia, Kabbage and Eric Schurenberg, Fast Company and Inc, Petralia shared that about 80% of the loans are approved in under eight minutes from companies that are generating around $5,000 a month.
Be sure to check out the interview for more on how Kabbage leverages data to achieve these fast approval times.
For more information on all topics for FinTech, please take a look at the latest edition of FinTech magazine.
Robinhood faces $35mn fine from New York DFS
The company’s crypto division was issued with a wrist slap in 2020, following the red flagging of several “matters requiring attention”. Robinhood revealed it had reached a settlement with the New York State Department of Financial Services regarding the issues, which related to “alleged violations” of cybersecurity and anti-money laundering rules.
The news follows on from the announcement earlier this week that the trading platform favoured by armchair investors, which almost broke Wall Street earlier this year, has an expected valuation of $35bn following its IPO.
Critics of the platform say Robinhood encourages “risky behaviour” among inexperienced (armchair) investors. The app has also been criticised for not informing customers that much of its profits are generated by routing their trades to Wall Street firms taking the other side, or so-called "payment for order flow."
Robinhood said last month they expected the DFS fine to be at the $15mn mark, adding it would be “the bottom of the range for our probable loss in this matter”. The $35mn penalty is on top of the record $70mn Robinhood incurred from US financial regulator FINRA in June, for “lax vetting and outages.”
However, the settlement indicates the company’s IPO will go ahead as planned, despite initial concerns the investigation could see the float delayed until later this year.
Robinhood floats imminent
Despite the regulatory hiccups, Robinhood priced its IPO between US$38-US$42 per share, giving the platform the US$35bn valuation and analysts predict the firm’s debut on the Nasdaq could occur as early as next week.
Robinhood democratising investment
Launched in 2013 by Tenev and Bhatt, who were Stanford University roommates, Robinhood’s founders will retain most of the voting rights after the IPO. Bhatt reportedly holds 39% of the voting power of outstanding stock, while Tenev holds 26.2%.
The online brokerage, which came under fire for its handling of the GameStop trading debacle, which saw the platform limit stocks to investors, states its mission is to “democratise” investing and is one of the most highly anticipated IPOs of the year.
Robinhood was valued at $11.7bn in autumn 2020 following a private equity funding drive. The new valuation will mean represent a three-fold increase in the company’s market value in less than 12 months.