After six years of ground work, data-focused SME lender Moula has plans to scale up following its recent cap raise.
The company announced a $20m Series D funding round last week led by Escala Partners. Existing investors Liberty Financial, which holds about a 20 per cent stake, and Acorn Capital also participated in the round.
While Australia’s major banks have historically steered clear of SME loans, recent years have seen an influx of new fintech startups entering the space. Moula competes for scale against companies such as Lumi and ASX-listed Prospa (ASX:PGL).
The aim is deploy sophisticated tech offerings that provide small businesses faster access to capital to help foster growth and liquidity.
Allegos said the market opportunity was based around providing SME customers two things; convenience and certainty.
“But that also needs to be conveyed in the context of responsible and transparent lending,” he told Stockhead.
“Notwithstanding that we make it easier and quicker to obtain funding, you need to be able to do it in a responsible manner. And that really only comes by virtue of understanding the underlying credit you’re claiming to.”
In comments accompanying the recent cap raise, Acorn Capital CEO Robert Routley cited Moula’s data-driven decision capability as a competitive advantage that helped it stand out from other players in the space.
The company deploys Microsoft’s DataStax platform — part of the IT giant’s Azure cloud-computing service — to crunch the numbers and build a propreity database.
In their simplest form, Allegos said the major cloud providers such as Azure and AWS provided an effecting modelling platform than could be easily updated with new data insights.
“In reality there’s a lot more work that goes into it. In our context, once you’ve run through 20,000-plus applications of SME lending opportunities, you have enough information to be able to not only assess underlying credit but also price it, and offer it in most suitable form,” he said.
“It only comes from experience – it’s all well and good having the model and data capability. But after six years of operating we’re only really starting to come to market with these numbers, because prior to that we didn’t have the extent of data to legitimately say ‘we’ve got a real machine learning capability here’.”
With a six-year data set and $20m of fresh capital in the bank, Moula plans to double-down on product development and beef up its engineering team.
The company will also recruit more sales staff to help drive growth, after more than doubling the size of its loan book in 2019 and processing over 20,000 business loan applications.
Allegos said the Moula service played into a broad cross-section of different industries, from trades and construction-linked sectors (“having the data capability there is critical”) to professional services such as accounting and law firms.
More broadly, he said the growth of SME lending was an example of how improved technology could create a net economic benefit.
“I think the best example of that is technology being utilised to manage how capital is obtained — what previously took six weeks now takes a day or two,” he said.
“That enables efficiencies that previously weren’t attainable, and I think you’re seeing that even in more traditional industries.”