Archive for the ‘borrower’ tag
A website called Lynx2Games.com has a new approach to buying and sharing that could help consumers avoid paying full price for video games.
When people buy a games on the site, they’re buying them in pairs — there’s a “borrower” and a “buyer” (friends can make a purchase together, or Lynx2Games can match up consumers interested in the same product). The borrower pays 25 percent and gets the game for the first three weeks, then they ship it to the buyer, who pays 75 percent and then gets to keep the game indefinitely. The average new console game costs $60, so that breaks down to $15/$45.
If you just want to play the game once, you can probably do that, and you pay less money than you would to rent (Redbox charges $2 per day, for example). And if you don’t care about getting the game right away, you can get it slightly later and slightly used for a 25 percent discount.
Lynx2Games is the latest service from startup LynxSquare. Co-founder and CEO Zul Momin says this kind of trading is happening already, when a customer buys a game then sells it back to a retailer like Game Stop when they’re finished. Usually the retailer makes most of the money on the deal (because it buys the game for a fraction of the initial cost, then sells it for near full price), with the first and second buyer only seeing small savings. Lynx2Games takes the reseller out of the equation.
LynxSquare is applying this model to several different products — the company plans to re-launch Lynx2Books, Lynx2Movies, and Lynx2Music in the six weeks. It emerged from the Austin Technology Incubator and has raised $750,000 from incubators.
It’s a cool model, but I wondered if it would become obsolete in a few years, as more and more games, books, movies, and music are consumed digitally. Momin says the secondary video game market is a $2 billion industry, so there’s no immediate threat. As for the long-term, he plans to launch a digital sharing product in 2013.
Today you can help someone escape poverty by trying out microlending platform Kiva, and it won’t cost you a dime. Go to kiva.org/free where Reid Hoffman has put up $1 million of his money to let 40,000 people give $25 microloans to help those in need start farms and general stores that can support their families. The Kiva Free Trials program hopes to introduce people to the positive impact of microfinance philanthropy, and get them to lend their own money next time.
TechCrunch is proud to work with Kiva to officially announce the Free Trials, and we’re challenging you our readers to see if we can loan out $250,000 by the end of the day. So visit kiva.org/free and share it with friends. Let’s use entrepreneurship to makes the world a better place.
For those less familiar, Kiva allows you to choose between profiles of borrowers in need of start up capital to launch a small business. Unlike a typical charity, once the business is bringing in money you get yours back and can withdraw it or reinvest in another borrower. Today it’s even easier since you’re investing Reid Hoffman’s money, so you can “get the Kiva experience but you don’t have to pull out your wallet right away” says president Premal Shah.
Kiva’s been around for 5.5 years and Shaw tells me that so far 700,000 lenders have microloaned over $291 million. 98.9% of loaned money is returned, so it’s a very high-leverage, low-risk form of philanthropy that often doesn’t actually cost anything. In the Free Trials, Reid will be the one getting his money back, but you’ll still get monthly updates on how the borrower you chose is starting to support themselves. The program is only for new Kiva users. If you’ve already given a microloan, you can still invite friends.
Reid Hoffman tells me the principle he lives by is “Do something that’s not for yourself everyday”. The LinkedIn co-founder chose to fund the free trials because they “engage lots of people with what they can do to alleviate poverty, help the entrepreneurs to take control of their lives, and you can repeat and scale it. We build a better future by empowering individuals to empower themselves.”
A previous pilot of the Free Trial program lent out $200,000 in a day, and 15% of lenders came back and invested their own money. We think TechCrunch readers and the whole tech community can come together at kiva.org/free to beat both of those records and use Kiva to change the world for years to come. And all our high net-worth readers can email firstname.lastname@example.org to learn about putting up money to power more free trials.
We’ve seen an increasing number of sharing platforms appear over the years, as consumers seek to lend and borrow rarely used items while earning and saving some extra cash. NeighborGoods and StuffPal are two efforts we’ve seen designed to facilitate such exchanges, and recently we came across another: Share Some Sugar.
Now in beta, Ohio-based Share Some Sugar aims to enable neighbors to “share what you have and borrow what you need”. Toward that end, owners and borrowers both begin by signing up with the site and creating a profile, including the neighborhood in which they live. Owners also indicate what kinds of items they have to share and the rates they’d like to be paid by those who borrow them. Those in search of a particular object can then search the site by ZIP code and item. When they find an offer that sounds good, they can send a request through the site; if accepted, owner and borrower can meet to exchange the item. Once the transaction is complete, both sides can leave feedback for the other. The video below explains Share Some Sugar in more detail:
With benefits for ownership-averse transumers, communities and the environment, the sharing trend appears to be going strong. What’s more, neighborhood orientated platforms also enable users to save money on delivery costs by exchanging goods in person. An idea to emulate in your area?
Spotted by: Alice Revel
In this economic climate, many small businesses do not qualify for loans based on the standards imposed by banks and financial institutions. For fledgling businesses, the establishment doesn’t have enough cash flow, revenue or credit to qualify for a loan. Many times, entrepreneurs have to put up personal assets as collateral for loans, which can be problematic and risky. The fact is working capital is difficult to get from banks unless a business has perfect credit.
Capital Access Network (CAN), a company that gives small businesses access to credit and working capital and helps solve the problem outlines above, is announcing this morning that it has raised $30 million from Accel Partners. As part of the transaction, Accel partner, Kevin Efrusy will join Credit Access’s board of directors, and Accel vice president, John Locke, will join as an observer.
CAN constitutes the largest, non-bank alternative capital provider to small businesses in the US. The company uses its own real-time platform and risk scoring models to provide capital to small and medium-sized businesses in the US and Latin America and has funded over $2 billion in capital to SMB’s under the brands NewLogic Business Loans and AdvanceMe. This represents roughly 100,000 distinct small business finance transactions. This year alone, CAN will fund over $600 million in loans to small businesses.
CAN uses a variety of data points to deem a business worthy of credit or capital apart from the traditional criteria. CAN’s proprietary underwriting algorithms will churn through its vast data stacks of historical merchant demographic, firmographic, psychographic and social and behavioral profiles seeking and seasoning new behavioral and synthetic risk indicators and recombining those indicators into new risk scorecards.
For example, CAN will look at frequency of sales (not just how much), inventory access, eBay seller rating, tax returns and other information. In terms of interest, the company uses a more unorthodox, merchant-friendly way of collecting money on top of a loan. If an online violin store needs $30,000 in working capital to purchase inventory, CAN will loan the money, but the borrower will need to pay back $35,000 to CAN over 12 months.
Typically, CAN will give merchants and businesses anywhere from $2,500 to $250,000 in working capital. Customers range from medical practices, to shoe stores to auto repair shops to clothing, accessory and home product online retailers.
CAN CEO, Glenn Goldman, tells me that the extra amount the borrower has to pay to CAN depends on risk of the loan, how long it will take for the loan to be paid back, the amount of capital lent and other factors. But he says many times, the amount CAN charges is less than any interest rate from a bank. And 75 percent of customers renew their funding. In some cases, repayment can be fairly simple. Goldman points to the example of one online merchant who chose to automatically forward a small percentage of sales from its payment processor directly to CAN to repay the loan every month. If sales were lower than usual that month, CAN would lower the amount needed to pay.
And Goldman explains that behavioral risk scoring, rather than just examining a small business owner’s FICO score, allows the company to ‘yes’ to a higher percentage of SMBs than traditional sources while mitigating losses.
For Accel, the investment marks the continuation of a thesis of investing aggressively behind companies that are enabling small businesses to grow faster, says Efrusy. He cites investments in Groupon, Etsy, 99 Designs, Braintee, DropBox as just a few of the Accel-backed companies that are helping are “giving small businesses tools to thrive.”
“From our work with small businesses, it’s clear that one of the most pressing issues for merchants is access to credit and working capital,” Efrusy said. “Especially today, banks are unable to play effectively in this market. Large institutions cannot reach, evaluate, or serve small businesses efficiently. Many newcomers to the finance space are constrained by limited access to and very high-cost capital combined with high portfolio losses given unseasoned risk scoring models. Capital Access Network has by far the strongest team, scale, and data-driven approach to this market.”
Goldman says the new funding will be partly used for boosting and redesigning the online merchant experience on CAN. By April, the lender will feature new user interfaces, merchant portals and online approvals.
As Efrusy explains, there’s a huge amount of disruption taking place in the online lending space, and CAN is in a great position to help small businesses grow with working capital. Kabbage is another startup that is also looking to provide capital to online merchants, and ZestCash is doing something similar on the consumer end of the spectrum.
ZestCash, a company founded by former Google CIO and VP of engineering Douglas Merrill to legitimize the payday loan industry, has raised $73 million round of funding. The company raised $23 million in an equity round led by Matrix Partners. Existing investors Lightspeed Venture Partners, GRP Partners, Flybridge Capital Partners, and Lighthouse Capital Partners also fully participated in the round. The company also raised a separate $50 million line of debt financing from Victory Park Capital to fund its loan portfolio.
ZestCash takes an entirely different approach to underwriting by combining Google-style machine learning techniques and data analysis, combined with traditional credit scoring. As a result, the company can offer credit to many people who historically would have been turned away.
Payday loans are common amongst consumers who don’t have the credit to take out a standard loan through a bank. Payday loans shops allow users to pay a fee to borrow a certain amount of money. For example, a consumer will on average pay $60 to borrow $300 for 14 days. After 2 weeks, the borrower must pay the entire loan and fee back in one payment. If the borrower cannot pay the loan back, then he or she can get an extension but will need to pay another $60 for the additional time.
ZestCash says that the average payday loan gets rolled over 6 times, which means the average borrower pays $420 in fees to borrow $300 in principal. In 2010, 30 million Americans took out a payday loan. ZestCash basically offers a better alternative for those who are forced to take out these immediate loans. With ZestCash, borrowers pick how much money they want to borrow and for how long. As they pick their loan terms, the company clearly displays their weekly payment, allowing users to adjust the terms to arrive at a payment that is manageable for them. Instead of paying the money back in one big balloon payment, borrowers can pay back their loans in small chunks over time.
The company allows users to borrow between $300 and $800 and ic currently available in four states— Utah, Idaho, Missouri and South Dakota. In terms of payments, ZestCash auto debits people’s accounts on the dates their payments are scheduled for. And while most payday loans are processed through brick and mortar shops, ZestCash operates solely online. When someone signs up for a loan they also get a full payment schedule of when every payment will come out of their account, and can pay back the loan between three and eight months. The startup also promises flexibility when dealing with individual borrowers and late payments.
Since its launch in 2009, ZestCash has grown its staff to more than 75 people and has loaned millions of dollars to thousands of customers. For example, Stan, a ZestCash customer needed help paying the insurance deductible for his newborn child to be in the neonatal intensive care unit in a hospital. He took out a several hundred dollar loan to pay for the health care immediately and then paid off the loan in a matter of months.
“We believe all data should be credit data,” says Douglas Merrill, Founder and CEO of ZestCash. “By using ‘big data’ analytical techniques we are able to offer a fair, lower cost alternative to people who do not have access to traditional credit.”
He tells us in an interview that more than two-thirds of the company’s customers come back for a loan. “The data-based underwriting is not like anyone else’s,” Merrill says. “We’re here to make sure customers who may have good credit by non-traditional metrics can get good, fair loans.”
Shawn Budde, Co-Founder and Chief Risk Officer of ZestCash, says that “we’ve reached the natural limit of what traditional underwriting tools are capable of. The machine learning-based underwriting techniques ZestCash is developing will completely change the way lenders view and use data.”
Matrix Partners’ Dana Stalder, who was the former CTO of PayPal, is particularly bullish on ZestCash and its potential. ZestCash is a multi-billion dollar opportunity, he told me in an interview. “ZestCash will disrupt the financial services industry by offering new services to millions of unbanked consumers. The opportunity is analogous to my experience at PayPal in the sense that both PayPal and ZestCash have figured out a way to provide more cost-effective services to customers through the novel application of analytics and technology.”
Stalder says that one challenge that ZestCash faces, which is similar to an issue PayPal faced during its initial growth stage, is the fact that credit industry is an appropriately, highly-regulated industry. Because of this, the company needs to deal with launching in each state individually, on a state-by-state basis.
The new funding will be used towards further innovations in underwriting, expansion into additional states, and company growth.