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Supplements » FundTech Autumn 2020

Fintech focus: Terms of engagement


Funding Xchange is a digital marketplace for funding options for small businesses. Founder Katrin Herrling has described it as MoneySuperMarket for SMEs, introducing transparency to a market that didn’t have any. “We hold lenders’ underwriting data to construct indicative offers,” she says. “As a result, we have reduced the cost of finance in the last year and also reduced the time it takes to get funding.”

The company was launched in 2014 with five employees. It now has a team of 50. It received a UK government grant of £5 million and also joined an accelerator programme run by Ping An Insurance in Shanghai. It has had two rounds of institutional investment that raised £10 million, the last of which closed in November 2019, led by Downing Ventures and Gresham House Ventures. “We have gone through all the stages of investment – from angel to venture to institutional. And you always wish you knew then what you know now in terms of what makes you investable,” says Herrling.

What’s been your biggest challenge?
We value our institutional investors and they are valued advisers on our board. But the most challenging thing, beyond getting a bank to sign a contract, is getting funding from institutional investors. They have a clear idea of what they are looking for in terms of profile or revenue model, but you don’t know that at the beginning. You need to understand their investment strategy, but it is not exactly tattooed on their forehead.

What has been your biggest barrier to entry?
The data we use is hugely restricted and it took us two years to be able to gain access. So it was less about the technology and the APIs and more about the legal agreements.

What impact has Covid-19 had on the fintech start-up sector?
We built our business before we built the platform and we now have relationships with 80 lenders. If you were to build a platform now, I don’t think a single lender would take your call. But the pandemic has impacted us significantly. We suspended our revenue model for the last six months, so we are charging our lenders a lot less. We have the economic strength to do that, but you can only act as a public service for so long before you have to return to the commercial model.

I would divide the current fintechs into two categories – those that can demonstrate a path to profitability and those that will struggle to do that. If you cannot demonstrate how you become structurally profitable, why would investors care about you? I think Covid-19 will result in a clearout of the sustainable versus the unsustainable and I’m sure there will be some good companies at an early stage that will struggle.