Beyond
Lending Cluband
Prosperin the United States,
very few peer to peer lending investment opportunities exist for
retail investors. However, one company has come up with an
innovative way for everyone to invest in loan inventory with
crowdfunding.
Kickfurther, a Colorado based
startup aims to help businesses fund purchase orders and
product inventory. I spoke with Sean De Clercq,
Kickfurther’s CEO to learn more about the company and also tested
out the Kickfurther platform myself in the review below.
Background on Kickfurther
Kickfurther launched their beta in January 2015 and they have
come a long way since then. Initially they kept their offers to a
maximum of $10,000 to learn how the platform would work and to
limit how much money was funded to each company. In April 2015
they reached $125,000 in funding which is also when they won the
inaugural PitchIt @ LendIt competition at
LendIt USA 2015. They competed against
8 startups and were selected as the winner by the panel
of venture capitalists. If you’re interested in seeing their pitch,
you can view the video
here.
Since then they have doubled their volume about every 2 months
and Sean expects that to continue. They surpassed $500k in early
August and by late September they surpassed $1 million. As of
December 1st, 2015 $2.2 million of loan inventory has been
funded on the Kickfurther platform. They found out very
quickly that repeat businesses wanted to come back for more. They
are now doing less $10k offerings with more offers being in the
range of $20k-$40k.
How Kickfurther Works
What’s interesting about Kickfurther is the focus on the
community, similar to that of Kickstarter. This is evidenced by
their borrower acquisition strategy. They find businesses through
websites like
Birchboxand
Touch of Modernwho have inventory financing
needs. These are businesses who likely have a strong relationship
with their customers who also may want to help fund their favorite
brands inventory. Kickfurther currently has a 70%/30% split of
outbound leads versus inbound with many companies coming through
referrals.
Once a small business owner fills out an application Kickfurther
qualifies the business on whether they have successfully completed
a production run previously and if approved, it is put on the site
as an offer. Although Kickfurther provides advice on the terms of
the deal, the business ultimately sets the terms and the crowd
decides if they want to fund it. Once funded, a business
purchases their inventory and receives their shipments. As the
business sells the inventory, the business pays back the investors
who own the inventory.
To understanding investing on Kickfurther it is important to
realize that as an investor you are not lending money, but
purchasing a portion of the inventory with your investment. Because
you are directly purchasing inventory, not making an investment,
Kickfurther does not have to comply with SEC regulations,
which is one of the reasons that this is open to everyone. The
model has been vetted by their legal advisor who has 35 years
experience with SEC compliance. Also of note is that employee
#1 and former Chief Operating Officer at Lending Club, John
Donovan, is an advisor.
The investors recourse is the fact that they have a contractual
agreement with the business and own inventory, which we will get
into later. Similar to the p2p lending platforms, you can invest a
small amount in each deal, with the minimum being $20. In the first
24 hours an investor can contribute a maximum of 10% of the total
deal. Each month, investors receive paybacks based on the inventory
that is sold.
Sample Kickfurther Deals
Kickfurther encourages businesses to share their deals with
their loyal customers as that is often a good source of capital. As
businesses complete offers and prove their propensity to pay, they
can offer lower rates on their subsequent offers. The Kickfurther
team provided us with $100 which I put into 4 different
offers. One offer I chose was the Humanoid Wakeboard offer since
this is a brand I am familiar with. Below you can see the deal
posted on their website which had received about half of its
funding when I invested.
By clicking on each offer I can see the details of the offer and
information about the company and product. In this offer, the
planned payback is 12% over 7 months. I can also see payment
history on their first successful Kickfurther deal. Many of the
deals are around 6 months with returns in the 10% range, which
means returns have the potential of being quite high when
annualized.
Troubled and Cancelled Offers
Investing in loan inventory is not without risk, but unlike
consumer lending your purchase of the loan inventory means it is
backed by a real asset. Offers marked troubled meet one of these
three criteria:
A monthly payout is completely skipped regardless of
explanation.
The total amount paid back to date is less than 50% of expected
payout to date.
The offer passes it’s final completion date without complete
payout.
There are two scenarios that can play out once it is clear that
the business won’t meet their obligations.
If the business fails to sell some or all of the
inventory.
In this case, Kickfurther can repossess the inventory and
let investors decide what the best course of action is. They poll
investors based on the percent you invested to determine next
steps. For example, investors may decide to liquidate it on a
site like Overstock.com or sell it on the Kickfurther
store.
If the business sells inventory, but fails to pay backers.
In this instance the business is committing fraud as they are
contractually obligated to pay back the money since they don’t own
the inventory. At this point the accounts receivable starts
accruing interest and the business is pursued in court.
A cancellation can be complicated to understand, but it is
an important piece because there are many things that come
into play at this point. Kickfurther is currently going
through their first cancellation now and Sean posted a
detailed blog post on the
Kickfurther cancellation
process if you want to learn more.
Conclusion
Kickfurther has only been in operation for about a year, but it
is one of the few opportunities available to retail investors which
is why we decided to highlight it on Lend Academy. They just
closed a $575,000 round and they have been growing steadily over
the last year. As they complete more offers and more data becomes
available it will be easier to understand what the risks of
investing are.
Kickfurther plans to implement a Kickfurther community
score which will deployed in a few weeks. They realize it is hard
for retail investors to compare companies because some of the data
is not available and the new community score will help. This is
especially important for businesses who have not yet completed an
offer with Kickfurther. They are also looking at integrations with
Shopify and Paypal which could offer much more real-time
information on the sales of the company. In the future Sean
speculated that as a business sells inventory, deposits could be
made daily into the investors accounts.
If you’re interested in testing out the Kickfurther platform,
you can signup with our
referral link and Kickfurther will deposit
$5 into your account. We also receive $5 into our account which
will help us continue our experiment in investing in loan inventory
on Kickfurther.
None of this information should be considered investment
advice. You should consider your own situation and risk tolerance
before making investment decisions.
The post
Kickfurther Review – Backing Small
Businesses Inventoryappeared first on
Lend Academy.