Royalty, supply chain finance and Hollywood-esque mystique

With a name that sounds like it was lifted from the screenplay of Casino Royale, Lex Greensill, the London based, Australian entrepreneur betting big on supply chain finance, has scored a strong indication his bet might play out, with news this week his company Greensill had cashed in a $800 million equity injection from Softbank.

The unassuming boy from Bundaberg (a town more famous for rum than financing) was appointed a Commander of the Order of the British Empire in 2017, rubbing shoulders with king-in-waiting Prince Charles, and is still involved with the family farm back in Queensland, Australia.

So how exactly does Greensill work, and what is the opportunity Softbank are especially keen to get in on?

Launched in 2011, the business has experienced phenomenal growth, helping over 1.3 million small businesses get paid sooner. It uses the credit-worthiness of their big-name customers as part of the risk assessment model, freeing capital up to those who are most under pressure, and thus ensuring the survival of businesses in places as remote as Bundaberg itself.

The Greensill model relies on the purchase of invoices or trade receivables from small companies seeking early repayment. It packages these into short-term bonds and sells them on to investors. Approximately 47 bonds are issued per business day, supported by the banking arm in Germany and other fund managers.

Greensill estimates approximately $55 trillion of cash is locked up through inefficient payment terms and structures.  Servicing this, and making a tidy profit in the process, is no doubt part of the attraction for Softbank. That and the fact that according to Greensill’s white paper, no investment-grade corporate has defaulted on its payment obligations in the past 20 years. High demand, low risk and few alternatives makes for an attractive ‘Golidlocks’ asset class

Competitors in the space include Taulia, Citi, Orbian (our interview with CEO here) and PrimeRevenue, with more eyeing off the space each year. It is certainly a fascinating space to watch, and an emerging asset class to consider, so long as the big boys keep paying their bills.

Daily Fintech Advisers provides strategic consulting to organizations with business and investment interests in Fintech. Jessica Ellerm is a thought leader specializing in Small Business and the Gig Economy and is the CEO and Co-Founder of Zuper, a new superannuation startup in Australia.

I have no positions or commercial relationships with the companies or people mentioned. I am not receiving compensation for this post. I was a previous employee at Tyro.

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