Alt Finance Week ended 9th October 2020

Here are the 3 stories that mattered this week:

1. Crowd Cube and Seeders to merge

Some weeks ago I mentioned wrote that the whole Alt lending market was ripe for consolidation and while Crowdcube and Seeders are in the equity space the sentiment is exactly the same. These are two of the biggest UK private equity start up platforms. Apart from the bigger is better mantra it is hard to see what’s in it for punters. After all it reduces competition and increases barriers to entry even though both companies had remarkably similar business models. The combined entity is valued at $ 140 million.  I am not sure that I can make sense of the numbers but I imagine that safety in size is a big factor in the decision making. I also see that Crowdcube are acquiring the database and IPR of Supdate a start up database designed to give some much needed transparency to early stage investments. Could also help in the Alt lending space. Further consolidation inevitable.

2. IMF says it’s time to invest in Infrastructure.

It’s no surprise I suppose that the IMF is once again saying that it is time for all countries to increase government spending on infrastructure projects. It follows a pattern that has been going on ever since the financial crisis in 2008. Quite rightly so but with a global pandemic, a busted banking system in the Eurozone and national budgets already stretched it is difficult to see how this is going to be achieved. It is obvious to me that governments cannot provide all the money that is needed but whenever a major project is discussed such as HS2 in the UK the benefits seem to be discussed in very obtuse terms. Governments at all administrative levels seem to have forgotten that in order ot raise finance they need to do it in the most efficient way possible and that does not necessarily mean the cheapest. Yet QE and ultra low interest rates push finance for projects to the margins of sanity and as a result the real reasons for doing anything are just not given the scrutiny the need and deserve. If the projects were tied to the benefits and the cash flows and subjected to the competitive analysis they need then things that really need to be done might get done sooner better and cheaper. Structured finance rather than sovereign debt would be a much better mantra to follow.

3. Oak North and Comply Advantage team up to combat financial crime.

Oak North once again shows its faith in all things technology driven. Comply advantage as the name will tell you is a company that build compliance applications. The software sounds interesting if indeed it does what it says on the tin. Comply say that Oak North needed something which only they could supply and that there were no similar offerings in the market place. This may well be the case. On balance this is a good thing but the word comply seems to suggest that fighting financial crime and compliance are two sides of the same coin. Digital Banks try and prevent financial crime through their application structure and the regulators write compliance. Complying with regulations in itself does not mean good if the rules are flawed in the first place. I have not checked on the on lime crime figures but it seems a day does not go past without some scam rearing its head. Better regulation might mean better outcomes but somehow I doubt it. I tend to think that the applications should come first and the compliance later. Perhaps this is what is happening here.

Howard Tolman is a well-known banker, technologist and entrepreneur in London, We have a self imposed constraint of 3 news stories per week because we serve busy senior Fintech leaders who just want succinct and important information.

For context on Alt Lending please read the Interview with Howard Tolman about the future of Alt Lending and read articles tagged Alt Lending in our archives.

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