investment banking

A great Fintech DogFooding story in SME equity fundraising: SparkUp

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The future has arrived and the pipeline of ICOs is active. Keep in mind that this glove does not fit all.  Capital Markets are being re-shaped left and right. We are following the process as it evolves.

How to raise funding, especially for small businesses, remains “The challenge” for the entrepreneurs involved at all stages of their business development,

despite the multiple alternatives, like Alt loans from Kabagge or Sofi, equity crowdfunding from Angel List or Circle Up, equity financing from investment boutiques like FT Partners or Zelig Associates, or equity financing from Corporate VCs like Google Ventures or Citi Ventures, or traditional VCs like Accel Partners or Bessemer.

SparkUp’s value proposition is empowering small business owners to raise funding

whether it is at the early stage or even later when ready to tap into the public markets. It is also empowering investment managers that are looking to leverage their data.

Jeremy Ley is the French young co-founder and CEO of Sparkup, whose disruptive energy one cannot ignore. I spoke to Jeremy last week because SparkUp caught my attention, as they are

“Eating their own Dogfood”, which means they are fundraising using their own AI sales technology that taps into their own network to quickly and effectively do the fundraising.

SparkUp is not an investment bank. SparkUp is not a crowdfunding platform. SparkUp is a sales technology tool with a focus on financial securities.

It is in the same space as CustomerMatrix or Salesforce with their AI CRM system. However, these technologies have a broader scope and are used mostly to improve revenues and sales pipelines in businesses. SparkUp has a laser focus on the sale of financial securities for SMEs, which is a multi-billion dollar opportunity.

SparkUp can tap into your existing business network with their AI CRM and generate leads faster and more effectively. They received their pre-seed funding in 2015 (1.1M€). They are operational currently in France, the UK and Norway. They have contributed to 7 equity public offerings, signed 8 Investment Managers with 3 Bn+ in assets under management and facilitated the equity fundraising of 40+ SMEs.

The average size of equity financing for SMEs is currently around 150k€ and rising. The value that SparkUp brings to the SME market is obvious since it remains a hugely untapped opportunity. SparkUp has its own online diagnostic test that allows SMEs to very quickly (3min!) estimate their fundraising potential, a digital process that improves the efficiency of SparkUp in serving prospects (i.e. not wasting time on SMEs that are not worthy clients).

Publicly trading companies that could benefit from a boost in retail demand or companies IPOing, are the ones using SprakUp. SparkUp can “smartly activate their databases” which results in improved retail distribution in a cheaper way than ads on online brokers or other digital strategies. In addition, brokers can use the SparkUp sales technology on a revenue sharing basis, to leverage their databases and sales people.

Investment managers have been using SparkUp to cross-sell more of their products with the smart use of their databases.

SparkUp is already operating in France, the UK and Norway. They are currently looking to fundraise funds for the R&D development of their algorithms and their scaling up. SparkUp will accomplish this by tapping into its own network and through algorithms identifying contacts at the right level, emailing them, managing the project of fundraising with its own technology. They are an AI CRM that serves the specific purpose of raising funds and currently, demo-ing live its use. This is a great example that we have not seen neither in the crowdfunding space (i.e. still looking for a crowdfunding platform that has crowdfunded itself) nor in the Market place lending space (i.e. an MPL financing its growth by borrowing on its own platform).

Efi Pylarinou is a Fintech thought-leader, consultant and investor. 

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Corporate Banking is mostly Traditional Fintech but disruption is coming via Blockchain

Banks serve Consumers and Corporates. (Banks don’t know how to service Small Business but that is another story).

In this post I want to focus on Corporates (Global 2000). This includes;

  • Debt (and maybe equity but that is more the domain of high growth ventures). Banks lend from their own Balance Sheet and are the conduit to the capital markets.
  • Treasury Management services.
  • Foreign Exchange.

This is a hyper competitive market. Corporates have a lot of clout so they get good prices and service by getting banks to compete. This is the opposite of what has traditionally been true in Consumer and Small Business markets where the Banks have had all the clout – and abused that clout – which is why Emergent Fintech ventures are doing so well in those markets.

In Corporate Banking there are three possible plays:

  1. Provide technology to Banks, which Banks use to service Corporates. This is Traditional Fintech and it is a huge and mostly consolidated market, but the Banks are always on the hunt for 10x better faster cheaper solutions enabled by new technology.
  1. Provide technology to Corporates that help them get better prices and service from Banks. An example of this is 360T, which does this with great success in Foreign Exchange.
  1. Provide technology to Corporates that enable them to bye-pass Banks. This is the bleeding edge. There are few examples as yet. It is difficult because Banks offer bundled deals that are a disincentive to Corporates who look to cherry pick a better price from some disruptive venture. These C Suite golf course relationships are powerful because the ability to pull all the threads together to make something big happen quickly is so valuable to Corporates – and today only Big Banks can deliver that.

However nothing withstands Moore’s Law forever and the disruption may come from a mix of Regulation (for example Dodd Frank mandating transactions via Exchanges versus Over The Counter) and Blockchain systems.

Blockchain systems are natural for cutting out intermediary costs in complex inter-enterprise processes where no institution needs to be trusted.

Smart Contracts can be programmed to whatever level of functionality is needed. Escrow agents that are Distributed Autonomous Corporations can hold money until conditions are met. This means that an Enterprise does not need to trust to any other Enterprise or any Institution; they trust in code which they can review to the hearts content. Corporations like being in control and Blockchain systems put them in control rather than having to trust to intermediaries.