The German start-up scene has witnessed huge growth in the fintech sector in recent years. In addition to those companies looking to make small-scale credit easily accessible a number of new start-ups have been focusing on so-called factoring. One of these companies, Billie, has just raised 10 million euros in a new round of funding.
These fintech start-ups want to help smaller companies stay liquid. They buy their debts and immediately pay the outstanding bills. As such, enterprise customers do not have to wait weeks for their money, while the start-ups earn a fee for the service.
Billie, the factoring start-up of former Rocket founder Matthias Knecht and Christian Grobe, recently announced a financing round of over ten million euros. The Series A round was led by the international VC, Creandum, which is involved in, among others, Spotify and Fintechs iZettle and Klarna. The company also has previous investors participate in the round. These included Speedinvest from Vienna, Rocket Internet and Picus Capital by Alexander Samwer.
The market is highly competitive, however, but Billie is currently the best financed company of its type in the German market. Compared to the competition, the Billie founders hope for an advantage through their BaFin license. While competitors are dependent on partner banks and need to pay for the cooperation, Billie is independent in this respect.
This could be an important difference in such a low margin business. The fees that Billie receives from its customers are, according to Knecht, in the discount range. In order to become profitable, the company will need to handle several hundred million euros in volume. However, the company aims to be profitable in five to seven years. The factoring volume is currently in the almost double-digit million range, with about 100 customers.
Knecht and Christian Grobe are not new to the fintech business. For Rocket Internet they built the credit intermediary Zencap, which was sold in late 2015 to the larger British competitor Funding Circle. A little later, the founders left Funding Circle and started this new project.
“Compared to other fintech business models such as automatic investment advice, our margins are not low,” explains Matthias Knecht, “but sometimes more than a factor of ten higher.”
Customer acquisition in factoring is also significantly easier than in traditional lending.
“There are only a few offers and few traditional providers in our area.”
For their new venture, the founders have brought several partners on board, including a large German bank. Furthermore, a pilot project with Postbank has recently been started. The institute is active in the factoring market and serves large companies with annual sales in excess of 75 million euros while the plan is for Billie is to create an offer for smaller companies.
The founders now want to use the new capital to bring more products to the market.
“For the first time we will have a completely automated key processes such as application, credit rating and fraud prevention. Most banks continue to be faced with a high manual effort that drives up costs and slows down processes. We want to use this automation for our next products,” said Knecht.
For larger companies, too, they want to become relevant in the future and target wider European markets in the medium term.