Uncapped Raises Additional $ 26 Million To Offer Revenue-Based Financing To European Entrepreneurs – TechCrunch
Uncapped, the London and Warsaw-based startup that offers ‘income-based’ funding to European companies so founders don’t have to forgo equity stipulated by venture capital, has raised $ 26 million new funding.
The round was led by Mouro Capital (the recently created fund previously called Santander InnoVentures), with participation from Iron Ventures and existing investors Global Founders Capital, Seedcamp and White Star Capital. Various angel investors have also backed Uncapped, including Taavet Hinrikus (TransferWise), Christian Faes (LendInvest), David Nolan & Kevin Glynn (Butternut Box) and Carlos Gonzalez-Cadenas (GoCardless).
Founded last year by serial entrepreneur Asher Ismail (who was until recently CEO of Midrive) and former VC Piotr Pisarz, Uncapped decided to use various marketing, sales and accounting data to be able to offer funding. start-ups based on their current (and projected) income. It arose out of the couple’s own frustrations with the limited financing options available to European entrepreneurs, namely private equity or traditional debt financing.
Seen as a third option, Uncapped provides what it calls “growth finance” in return for a lump sum as low as 6%. Companies only repay capital as they generate income, “with no fixed repayment date and no compound interest, equity or personal guarantees.”
It was initially touted as particularly suited to income-generating businesses wishing to invest in online marketing to grow their sales faster, but has since broadened its target to other scenarios.
“When we started, we knew that selling stocks to buy Facebook and Google ads was bad business for the founders,” says Ismail. “So that’s where we focused and mainly funded companies for advertising and inventory. Since then, we’ve been focused on helping businesses secure financing for any purpose, including new product launch, international expansion, or team growth ”.
After launching and refining its technology, Uncapped accelerated the time it takes to make a loan decision from three days to a few hours. Once funding is agreed, the startup can also issue Visa cards so founders can start spending funds immediately.
“With this new round of investment, we have also started funding early stage companies with only six months of revenue history (previously our minimum was nine months),” says Ismail. “We have also doubled the amount we can advance in one go to £ 2million. So now more companies can access funding for more use cases and faster ”.
When asked how the coronavirus pandemic has affected the way Uncapped assesses risk, where past earnings performance may not be a reliable indicator for the future, Pisarz says that a recession is in some ways the best time to build a credit model, “as everyone’s models are now off topic.”
“While other online lenders depend on the founder’s personal guarantees and credit history as the primary drivers of their risk models, we use live data on the company’s actual transactions to make our decisions,” me he said. “When the pandemic hit, we were able to access real-time data on the performance of our portfolio, make quick decisions and continue to issue loans, where others have been forced to opt out. Our number of investments and returns have since increased exponentially ”.
To boot, Pisarz says Uncapped has continued to upgrade its underwriting technology, and now having seen how different business models adapt to tougher times, it has built confidence in its underwriting.
“Unlike a VC, we need our entire portfolio to be successful, not just a few that make up for the losses of others. We must therefore have a lot of certainty in our decision-making, ”he concedes.
“Equity was the most expensive way to fund digital ad spend and repeatable growth, and as fundraising became even more difficult due to the pandemic, it only got more expensive,” Ismail adds. . “Our prime target therefore continues to be direct-to-consumer products and other rapidly monetizing startups that generate between £ 10,000-2 million in monthly sales, have a healthy unit economy and want to avoid diluting their founders. and existing investors.
“For companies that are still in the R&D stage or need more time to get into the market, venture capital is still a good solution, but for companies that are already active, have costs of Predictable customer acquisition and repeatable growth, we know we are a better option ”.