Venture Capital & Private Equities’ love affair with Finance Apps

Hats off to Taulia for raising $27 million Series D round at a valuation around $200 million. See this WSJ article.

Jason has been covering the valuations in the P2P market for some time (read What Really Drives Valuation For Technology Companies These Days?)

It’s pretty frequent that I get calls from the private equity world trying to understand the size of various early pay techniques. Not surprising, many of the apps being developed are finance oriented.

What we have going on now is sort of a gold rush to find the next big company for early payments. While there is a perfect storm of opportunity (zero short term rates, structural changes in banking, technology, etc.) we are still in the early days. What compounds the challenge is that it’s still guess work in terms of how big financing techniques like reverse factoring and dynamic discounting are and will be. Basically, private equity is funding the likes of Taulia and others on the hope that this is a gigantic market.

But no one really knows how big the various techniques are today or how big they can be. One thing is for sure, outside of the pcard market, not many release data – see my post No Supply Chain Finance League Table Hinders Market

Why? Well, lifting your kimono when no one else does can invite ridicule. And lifting your kimono when others do can also be embarrassing.

But perhaps these cheques and valuations are well worth it. We have 2.4 billion Internet users, 164m US smartphone users with "always-on" mobile connectivity and B2B and supplier network growth that is growing low double digits. We all have one-click purchase power through Apple, Google, Amazon and eBay, now small business has One Click financing from the likes of Tungsten,Taulia, C2FO and P2P lending platforms like LendingClub and FundingCircle.

The venture capital and private equity world are going through changes in financing start-ups and late-stage financing. The rise of crowd-funding platforms has been a game changer in raising capital, especially small amounts. As the kings of capitalism look for the next Facebook arising out of finance apps, it would be better for all if we had some transparency into the market size/potential other than guess work by consultants and analysts.  Perhaps there is a data business in there for a trusted third party – Reuters, IBM, KPMG are you listening?

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