Sramana: How many customers do you have, and what is the nature of their use of Kabbage?
Marc Gorlin: We have north of 65,000 customers. Not all of them are active at one time. We put out north of 30,000 advances. That is one of the things that is unique about our platform. You have folks coming back again and again. You have people coming back to use the Kabbage product again and again. That tells you that this is a source of working capital for small businesses.
We have looked at businesses that started using Kabbage a year before and a year after. We have seen that their revenues increased by 266%. We are super excited to see the impact of the working capital that we are providing. We see business activity and performance as a far better predictor of the health of a small business than the credit scores. Our charge-off rates are very low. Some of the other data we are layering on were hypotheses in the beginning, but they are now proving to be true. Customers who link their Facebook or Twitter information to their Kabbage account have a 20% lower delinquency rate than those who do not provide those links. That is pretty cool.
Sramana: What percentage of your business are eBay sellers?
Marc Gorlin: A lot less than it used to be. It is around 40% now. In the online space, we have found that successful merchants sell cross-channel. They sell on eBay, Yahoo, their own store and Amazon. They sell everywhere.
Sramana: Amazon has just announced that they are going to start a program like yours for their merchants. What are your thoughts?
Marc Gorlin: We are flattered. They knew what we were doing a long time ago and we think it is good for small business. More people getting into this space will inject more capital in a place where it is needed. We don’t think they are doing it as good as us. You can only borrow from them if you sell on their platform. If you don’t keep growing then you are going to be in default and they will claim that from you. Do you really want one company controlling where your inventory is? They already keep people’s money for two weeks before they pay them so they are almost loaning them their own money. I think it is better for small businesses to have an independent company to rely on.
Sramana: Banks are supposed to be doing this work, and they are not doing it well. They know how to lend to restaurants and brick and mortars, but they don’t know how to appraise and evaluate small online businesses.
Marc Gorlin: Banks were given $30 billion to put out to small businesses, and they had to send the vast majority of it back. There are too many people and too much paper involved in trying to go to a traditional bank for a loan. It is expensive for the banks. It is not economical for banks to put out small loans. At Kabbage we have automated that process. That system gets better and smarter over time.