WEBVTT - Kabbage's Petralia on Licensing Fintech to Global Banks (Audio)

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<v Speaker 1>You're listening to Taking Stock with Kathleen Hayes and Pim

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<v Speaker 1>Fox on Bloomberg Radio. Well, she may head up one

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<v Speaker 1>of the most successful, fast growing fintech companies in the industry.

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<v Speaker 1>Online learning the small business started back in two thousand

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<v Speaker 1>nine a company called Cabbage. Katherine Bertalia actually was a

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<v Speaker 1>graduate student in literature, John Steinbeck being one of her favorites.

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<v Speaker 1>I don't know how she got from Steinbeck to fintech.

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<v Speaker 1>Last you want to find out? Now? Cabbage is where

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<v Speaker 1>the name of the company based in Atlanta, Georgia, and

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<v Speaker 1>she's there today. Katherine, thanks for joining us. Thanks for

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<v Speaker 1>having me so. First of all, your your small business

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<v Speaker 1>lending is unique from a lot of other firms. You

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<v Speaker 1>lend up to about a hundred thousand dollars. It's all online.

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<v Speaker 1>Your your software quickly evaluates their readiness and it's directly

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<v Speaker 1>to the senses themselves. That's correct. So how does it

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<v Speaker 1>work so our customers are able to give us access

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<v Speaker 1>to the data that they used to run their business.

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<v Speaker 1>Have you've ever logged into some other website. With Facebook,

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<v Speaker 1>it works much the same way. So we don't take

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<v Speaker 1>the customers credentials, but they log into their check the account,

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<v Speaker 1>or to quick books or UM their payment process or

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<v Speaker 1>some other information UM some other site that they're using

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<v Speaker 1>to run their business, and we're able to take that

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<v Speaker 1>data to make a really rapid underwriting decision for them.

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<v Speaker 1>Instead of having to produce and provide financial statements and

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<v Speaker 1>UM bank statements and spend a lot of time gathering

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<v Speaker 1>documentation for traditional loan we're able to do that work

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<v Speaker 1>for them now. Catherine, taking a look at the operations

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<v Speaker 1>of Cabbage, I understand that overall that the loans that

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<v Speaker 1>you originated in the first half of the year rose

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<v Speaker 1>in volume compared to but the pace of the growth

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<v Speaker 1>has slowed. So in you originated about nine million dollar

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<v Speaker 1>dollar's worth of loans, and I'm wondering what you can

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<v Speaker 1>tell us so far about this year because you've got

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<v Speaker 1>some competition, I mean, on debt capital loaned about one

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<v Speaker 1>point nine billion. Yes, there are plenty of players in

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<v Speaker 1>this space. The last six and nine months have certainly

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<v Speaker 1>been interesting to watch from an outsider's perspective. I'm sure. UM.

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<v Speaker 1>So there's certainly there's been some more crowding in the market,

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<v Speaker 1>although that's really loosened up a little bit, I think

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<v Speaker 1>in the last four or five months. UM. I think

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<v Speaker 1>from our perspective, it's just a matter of being smart. Um,

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<v Speaker 1>we're not trying to buy the market. We're trying to

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<v Speaker 1>you know, move into new markets. And we really have

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<v Speaker 1>two businesses. We have a direct lending business in the US,

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<v Speaker 1>and we also license our technology to global financial stitutions

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<v Speaker 1>banks like Santander and I m G and Scotia Bank worldwide.

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<v Speaker 1>So we have our efforts focused in two places. How

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<v Speaker 1>did you your companies based in Atlanta, Georgia? You did

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<v Speaker 1>spend time in Silicon Valley. I'm interested to how you

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<v Speaker 1>you ended up your headquarters on on the other side

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<v Speaker 1>of the country. Uh and uh. Also we're good idea

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<v Speaker 1>of this for this came from well, why Atlanta? We

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<v Speaker 1>get asked that question a lot. Honestly, we lived there.

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<v Speaker 1>It seems like a great it seems like a great place.

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<v Speaker 1>Breast one a lot of people don't know is um

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<v Speaker 1>it's there's everyone has to have a nickname with the

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<v Speaker 1>word alley and of course our transaction alley, since of

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<v Speaker 1>US payment transactions actually flow through it l into based businesses.

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<v Speaker 1>When the Fed automated payments in the fifties, they did

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<v Speaker 1>that in the Atlanta region and as a as a result,

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<v Speaker 1>a lot of financial technology companies grew up in that area.

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<v Speaker 1>So it's a great place to start a fin tech company. UM.

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<v Speaker 1>And your other question about the name Cabbage, was that correct? Um? So,

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<v Speaker 1>Cabbage is If you google cabbage with the C, you'll

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<v Speaker 1>see the second definition of it is it's a metaphor

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<v Speaker 1>for cash. It's a depression era term. Um. And we

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<v Speaker 1>were looking for names, we um. We were struggling. Obviously,

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<v Speaker 1>it's hard to find a domain name in Cabbage with

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<v Speaker 1>the C with a lot cheaper than Cabbage with the K.

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<v Speaker 1>So we picked Cabbage with the K. Now, Cabbage was

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<v Speaker 1>founded in two thousand eight. I understand you've raised about

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<v Speaker 1>two hundred and forty million dollars from companies such as

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<v Speaker 1>Blue Run Ventures, Soft Bank Capital, Ups, Strategic Enterprise Fund

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<v Speaker 1>UH late last year valuation of about a billion, and

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<v Speaker 1>you raised more than a billion in debt capital today.

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<v Speaker 1>Is that accurate? Um? We We don't comment publicly on

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<v Speaker 1>the company valuation, but we do have um we have

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<v Speaker 1>publicly announced the size of our debt facility, which is

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<v Speaker 1>close to a billion dollars. And is there any update

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<v Speaker 1>that you can give us on the launch of Carrot,

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<v Speaker 1>which was the consumer lending business that was back in

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<v Speaker 1>Have you decided that's not something that's not a way

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<v Speaker 1>you want to go? Well, you know, the reason we

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<v Speaker 1>launched Carrot was twofold. One of them was because we

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<v Speaker 1>had a lot of people coming to our site who

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<v Speaker 1>are actually consumers, not small businesses, so we wanted a

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<v Speaker 1>product to serve them. But secondly, it allowed us to

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<v Speaker 1>demonstrate sort of the flexibility of the platform. It was

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<v Speaker 1>the first white label, if you will, launch that we

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<v Speaker 1>had on the Cabbage platform and so as a result,

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<v Speaker 1>that sort of catapuled this into the limelight from a

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<v Speaker 1>from a software and technology perspective and what precipitated all

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<v Speaker 1>of the relationships we have with these global banks. So

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<v Speaker 1>we're excited about the way we were able to demonstrate

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<v Speaker 1>the flexibility of the technology using Carrot, But that market

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<v Speaker 1>is pretty crowded right now too, so we never intended

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<v Speaker 1>to try to run out and compete with all of

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<v Speaker 1>the consumer lenders in the in the world, Catherine, I'm

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<v Speaker 1>interested to um ups of course, is also based in Atlanta.

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<v Speaker 1>That was one of your first very clever partnerships back

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<v Speaker 1>in twelve uh you entertaining agreement allowing small businesses to

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<v Speaker 1>share their shipping histories with Cabbage. You've done so many

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<v Speaker 1>more partnership Scotia Bank is one of your latest and

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<v Speaker 1>how how is that one working? What's it? What does

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<v Speaker 1>it mean for Cabbage? So the bank partnerships effectively allow

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<v Speaker 1>um these large financial institutions to provide a a line

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<v Speaker 1>of credit, a small business line of credit product to

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<v Speaker 1>customers that they had a hard time serving before, not

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<v Speaker 1>because of an underwriting process, but because they had a

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<v Speaker 1>hard time serving small businesses who were looking for less

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<v Speaker 1>than a hundred thousand dollars. Most banks spend the same

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<v Speaker 1>amount of money to originative by thousand dollar loan is

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<v Speaker 1>they want a five million dollar loan from a small

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<v Speaker 1>business perspective. So the way the process works on the

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<v Speaker 1>way to gather data makes it cost effective now for

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<v Speaker 1>banks to serve really small businesses that were previously just

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<v Speaker 1>checking account customers. They weren't borrowing customers. And so the

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<v Speaker 1>way it works with the bank partners and Scotia Bank

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<v Speaker 1>in particular is um it's their brand, it's their bank,

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<v Speaker 1>but it's our technology in the back end of powering

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<v Speaker 1>the loans they're making to their small business customers. I

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<v Speaker 1>want to thank you very much for spending time with us.

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<v Speaker 1>Katherine Petrolia is the co founder and the head of

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<v Speaker 1>operations for Cabbage. They're based in Atlanta. Thank you for

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<v Speaker 1>listening to Taking Stock. I'm pim Fox my co host

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<v Speaker 1>Kathleen Hayes. This is Bloomberg. Coming up on Bloomberg Law,

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<v Speaker 1>Will A T and T you get to say thanks

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<v Speaker 1>to its customers or will city groups lawsuits stop it?

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<v Speaker 1>City Group says the A T and T Thanks Customer

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<v Speaker 1>awards program in fringes City groups numerous thank you trademarks.

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<v Speaker 1>That's coming up on blom Brig Radio. The it