Mar 21, 2024 · 33m · top-founders
Miami Based Fintech did $70m in 2023 Revenue - What about Gross Margin?
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
Nathan Latka interviews FunKite CEO Alex Schwartz to dissect how the fintech firm reached $70 million in 2023 revenue through proprietary cash-flow underwriting, structured debt financing, and automated revenue-based financing operations.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Nathan holds 34.3% of the talking time here. How this is scored →
Nathan as informed peer 5.2 Guest teaching 4.8 Guest disagreement 2.8 Nathan pushing back 4.1
speaking balance: gold is Nathan, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 5:49 Alex rejects effective interest rate framing
Alex immediately rejects Latka's calculation of a 50-52% APR, asserting that the product is a purchase of receivables rather than a loan.
Hardest push from Nathan ▶ 16:26 Latka confronts Alex on the 200M claim vs regulatory filingsLatka directly confronts Alex on where the 200 million dollar figure comes from, citing public debt filings showing only 16.8 to 22.8 million dollars.
Biggest teaching moment ▶ 6:23 Alex breaks down factoring vs future receivables purchaseAlex delivers an educational breakdown distinguishing traditional purchase-order factoring from FunKite's dynamic revenue-reconciled advance model.
Nathan holds their own ▶ 5:56 Latka cites true sale and usury legal nuancesLatka demonstrates deep fintech expertise by unpacking true sale classification, recharacterization risk, and state usury licensing laws.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Nathan as informed peer | Guest teaching | Guest disagreement | Nathan pushing back | Why |
|---|---|---|---|---|---|---|
| FunKite's RBF Model and Target Industries | 5 | 5 | 3 | 4 | Latka inquires about deal sizes, targeted sectors, and why FunKite avoids trucking and construction. Alex explains the mechanics of revenue-based financing and clarifies that there is no fixed maturity term. | |
| Discount Rates, Regulatory Disclosures, and Capital Costs | 7 | 6 | 4 | 6 | Latka calculates an effective annualized interest rate above 50% and raises legal classifications like usury and true sale. Alex pushes back, arguing it is purchase of receivables rather than a loan and explains why cost of capital is the proper metric. | |
| Pipeline Volume, Conversion Metrics, and Fintech Competition | 5 | 5 | 4 | 4 | Latka pushes for monthly origination and conversion volume, while Alex corrects Latka on fintech competitors like LendingClub being consumer lead-gen rather than business funders. | |
| Proprietary Cash-Flow Underwriting vs. Traditional Banking | 4 | 6 | 2 | 3 | Alex details FunKite's automated bank-statement cash flow underwriting, contrasting it with traditional bank underwriting that relies strictly on FICO scores. | |
| Capital Structure Mechanics and Structured Note Financing | 7 | 5 | 3 | 6 | Latka questions FunKite's capital structure, asking how a reported 16.8 million dollar debt filing aligns with Alex's claim of 200 million dollars in capacity. Alex explains the structured note and syndication participation model. | |
| Default Rates, Legal Recovery, and Net Interest Margins | 7 | 6 | 3 | 5 | Latka probes write-off rates, legal recoveries, and portfolio economics. Alex explains FunKite's 6.8% charge-off rate and illustrates how capital velocity enables 16-18% net interest margins. | |
| Automation Scale, Founder Coding, and Card Processing Expansion | 5 | 4 | 2 | 3 | Alex discusses scaling automation and coding features himself to avoid developer delays, while also detailing expansion into credit card split processing. | |
| 2023 Financials, Equity Valuation, and Cost of Capital | 6 | 5 | 3 | 5 | Latka estimates FunKite's revenue based on prior assumptions, leading Alex to reveal 70 million dollars in gross revenue for 2023 and sub-12% cost of capital. | |
| The Famous Five Questions and French Bulldog Cameo | 1 | 1 | 1 | 1 | Alex answers the rapid-fire Famous Five questions, passes on business books, and briefly brings his two French bulldogs on camera. |
Statements from this episode (23)
Schwartz: FundKite's average deal is $110K for $1M–$5M businesses
“So our average deal size is about a 110,000 dollars. And this, these are companies that are doing between one and five million a year in annual growth sales.”
Schwartz: FundKite avoids trucking and bail bondsmen due to industry distress
“There's some industries that we don't cater to at the moment... Like transportation and trucking. They're really in trouble. Those guys are really having a big hard time right now. Getting by. We don't do bail bondsman. So truckers, transportation, and we've p…”
Schwartz: FundKite models 8- to 16-month paybacks with no fixed terms
“No, I mean, we model anywhere from eight to 16 months, but it's very unpredictable, right? So there is no term, there is no fixed term with our product.”
Schwartz: FundKite's receivables discount rate ranges from 10% to 28%
“Typically it can range from anywhere from 10 to about 28% discount. So depending on the risk factors that we're facing.”
Schwartz: Revenue-based financing should be evaluated by capital cost, not APR
“The better way to look at this is, is the cost of capital. So, you know, I'm getting 90,000 dollars. I got to pay back a 100,000 dollars. My cost of capital is 10,000 dollars. That's the true way to look at this. And cause there is no term and that's really, r…”
Schwartz: FundKite discounts balances for 30-day repayments rather than restructuring deals
“No, we don't restructure them, and I've never seen it explode in a way where they just pay back like that. However, you know, if a merchant comes back in 30 days and says, look, I just want to repay the receivables now, we just give them a discount on the bala…”
Schwartz: FundKite processes approximately 5,000 business applications monthly
“We processed last month probably approximately 5000 applications for different businesses, right?”
Schwartz: FundKite issues funding offers to roughly 27% of its applicants
“Out of 5000 applicants,
, we made offers to merchants.
About 27% of those applicants we made funding offers to.”
Schwartz: LendingClub operates as consumer lead generation, not direct business funding
“So Lending Club is really not a funder.
It's a lot of them are like kind of lead gen.
So you're, they're gathering, they're telling you they're doing it, and then they send it out.
But Lending Club is not really a business funding.
They do it more personal stu…”
Schwartz: FundKite has roughly $30 million per month in funding capacity
“On any given time, our capacity is about thirty million a month.”
Schwartz: Upcoming 2025 regulations will force unprepared banks to lend to SMBs
“There's going to be some regulation coming out next year where banks are going to be forced to go back and start to lend out to the small businesses, but banks are not equipped to underwrite a small bit.”
Schwartz: FundKite has raised nearly $200M in debt and participation capital
“And so both in debt and participation, almost two hundred million.”
Schwartz: FundKite avoids warehouse facilities and senior credit lines
“We don't have any warehouse facilities or senior lines. We don't take on capital like that, right? We have investment partners that participate in these transactions or these contracts and that's how we structure it.”
Schwartz: FundKite increased structured debt note filing to roughly $22.8M
“I did another filing recently. That number went up to like 22.8 or something.”
Schwartz: FundKite maintains a 6.8% lifetime write-off rate on its receivables
“Total life average of write off about 6.8% of the receivables we purchase.”
Schwartz: FundKite recovers at least 50% of receivables in default
“So we recover at least 50% of what goes into defaults or collections.”
Schwartz: 90% of merchant defaults are orchestrated by debt settlement companies
“Nine out of 10 of those deals that go into defaults are not because the merchant is running into issues. They're going in because they get the debt settlement companies call them and say, basically stop paying. We're going to negotiate for less, right?”
Schwartz: 12% to 15% of FunKite portfolio experiences collection issues
“So total total, I think trailing, it's about 12 to maybe 15% of the portfolio going to some type of a collection issue.”
Schwartz: FundKite operates its platform with only five software engineers
“We have five engineers.”
Schwartz: FundKite generated approximately $70 million in revenue during 2023
“Well, we did, I think we did about seventy million worth of revenue last year, give or take.”
Schwartz: FundKite's eventual acquirer will be a bank or hedge fund
“There's really going to be only two buyers, right? There's either going to be a bank who's going to need, you know, this full setup that can underwrite and fund deals, or it's going to be a hedge fund that's just got an enormous amount of money to put out and …”