The Exchanges

Q That's great. And so where are you today? How much total, this is the, these are the big numbers, the headliner. So how many total businesses have taken a loan out and what's the total volume?

A So we're, we have a 115,000 approaching a 120,000 small businesses in the U S that have taken a loan. We're approaching four billion dollars in capital delivered. We've done really all of this. We started the business in Oh eight Oh nine, but we didn't launch until 2011 because we were spending that year and a half, two years. Doing two things, raising money and building technology. Uh, if you look at a lot of the other folks that are out there, you know, in the space, you'll notice the year they started was the same year they started lending. Well, you need time to build a system, right? We knew that that was a key component, and so we took our time and built the right system.

AI assessment note: “approaching a 120,000 small businesses... approaching four billion dollars in capital delivered”

Q It's frustrating. Now, before we get into some other stuff that's not directly related necessarily to the business, um, how do you make money?

A So we make money, uh, really a couple of ways. One is, uh, we make money on the, for, through interest that we charge on the, on the loans that are being made. Um, very, very important though. Uh, it's only, and it sounds like this is a sort of a duh comment. It's only for the capital you have out only for the time you have that capital out. So we approve you for a line of credit. We don't charge you an origination fee, some sort of availability fee because you've had a 100,000 that you haven't tapped. Um, we don't charge you because you paid us off early or anything along those lines. You're literally charged only for the time. So that's one way. The second way is these licensing relationships we have with your friend, uh, uh, over at Santander. Um, you know, we, we have licensing fees that we receive in connection with doing those relationships with customer with, with those types of banks.

AI assessment note: “One is, uh, we make money on the, for, through interest”

Q move a Parts of their trade off the US dollar so that we don't have as much leverage over their kind of national security. Uh, people are saying the stock market is high right now, and there's a crash coming. If that happens, quantitative easing continues to go up. Do you ever worry about the value of a US dollar? Is it actual threat to kind of what you're doing?

A Um, well, you know, well, look, I, I do worry to the extent that we, you know, operate in foreign currencies at times, we do have currency risk. That's associated with some of the things that we do, so it's not so much that I worry about the, um, I worry about the, the value of the U.S. dollar so much as I worry about volatility, um, within the, the currency markets, and so we've looked at solutions to be able to hedge against currency risk as we receive funds in You know, euros or, uh, pesos or Mexican dollars or yen or whatever it may be, um, so that we can manage that. But I do think a lot about currency right now. Um, by the way, you know, five years ago, I, I could never have imagined even answering that question.

AI assessment note: “it's not so much that I worry about the, the value of the U.S. dollar”

Q Um, two, two last questions. One's related to blockchain, not the speculation side, the actual tech, and the second is related to kind of Data as a war that we're seeing related to Cambridge Analytica and how it applies to banking and finance. Um, let's start with, let's start with blockchain. Um, any opportunity for you to get into that space from the, not from speculative side, the actual tech?

A So the, the way I think about blockchain, yeah, the answer is there's going to be a number of ways I think over time. The one that I am thinking a lot about right now is how we actually leverage it in the capital markets in order to, so there's lots of things that we try to solve for in the debt markets, right? We're not a bank, so we don't have the deposit base that you referenced earlier. Um, but what we need to have is immediacy of capital. When somebody comes and asks for money, we have it. Uh, we need permanence, which means that through cycles, we'll have that element Diversity and flexibility. A diverse set of funders and a diverse set of ways to fund, and then flexible capital so we can test new products and services. We've solved a lot of these issues, permanence being one that's a little bit more challenging. The way I think about blockchain, and frankly, crypto, if you will, that sits on top of blockchain, is a way to maybe, um, either hedge against some of the, some of the permanence issues that, that exist in the capital markets for companies like Cabbage, um, or a way to, Um, so either a way to hedge it or a way to offload the permanence piece into a separate vehicle that can be tradable, um, you know, independent of that, that debt facility. And without getting into a lot of details, I'm playing around with a lot of models, again, within the capital markets where…

AI assessment note: “The one that I am thinking a lot about right now is how we actually leverage it”

Q Is this tech built internally based off data sets that you know, or are you licensing, you know, something from Experian or a typical credit agency?

A So no, we, uh, we built all our technology in house. Um, we do, um, compliment it with some traditional data only because it makes sense to use as much data as possible. But the most important aspect is, is we only pull in data that we can actually access and pull in at the, at the time that you're, um, applying for the loan. So, so it's not going to be a situation where we say, Hey, thanks for going through this process. Um, now let's get back to you in a couple of days while we go find out more information about you. It is, we want to find out, figure it out right away and let you know, because guess what you've got as a small business owner, you've got a lot of better things to do than to spend a lot of time with your bank. It's instant. Instant.

AI assessment note: “we built all our technology in house. Um, we do, um, compliment it with some traditional data”

Q Yeah. Just a little bit. Now you have something unique in your business. Are you able to raise against kind of a future income stream, whether it's the interest or things like that? Walk us through the kind of unique economics you have.

A Yeah. So the money I talked about, the, the five hundred million is actually an equity raise. We've also raised in debt, literally at this .1000000000 of dollars. We put out a lot of money to date. Um, and that is money that we raise based off of the receivables, obviously, of the, of the loans that we're making right now. Um, the equity that we raise is for operating capital, and also our lenders want to know that we're putting some skin in the game, right? So they want to understand that we're actually putting money alongside them, uh, in lending to our customers. So we, um, participate in that, and also as we think about expansion, both geographical and product expansion, Um, we use our own capital often for those efforts because we've got to prove the market. We've got to prove that we know what we're doing, obviously, to our lenders, and so we, uh, so we utilize our own capital to do that.

AI assessment note: “that is money that we raise based off of the receivables”

Q the tech side of this. We focus on the finance side, but really, I mean, someone could argue your asset is you've identified probably thousands of signals that you can pay attention to that BB&T is going to ignore, and that's what allows you to get comfortable making a loan to someone that BB&T wouldn't make a loan to. So tell me about the tech. How is that constantly evolving?

A So it's two things. It's one, being able to take that data in and understand the small business, as you said. The other piece of this is to be able to do it very, very, very quickly, right? Because it's not that small businesses are Need money fast. It's that those small business owners need to get back to what's really generating revenue for them, right? So focus on the things that are most important in their business. Um, so, um, what we do is allow a small business to connect all key data sources that relate to how they run their business. So it can be their, their banking, um, account. It can be processing. So quick books, chase credit card, shipping, social accounting, web analytics. What we want to do is we want to get in two things. One is At the time of application, we want to get the best view possible of how that small business is operating so we can answer the key questions that banks ask small businesses, which is, What's the capacity or, or the size or robustness or profitability of the business? What's the character of the small business owner? If they have the money in the counter, are they going to pay? And three is what's the consistency or stability? Is that business going to be around for a legitimate period of time where, you know, we can offer capital and enter in that kind of relationship with them? We just, the thing that banks have done is they've taken …

AI assessment note: “allow a small business to connect all key data sources that relate to how they run”

Q For a small business listening to that might want to go to cabbage and use you paint us as simply as you can. What is the true cost of capital working through you?

A Yeah, so, um, the, the true cost of capital for a small business, it really depends on the small business and the risk, so we have rates that are as low as 12%, uh, and in fact, we're doing a deal, um, right now, um, which, which we'll talk about, uh, in a few months, um, where, uh, where small businesses will be able to access capital for as low as, um, mid to upper single digits, um, for certain types of purchases and things along those lines online, and, uh, and so, Uh, the true cost of capital can be anywhere from, you know, like I said, below 10% in connection with that deal, and then run up into the, you know, sort of mid, you know, we, we average about a, a mid thirties APR, but, but the most important, um, thing to focus on is, you know, the use of capital. So what we, we really talk with our small businesses about is to leverage the capital for revenue generating purposes. So you're buying inventory to turn that inventory within a reasonable period of time. We're also now putting in place, we have a 18 month product, uh, that we're now going into full release in June. That capital will be lower cost capital, um, that'll focus on longer term assets. And so as Cabbage grows and becomes, um, I, I think, you know, um, more, um, complex in terms of its ability to offer products and services, but obviously simple to the customer, um, we'll be able to offer longer, longer dur…

AI assessment note: “we average about a, a mid thirties APR”

Q Last question before we wrap up with the famous five. Why has Atlanta, uh, been able to stay under the radar in terms of, it's not known as a top tech hub, but I know from firsthand interviews, there's a lot of technology happening, especially at the Atlanta tech village. Why has it stayed under the radar?

A Um, not intentionally. Um, so I, I don't think a city tries to be, you know, under the radar. Um, but I think, uh, I think it's, um, Look, I, I think a lot of people think of the south. I mean, you know, it's amazing how many people I run into, and they go, where in the valley are you located? And I go, yeah, in sort of the southern valley, you know, way, way, way south. Um, and, uh, and it always really shocks people. Um, I, I actually think our, our, our best days are, are happening, um, in sort of consecutive fashion right now. So I'm excited about what's going on with ATV, Atlanta Tech Village, David Cummings, a bunch of other incubators, and we've also had a lot of great wins, Ionic Security, Cardlytics, Um, you know, and a bunch of other companies that are, that are sprouting out right now and raising full story, raising a bunch of money.

AI assessment note: “I don't think a city tries to be, you know, under the radar”