Beyond Lending Club and Prosper in the United States, very few peer to peer lending investment opportunities exist for retail investors. However, one company has come up with an innovative way for everyone to invest in loan inventory with crowdfunding. Kickfurther, a Colorado based startup aims to help businesses fund purchase orders and product inventory. I spoke with Sean De Clercq, Kickfurther’s CEO to learn more about the company and also tested out the Kickfurther platform myself in the review below.
Background on Kickfurther
Kickfurther launched their beta in January 2015 and they have come a long way since then. Initially they kept their offers to a maximum of $10,000 to learn how the platform would work and to limit how much money was funded to each company. In April 2015 they reached $125,000 in funding which is also when they won the inaugural PitchIt @ LendIt competition at LendIt USA 2015. They competed against 8 startups and were selected as the winner by the panel of venture capitalists. If you’re interested in seeing their pitch, you can view the video here.
Since then they have doubled their volume about every 2 months and Sean expects that to continue. They surpassed $500k in early August and by late September they surpassed $1 million. As of December 1st, 2015 $2.2 million of loan inventory has been funded on the Kickfurther platform. They found out very quickly that repeat businesses wanted to come back for more. They are now doing less $10k offerings with more offers being in the range of $20k-$40k.
How Kickfurther Works
What’s interesting about Kickfurther is the focus on the community, similar to that of Kickstarter. This is evidenced by their borrower acquisition strategy. They find businesses through websites like Birchbox and Touch of Modern who have inventory financing needs. These are businesses who likely have a strong relationship with their customers who also may want to help fund their favorite brands inventory. Kickfurther currently has a 70%/30% split of outbound leads versus inbound with many companies coming through referrals.
Once a small business owner fills out an application Kickfurther qualifies the business on whether they have successfully completed a production run previously and if approved, it is put on the site as an offer. Although Kickfurther provides advice on the terms of the deal, the business ultimately sets the terms and the crowd decides if they want to fund it. Once funded, a business purchases their inventory and receives their shipments. As the business sells the inventory, the business pays back the investors who own the inventory.
To understanding investing on Kickfurther it is important to realize that as an investor you are not lending money, but purchasing a portion of the inventory with your investment. Because you are directly purchasing inventory, not making an investment, Kickfurther does not have to comply with SEC regulations, which is one of the reasons that this is open to everyone. The model has been vetted by their legal advisor who has 35 years experience with SEC compliance. Also of note is that employee #1 and former Chief Operating Officer at Lending Club, John Donovan, is an advisor.
The investors recourse is the fact that they have a contractual agreement with the business and own inventory, which we will get into later. Similar to the p2p lending platforms, you can invest a small amount in each deal, with the minimum being $20. In the first 24 hours an investor can contribute a maximum of 10% of the total deal. Each month, investors receive paybacks based on the inventory that is sold.
Sample Kickfurther Deals
Kickfurther encourages businesses to share their deals with their loyal customers as that is often a good source of capital. As businesses complete offers and prove their propensity to pay, they can offer lower rates on their subsequent offers. The Kickfurther team provided us with $100 which I put into 4 different offers. One offer I chose was the Humanoid Wakeboard offer since this is a brand I am familiar with. Below you can see the deal posted on their website which had received about half of its funding when I invested.
By clicking on each offer I can see the details of the offer and information about the company and product. In this offer, the planned payback is 12% over 7 months. I can also see payment history on their first successful Kickfurther deal. Many of the deals are around 6 months with returns in the 10% range, which means returns have the potential of being quite high when annualized.
Troubled and Cancelled Offers
Investing in loan inventory is not without risk, but unlike consumer lending your purchase of the loan inventory means it is backed by a real asset. Offers marked troubled meet one of these three criteria:
- A monthly payout is completely skipped regardless of explanation.
- The total amount paid back to date is less than 50% of expected payout to date.
- The offer passes it’s final completion date without complete payout.
There are two scenarios that can play out once it is clear that the business won’t meet their obligations.
- If the business fails to sell some or all of the inventory.
In this case, Kickfurther can repossess the inventory and let investors decide what the best course of action is. They poll investors based on the percent you invested to determine next steps. For example, investors may decide to liquidate it on a site like Overstock.com or sell it on the Kickfurther store.
- If the business sells inventory, but fails to pay backers.
In this instance the business is committing fraud as they are contractually obligated to pay back the money since they don’t own the inventory. At this point the accounts receivable starts accruing interest and the business is pursued in court.
A cancellation can be complicated to understand, but it is an important piece because there are many things that come into play at this point. Kickfurther is currently going through their first cancellation now and Sean posted a detailed blog post on the Kickfurther cancellation process if you want to learn more.
Kickfurther has only been in operation for about a year, but it is one of the few opportunities available to retail investors which is why we decided to highlight it on Lend Academy. They just closed a $575,000 round and they have been growing steadily over the last year. As they complete more offers and more data becomes available it will be easier to understand what the risks of investing are.
Kickfurther plans to implement a Kickfurther community score which will deployed in a few weeks. They realize it is hard for retail investors to compare companies because some of the data is not available and the new community score will help. This is especially important for businesses who have not yet completed an offer with Kickfurther. They are also looking at integrations with Shopify and Paypal which could offer much more real-time information on the sales of the company. In the future Sean speculated that as a business sells inventory, deposits could be made daily into the investors accounts.
If you’re interested in testing out the Kickfurther platform, you can signup with our referral link and Kickfurther will deposit $5 into your account. We also receive $5 into our account which will help us continue our experiment in investing in loan inventory on Kickfurther.
None of this information should be considered investment advice. You should consider your own situation and risk tolerance before making investment decisions.