Build versus Rent
Cloud Lending’s solutions typically constitute mission critical back office systems for clients. The company leverages Salesforce.com’s platform as a delivery mechanism, using their infra and data center to build applications for p2p lenders. This gives them an added advantage of a big name safety apparatus, this is vital as lenders are extremely paranoid about security and with the Salesforce brand behind them for cloud infrastructure; it becomes easier to convince clients to trust a start-up software company. The company provides a suite of applications that cover the entire lifecycle of loans, from origination to syndication to servicing. This creates an obvious question that tech being the biggest differentiator between p2p lenders and traditional finance companies, are p2p lenders not signing away their originality and risk becoming a me too player in the market.
Necessity is the mother of Invention
Snehal Fulzele met Darpan Saini at Carnegie Mellon University. Both were pursuing a Masters Degree in Software Engineering and went on to work at companies like IBM, Adobe and Oracle. The founders being immigrants could not get a credit card and were declined by both Bank of America and Wells Fargo. While researching for alternative sources of funding, they stumbled on to alternative lending sites like Lending Club and Prosper. It was at Oracle, while working on Flex Cube (a core banking platform) that they realized the need for an enterprise tech solution for such Fintech lenders. Enterprise software solutions were only available for banks and nobody was specifically building a technology infrastructure platform for catering to the new aged lenders. Considering the traction in cloud, they developed an “end to end lending solution built natively on Salesforce.com”.
Building the company
The company was founded in November 2012 with its headquarters in San Mateo. The company has grown to over 90 employees and now has offices in Bangalore and London. The company raised a pre series A of little more than 2 million dollars and closed an 8 million dollar series A in August 2015. The round was led by SF Capital (investors in OnDeck) and COTA, Kodak and Green Visor Capital also participated in the round. The company’s first customer was Propel Financial Services, a traditional lending company focused on property tax financing. It has now over 80 customers across 22 countries; with 50% traditional finance companies and 50% emerging Fintech companies. The start-up is built on Software as a Service (SaaS) model, where the company does not sell the software as a product but instead charges the customer on a monthly per user basis. Cloud Lending Solutions digitizes origination, underwriting, servicing and collections, creating a single system of record for your lending operations. Clients include banks, traditional finance companies, online lenders, and marketplace platforms. Among their customers they count Capital Good Fund, Juhudi Kilimo, Encore Capital Group, Dealstruck , Mission Asset Fund and more.
Snehal, the co founder and CEO of the company in an interview with Lending-Times.com explains that each customer has a unique lending model. Their secret sauce is the algorithm on the basis of which they decide to fund a borrower and at what rate, the rest of the tech involved is similar to a core banking system which is just a facilitator and adds no value to their business. Cloud Lending is helping them setup a marketplace in as little as 90 days, this helps the lender in getting the first movers advantage in their particular niche and more importantly they can start testing their algorithm to iterate their lending models accordingly. The platform has been developed keeping flexibility in mind. The customer can build multiple applications on top of the cloud infrastructure to meet his evolving requirements. The company has complete p2p functionality which supports both Zopa like pure retail model and Prosper like combined (institutional and retail) model. The end to end solution can cost anywhere between 100 to 200 thousand dollars a year.
Cloud Lending has been able to bring companies like Lending Point, New Zealand based Harmony and Dealstruck on board as customers. It has been able to tap developing markets with Lenddo (Philippines and Colombia) and Juhud Kilimo (Kenyan Farmers). The company seems to be winning the buy versus rent question with its focus on speed and having an experience of serving more than 80 customers worldwide. The company also touts a 60% lower operating cost as compared to building the infrastructure from scratch. But as a lender grows, it is difficult to imagine the customer sticking with Cloud Lending and not building its own systems. This is a question which the founders would be aggressively trying to address.
The company is going to keep its focus on alternative lenders. The company is seeing thousands of p2p lenders entering the market and addressing their own niche. Foundation Capital believes that a trillion dollar worth of financing would be originated by p2p lenders by 2025. The company wants to be at the forefront of providing the tech solutions for start-ups to take on the traditional banks. The company in a smart move is also hedging its bets by targeting traditional banks looking to enter the online lending space. Banks with an entrepreneurial nature are themselves staking a claim to online lending and manoeuvring the onboarding process of customers via online channels. This indicates the maturity of the SaaS infra space as both institutions and start-ups make a beeline for enterprise solution providers for faster rollouts of their platform.
Author : Heena Dhir and George Popescu