Has the Future Already Arrived?
If it is possible for an algorithm to take a person’s cash flow, credit history, and Facebook account information and turn it into numerical creditworthiness score within a matter of seconds, then surely someone can create an algorithm that can take similar data from a small business and instantaneously determine how much it is going to be worth. Actually, that’s exactly what the team over at Aprenita has done.
Here is an example of the type of data Aprenita has access to in the mobile apps market :
- customer engagement
- marketing conversion
- outstanding invoices from the app store
- customer feedback
- and much more
Coming up with an algorithmic platform that would assess businesses in real time and completely is particularly easy in the mobile app market. What used to be a utopistic dream for lenders is actually becoming a reality with Aprenita’s innovative lending platform for mobile app designers.
Successfully Navigating the $120bil Mobile App Market
Aprenita is a New York-based lender that caters to a very specific but large market. They advertise themselves are “the only financing company in the world that is exclusively focused on providing innovative financing solutions for mobile app businesses.” According to Aprenita co-founder, Sergei Kovalenko, the mobile app market is worth $100-120billion. Since the launch of Aprenita’s first version of their platform in September 2015, they have secured a few dozen customers and are currently deploying approximately $1million a month in capital loans funded by a mixture of their own capital and a few investors.
Kovalenko came up with the idea for Aprenita in 2014 while he working as an angel investor for mobile app developer and recognized a certain disconnect between the digital start-up company and the existing sources of capital. He explains that while traditionally banks and other lenders base loan decisions solely off revenue, Aprenita understands that most mobile app companies need a large amount of paid user acquisition and growth capital, as well as time to grow before they can start showing any significant amount of revenue. Without the help of a traditional bank loan, most mobile app developers will either turn to the use of credit cards or search out venture capitalists, but Aprenita knows that often credit cards cannot and will not offer a line of credit large enough to make a difference, and most VC’s expect a larger portion of equity than the owners are prepared to lose. With co-founder Mark Loranger, Kovalenko has tried to build a lending company that will use all the available information about a potential customer in order to accurately assess risk and provide the proper amount of capital to start-up companies that are best equipped to pay back their loans, without charging exorbitant fees or taking an ownership stake.
Using KPI’s to Make Real-Time Decisions
The team of entrepreneurs, developers, and engineers at Aprenita has designed a platform that uses key performance indicators such as analytics, revenue, and marketing in order to make highly educated loan decisions for their customers. As advertised on their website, the application process takes about 10 minutes and funding is normally received within 1-2 days. Kovalenko explains that their decisions are strictly data-based. They do no ask for a personal guarantee or physical collateral if the KPI’s add-up then Aprenita issues the loan.
Similar to other alternative data companies and lenders who have begun assessing consumers by integrating with their bank and social media accounts, Aprenita sources out their information on potential customers through direct integration with App Stores (GooglePlay and Apple) and analytics accounts (ie. Flurry, Localytics). Using their algorithm, Aprenita can evaluate a company’s creditworthiness within a few minutes and issue funds with 24 hours. The co-founders stand behind the data and attest that it is proof the companies will be able to repay their loans. When asked about current default rates, Kovalenko said though they have expected and planned for a certain percentage of defaults they have no had any thus far. It would seem the data does not lie.
Is This a Window into the New Age of Lending?
There is no denying that there is a science to lending, but science is a constant evolution, and lending is no different. This is the Information Age after all, so it makes sense that lenders are taking full advantage of the amount of information at their disposal. By connecting with a company’s accounting system, POS, bank, analytics, and social media account, lenders will be able to calculate creditworthiness unlike they ever have before. Will full integration with other accounts and systems create a transparency in lending that will make for a healthier the financial environment? It seems that while the data is plentiful and available almost instantaneously, the world will still need to wait to see what the future of Fintech holds.