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BFD Expert Voices - Private Credit

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Kabbage, Inc. has filed for Chapter 11 bankruptcy protection, the company has announced. The company, also known as KServicing, was the loan book business of Kabbage before that company agreed to be bought in 2020.

Why it matters: The bankruptcy proceedings show that the PPP, the government support program that was meant to be fintech's moment to shine, is what led to Kabbage, Inc.'s problems. 

Of note: Softbank invested $250 million in the company in 2017 and remains one of Kabbage, Inc'.s largest shareholders. 

In addition to Softbank, other shareholders include Blue Run Ventures, Mohr Davidow Ventures and Thomvest Ventures.

Kabbage, Inc.'s creditors include Customers Bank and the Federal Reserve Bank of San Francisco.

Details: Kabbage, Inc. said in the Delaware filing that it has estimated assets of between $500 million to $1 billion and liabilities in the same range.

Flashback: Kabbage's PPP loan unit was the second largest PPP lender in the country by mid-2020. American Express agreed to acquire Kabbage in 2020 but without the company's loan portfolio. 

Yes, but: By May 2021, federal regulators had stepped into the program amid allegations of fraudulent businesses receiving the loans. The Justice Department launched an investigation into several fintechs, including Kabbage, Inc., to examine allegations of mistakes made on billions of dollars of pandemic aid aimed at struggling businesses. 

What they're saying: “Processing the remaining PPP Loans has presented a number of challenges for the company, particularly in light of the extreme administrative and cost burden placed on the company,” the bankruptcy court documents read, citing the DOJ probe. 

Kabbage, Inc., hit by PPP loan issues, files for Chapter 11

1 big thing: Kabbage, Inc. files for Chapter 11

Illustration of a PPP loan application with a "no stamp" with a dollar sign on it

Zenskar, a billing workflow automation solution for SaaS companies, raised $3.5m in seed funding. 

Why it's the BFD: Co-founder Apurv Bansal tells TechCrunch that 10% to 15% of SaaS companies today have moved toward a consumption-based pricing model on customers’ demand.  

Of note: Bansal added that simple subscriptions will only be about 30% of the market. Complex subscription and consumption-based billing will cover the rest over the next decade, he said. 

Details: Bessemer Venture Partners led the funding round, and was joined by Shine Capital, Basecamp Fund and Converge, TechCrunch reported. 

2. The BFD: Zenskar gets Bessemer backing

Consumers turn to fintechs for fertility treatments (Bloomberg)

Consumers are turning to startups likeFuture Family, Sunfish, and Carrot Fertility to pay for costly fertility treatments that often are not covered by insurance.

Celsius sets dates for asset auction (The Block)

The bankrupt cryptocurrency lender will have a final bid deadline of Oct. 17, with an auction, if necessary, on Oct. 20. 

A sale hearing will be held on Nov. 1 before Chief U.S. Bankruptcy Judge Martin Glenn, according to a filing.

Mastercard releases new tool for combating fraud in crypto (CNBC)

Called Crypto Secure, the system uses artificial-intelligence algorithms to determine the risk of crime associated with crypto exchanges on the Mastercard payment network. 

CipherTrace, a blockchain security startup Mastercard acquired last year, powers the service.

3. Credit score

Illustration of scoreboard with a downward line illuminated on one side and an upward line illuminated on the other.

• Railsr, a London-based embedded finance startup, raised $46m in debt and equity. The $26m equity portion was led by Anthos Capital, with participation from Ventura, Outrun Ventures, CreditEase and Moneta. Mars Capital provided $20m of debt. https://axios.link/3UXjHt0

• Amplify Life Insurance, a digital life insurance platform, raised $10 million in follow-on funding. Munich Re Ventures led and was joined by Crosslink Capital, Greycroft and Conversion Capital. www.getamplifylife.com

• Spleet, a Nigerian proptech, raised $2.6m in seed funding led by MaC Venture Capital, with participation from Noemis Ventures, Plug and Play Ventures, Assembly Funds, Ajim Capital and Francis Fund. https://axios.link/3Rzw5MM

• Accel-KKR made a “significant” equity investment in Salary.com, a compensation software and data provider to which Accel-KKR had previously provided debt financing. www.salary.com 

• Société Générale is acquiring a majority stake in PayXpert, a Europe-focused payment services company. Societegenerale.com

• Rapid Finance, a Maryland-based SME financing firm, acquired digital lending technology provider Thrive for an undisclosed sum. https://axios.link/3M5LxPM

• HSBC (NYSE: HSBC) is considering a sale of its Canadian operations. https://axios.link/3yfPJGR 

4. Deals of the day

🎙Check out “How it Happened: Elon Musk vs. Twitter Part II: Empire of Risk"  in Axios’ new podcast docu-series about how Musk built his business empire, the rise of Twitter and what the collision between the two could mean for us all. Listen here.

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October 04, 2022

1 big thing: Kabbage, Inc. files for Chapter 11