Nigerian ethical credit-recovery fintech Bfree secures $1.7M, expands to Asia, Europe, South America and across Africa
Bfree, a Nigerian credit management fintech has embarked on global expansion after raising $1.7 million in a pre-Series A round, to tap the opportunities in emerging markets, where digital lending apps have recently sprung up in droves.
Funds that participated in the latest round included 4Di Capital, Octerra Capital, VestedWorld, Voltron Capital, Logos Ventures, and several other angel investors, bringing the total capital raised by the Lagos-based startup to $2.5 million, having realized $800,000 in a seed round last May.
Bfree is now on a massive recruitment drive for the 16 new markets it is setting up operations in, including Ghana, India, Uganda, Brazil, Colombia, Mexico, Russia, Poland, Pakistan and Indonesia. This is as it grows beyond Nigeria, where it started operations in August 2020 before entering Kenya in July last year.
“We are going into markets with large populations, credit deepening and an underdeveloped regulatory environment, where a behavioral collection approach is likely to work,” Bfree co-founder and CEO, Julian Flosbach told TechCrunch.
Bfree was founded by Chukwudi Enyi (COO), Moses Nmor (CPO) and Flosbach (CEO), who were looking to develop better, ethical and tech-inspired debt-collection tools and processes following their first-hand experience working for digital lenders in Nigeria.
“We saw that there was like a little bit of a breach in the value proposition of lenders — they are good at giving out loans, but the aftersales services of the credit market didn’t work as collections processes were inefficient and not user friendly,” said Flosbach.
Flosbach told TechCrunch that Bfree employs the use of ethical debt collection standards and works closely with defaulters for tailor-made settlement options, with the end-goal of increasing the repayment rate and customer satisfaction.
Ethical debt collection standards ensure the privacy of customer information during the process, explore flexible repayment options and do not lead to unnecessary penalties like lateness fees and debt-shaming (as is the practice with many digital lenders at the moment).
The startup is currently working with 30 credit institutions, including digital lenders, micro-finance institutions and banks. Using customer data provided by the lenders, the startup builds the user profiles of defaulters, and runs their data through an algorithm to predict their behavior and recommend the best collection method.
Depending on a customer’s risk profile, Bfree either directs them to a self-service platform, where borrowers set new payment plans using their phone number, follow-up on debt balance through automated communication (chat boxes, callbots or IVR technology) or direct calls. The startup also regularly conducts financial literacy campaigns.
The emerging markets have in recent years experienced a surge in digital lenders providing credit to a population that has remained underserved by formal lenders. The credit offered is often instant and collateral-free, which is unlike loans from formal banking institutions (like banks) where borrowers are at the very least required to hold an account, have regular account activity and maintain minimum operating balances. Besides, traditional lenders require collateral of some kind to cushion them from losses whenever borrowers fail to repay.
Digital lenders avail the much-needed credit to people locked out by formal banking institutions, but they experience a high default rate (in mid 2020, Kenya’s default of digital loans stood at 23%), which has forced them to outsource the services of collection agencies, which, among other techniques, use debt-shaming tactics like calling the friends and relatives of borrowers.
Bfree has so far followed up with 1.2 million defaulters to date, and are currently handling around 800,000 customers, majority of them in Nigeria. Flosbach anticipates that the startup will be handling 1.4 million profiles by the end of next month.
In preparation for its next stage of growth, Bfree has secured the services of leading industry professionals, including CTO Konrad Pawlus formerly of SALESmanago and Yohan Theatre who previously worked at investment management firm PIMCO. Theatre takes over as the head of data decision-making and financial engineering. The duo will be part of the team that will steer the startup’s new business as it works to disrupt traditional finance by leveraging blockchain technology for secondary debt markets.
“Lenders in the US or in Europe have the opportunity to sell significant chunks of their debt portfolios to third parties. This means they only carry a portion of the risk of the loans they issue. In emerging markets, this is typically not the case. Lenders have to carry the entire credit risk on their own. A key driver for this difference lies in higher transaction costs and contractual uncertainties,” said Theatre.
“The arrival of DeFi (decentralized finance) is a game-changer: transaction costs can be slashed while contractual certainty is increased by smart contracts. These are some of the risk-sharing instruments that we are now actively providing to lenders and borrowers,” he said.
The market has changed, but super-voting shares are here to stay, says Mr. IPO
Yesterday, the ride-sharing company Lyft said its two co-founders, John Zimmer and Logan Green, are stepping down from managing the company’s day-to-day operations, though they are retaining their board seats. According to a related regulatory filing, they actually need to hang around as “service providers” to receive their original equity award agreements. (If Lyft is sold or they’re fired from the board, they’ll see “100% acceleration” of these “time-based” vesting conditions.)
As with so many founders who’ve used multi-class voting structures in recent years to cement their control, their original awards were fairly generous. When Lyft went public in 2019, its dual-class share structure provided Green and Zimmer with super-voting shares that entitled them to 20 votes per share in perpetuity, meaning not just for life but also for a period of nine to 18 months after the passing of the last living co-founder, during which time a trustee would retain control.
It all seemed a little extreme, even as such arrangements became more common in tech. Now, Jay Ritter, the University of Florida professor whose work tracking and analyzing IPOs has earned him the moniker Mr. IPO, suggests that if anything, Lyft’s trajectory might make shareholders even less nervous about dual-stock structures.
For one thing, with the possible exception of Google’s founders — who came up with an entirely new share class in 2012 to preserve their power — founders lose their stranglehold on power as they sell their shares, which then convert to a one-vote-per-one-share structure. Green, for example, still controls 20% of the shareholder voting rights at Lyft, while Zimmer now controls 12% of the company’s voting rights, he told the WSJ yesterday.
Further, says Ritter, even tech companies with dual-class shares are policed by shareholders who make it clear what they will or will not tolerate. Again, just look at Lyft, whose shares were trading at 86% below their offering price earlier today in a clear sign that investors have — at least for now — lost confidence in the outfit.
We talked with Ritter last night about why stakeholders aren’t likely to push too hard against super-voting shares, despite that now would seem the time to do it. Excerpts from that conversation, below, have been lightly edited for length and clarity.
TC: Majority voting power for founders became widespread over the last dozen years or so, as VCs and even exchanges did what they could to appear founder-friendly. According to your own research, between 2012 and last year, the percentage of tech companies going public with dual-class shares shot from 15% to 46%. Should we expect this to reverse course now that the market has tightened and money isn’t flowing so freely to founders?
JR: The bargaining power of founders versus VCs has changed in the last year, that’s true, and public market investors have never been enthusiastic about founders having super voting stock. But as long as things go well, there isn’t pressure on managers to give up super voting stock. One reason U.S. investors haven’t been overly concerned about dual-class structures is that, on average, companies with dual-class structures have delivered for shareholders. It’s only when stock prices decline that people start questioning: Should we have this?
Isn’t that what we are seeing currently?
With a general downturn, even if a company is executing according to plan, shares have fallen in many cases.
So you expect that investors and public shareholders will remain complacent about this issue despite the market.
In recent years, there haven’t been a lot of examples where entrenched management is doing things wrong. There have been cases where an activist hedge fund is saying, “We don’t think you’re pursuing the right strategy.” But one of the reasons for complacency is that there are checks and balances. It’s not the case where, as in Russia, a manager can loot the company and public shareholders can’t do anything about it. They can vote with their feet. There are also shareholder lawsuits. These can be abused, but the threat of them [keeps companies in check]. What’s also true, especially of tech companies where employees have so much equity-based compensation, is that CEOs are going to be happier when their stock goes up in price but they also know their employees will be happier when the stock is doing well.
Before WeWork’s original IPO plans famously imploded in the fall of 2019, Adam Neumann expected to have so much voting control over the company that he could pass it along to future generations of Neumanns.
But when the attempt to go public backfired — [with the market saying] just because SoftBank thinks it’s worth $47 billion doesn’t mean we think it’s worth that much — he faced a trade-off. It was, “I can keep control or take a bunch of money and walk away” and “Would I rather be poorer and in control or richer and move on?” and he decided, “I’ll take the money.”
I think Lyft’s founders have the same trade-off.
Meta is perhaps a better example of a company whose CEO’s super-voting power has worried many, most recently as the company leaned into the metaverse.
A number of years ago, when Facebook was still Facebook, Mark Zuckerberg proposed doing what Larry Page and Sergey Brin had done at Google but he got a lot of pushback and backed down instead of pushing it through. Now if he wants to sell off stock to diversify his portfolio, he gives up some votes. The way most of these companies with super voting stock are structured is that if they sell it, it automatically converts into one-share-one-stock sales, so someone who buys it doesn’t get extra votes.
A story in Bloomberg earlier today asked why there are so many family dynasties in media — the Murdochs, the Sulzbergers — but not in tech. What do you think?
The media industry is different from the tech industry. Forty years ago, there was analysis of dual-class companies and, at the time, a lot of the dual-class companies were media: the [Bancroft family, which previously owned the Wall Street Journal], the Sulzbergers with the New York Times. There were also a lot of dual-class structures associated with gambling and alcohol companies before tech firms began [taking companies public with this structure in place]. But family firms are nonexistent in tech because the motivations are different; dual-class structures are [solely] meant to keep founders in control. Also, tech companies come and go pretty rapidly. With tech, you can be successful for years and then a new competitor comes along and suddenly . . .
So the bottom line, in your view, is that dual-class shares aren’t going away, no matter that shareholders don’t like them. They don’t dislike them enough to do anything about them. Is that right?
If there was concern about entrenched management pursuing stupid policies for years, investors would be demanding bigger discounts. That might have been the case with Adam Neumann; his control wasn’t something that made investors enthusiastic about the company. But for most tech companies — of which I would not consider WeWork — because you have not only the founder but employees with equity-linked compensation, there is a lot of implicit, if not explicit, pressure on shareholder value maximization rather than kowtowing to the founder’s whims. I’d be surprised if they disappeared.
Tesla brings back European referral program as end of Q1 nears
Tesla is bringing back its referral program to Europe, a strategy that taps into the brand loyalty of customers as it seeks to preserve market share and boost sales before the first quarter of 2023 closes.
The referral program follows Tesla’s move to reduce prices in a variety of markets, including Europe, China and North America.
Starting Tuesday in Europe, new Tesla buyers can receive 100 so-called “Loot Box Credits” when referred by a current Tesla owner, who will get 2,000 credits for the referral. If the referred customer takes delivery before March 31, 2023, they’ll get a bonus of 5,000 free Supercharging kilometres, and the referrer will get 10,000 credits. Those credits can be redeemed for software upgrades, up to 10,000 kilometers of free Supercharging “and more.”
Tesla has never used traditional advertising, so the company has historically used its referral program to get its loyal customer base to promote vehicles. Those rewards have changed over the last few years. At certain points, owners could win rewards like having a photo of their choosing launched into deep space orbit, an invite to an upcoming Tesla event, or even free new Roadsters to owners who accumulated enough referrals.
Tesla realized such extravagant rewards were starting to eat into profits, so in 2019 the automaker paused the program and came back with a more reasonable one that gives the referral giver and receiver 1,000 miles of free Supercharging each.
Last November, Tesla launched a revamped referral program in the U.S., which gives out credits that can be put towards the purchase of Tesla solar products, like the Solar Roof and Solar Panels. Tesla also launched a program in China called Treasure Box, where owners get credits that can be used towards the purchase of accessories like vehicle chargers, t-shirts or shot glasses.
The move in Europe suggests that Tesla is trying to hold onto, or even grow, its market share dominance. Tesla was the most popular EV brand in Europe last year, with the Model Y and Model 3 topping the ranks at 138,373 and 91,257 sales, respectively. Following behind were the Volkswagen ID.4 with 68,409 unit sales, the Fiat 500 electric with 66,732, and the Ford Kuga plug-in hybrid EV with 55,018 sales, according to Inside EVs.
While Tesla was the most popular EV brand in Europe last year, it actually falls behind the large multi-brand OEMs. Volkswagen Group, which includes brands like Audi and VW, actually has the largest market share of plug-in EVs with 20.6%. Stellantis, BMW Group and Hyundai follow with 14.6%, 10.5% and 10.1%, respectively. Mercedes and Tesla are tied at around 9% share.
As of this week, Tesla has finally hit production capacity of 5,000 vehicles per week at its Berlin gigafactory — a milestone CEO Elon Musk had originally promised for the end of 2022. While production numbers don’t equal sales, it’s possible that the increased production in Europe could help the automaker maintain its position and gain even more market share in the future.
The referral program isn’t the only move Tesla has made to boost sales, particularly before it reports quarterly earnings. In January, Tesla cut prices for Model 3 and Model Y vehicles in the U.S. and Europe by 20%. Earlier this month, the automaker slashed Model S and Model X prices in the U.S. as well.
In December 2022, Tesla also provided up to $7,500 discounts for vehicles purchased and delivered before the end of the year in the hopes of attracting buyers who might otherwise wait for the new year when Inflation Reduction Act incentives would kick in.
Pinterest brings shopping capabilities to Shuffles, its collage-making app
Pinterest announced today that it’s testing ways to integrate Shuffles collage content into Pinterest, starting with shopping. Shuffles, which is Pinterest’s collage-making app, launched to general public last November. To use Shuffles, users build collages using Pinterest’s own photo library or by snapping photos of objects they want to include with their iPhone’s camera. The iOS-only app is available in the U.S., Canada, Great Britain, Ireland, Australia and New Zealand.
Shuffles will now have all of the shopping capabilities as regular pins. Users will be able to tap individual cutouts used in collages, see the brand, price, and other product metadata along with similar products to shop.
“Unlike typical product exploration, Shuffles bring an interactivity that makes the experience inspirational and fun,” the company said in a blog post. “Gen-Z is curating fresh, relevant content alongside their peers, which is quickly making for a marketplace of trendy, shoppable ideas. The high density nature of Shuffles, which can include layers of product cutouts from multiple Pins, allows consumers to dig deeper and also connect to other Shuffles that include the same Pins. As we look ahead to how consumer behavior is evolving, we’re testing ways of integrating Shuffles collage content into Pinterest, starting with shopping.”
Although Shuffles surged to become the No. 1 Lifestyle app on the U.S. App Store in August when it was invite-only, the app’s popularity has since declined. By bringing shopping capabilities to Shuffles, Pinterest is likely looking for ways to retain users on the standalone app.
Pinterest also announced that it’s exploring a new takeover feature for advertisers called “Pinterest Premiere Spotlight” that prominently showcases a brand on search. The company says the feature is designed give advertisers a new way to reach users on Pinterest.
The company says 97% of top searches on Pinterest are unbranded, which means users typically don’t type a brand name into their searches on the platform. This gives brands the opportunity to be discovered as they help consumers go from discovery to decision to purchase, Pinterest says. In the coming months, the company planes to offer additional ways to help brands connect with shoppers.
Pinterest also shared some new stats about its Catalogs offering, which lets brands upload their full catalog to the platform and turn their products into dynamic Product Pins. The company says it has seen a 66% increase in retailers setting up shop by uploading or integrating their digital catalogs on its platform, along with 70% growth in active shopping feeds year over year globally.
As part of its most recent earnings release, Pinterest revealed that its platform now has 450 million monthly active users globally, a 4% jump year-on-year. Pinterest has been focused on enhancing the shopping experience on its platform over the past few years, and said during its earnings call that it wants to make every pin shoppable, including videos.
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