Where does an online micro lender go when it needs money? To venture capitalists, of course.
BillFloat, a three-year-old San Francisco-based startup, raised $21 million to fund its plans to sign on more partners in the banking, telecommunications and utilities industries. Investor Growth Capital led the financing with support from existing investors Venrock, First Round Capital and Baseline Ventures. The company has raised a total of $36.9 million.
Ryan Gilbert, BillFloat’s co-founder and chief executive officer, said he plans to expand his 40-person team by two-thirds this year, adding mostly developers. BillFloat expects its network to drive more than $400 million in loans this year and become profitable. The company charges a fee of 3 percent to 7 percent on each transaction.
BillFloat has forged deals with utilities, cable companies, wireless carriers and insurers, letting consumers take out short-term loans to pay bills. BillFloat’s automated underwriting system allows the company to reach more than 700,000 customers that most banks consider too risky.
“The credit environment for consumers is very difficult,” Gilbert said. “We provide a viable alternative to payday loans and overdraft protection.”
Over time, Gilbert expects BillFloat’s biggest opportunity to be in licensing its technology to financial institutions with much bigger balance sheets. BillFloat also said today that it’s focusing on a new service called More-Time-to-Pay, aimed at going beyond the 30-day loans it currently offers for bills. For example, the company has a partnership with MetroPCS so that customers can take out a loan for a smartphone and pay it back over six to nine months.
And BillFloat isn’t done with its own fundraising efforts. Later this year, the startup plans to raise debt financing — up to $100 million — to fund loans.