Wonga Raises £73m In Series C Funding To Double-Down On Massive UK Growth
Wonga, the short-loans company which uses a realtime platform to assess users applications instead of people, has raised a significant £73 million ($117 million) funding round – actually a Series C – as expansion capital. Wonga plans to use the cash to expand further in the UK, it’s home market.
The funding round was led by Oak Investment Partners. Meritech Capital partners, another US VC, and Wellcome Trust, the UK’s largest charity and health-funding organisation, also invested, as did some existing investors. Wonga has also had previous investment from Accel Partners, Greylock Partners, Balderton Capital, Dawn Capital and London based Seed fund TAG. However, we understand from sources that Balderton didn’t invest in this round, making Dawn Capital the only investor to have invested three times in the business, and the only European VC to have invested in this round.
Wonga has attracted criticism and controversy because it makes short-term cash advances at rates of interest equivalent to about 3,000 per cent a year based on an application form and an algorithm. However, critics rarely mention that Wonga’s typical customers are young professionals earning national-average wages and are usually applying for less than £200. Most have never used short-term loans services, so it’s tapping a new market which is able to afford the loan. Wonga was launched in October 2007 and has processed more that 1.8 million applications via the web and mobile and recently made it’s one millionth loan.
Speaking to TechCrunch, founder and CEO Errol Damelin said “Because we make cash advances we need resources to do that so this is expansion capital to fund consumer demand. The vast majority of our customers are using us as an alternative to a bank overdrafts, which come with charges and fees, or credit card debt.”
“We use our own balance sheet to do the lending, using debt and equity. So the round was not raised specifically to lend with, but to give us a strong balance sheet.” He said this was simiar to other financial services businesses. “We never wanted to be more leveraged. We chose to have have a strong balance sheet.” It’s also to make sure Wonga “has the same engineering talent as Twitter or Facebook.”
“Want to keep driving the benefits to customers, so this is about increasing speed and convenience,” said Damelin. “Before Wonga short terms loans were done on the doorstep, or pay day loans or via call centres. We’ve built the world’s fully automated lending platform and that’s unique.” Wonga is certainly scaling – it launched with same day money, then we moved to same hour, then within 15 minutes.
Damelin said Wonga would eventually come to a point where an international strategy was required but this wasn’t it. They are effectively doubling-down on the UK, one of the largest markets in the world for unsecured debt. While the FT seems to think there are US expansions, Damelin told us that is categorically not the case.
Wonga clearly has plenty of revenues. It recently sponsorsed free public transport in London during last New Year’s eve.
Damelin added that the fact the The Welcome Trust – the UK’s bigggest charity – had invested was a reflection that “from their point of view that we think about things in a coherent way, and care about the customer and being a responsible corporate citizen.”
He admitted that Wonga attracts criticism. “It has been controversial, people have issues. It happens to be a space that attracts controversy but we think about it a lot and engage with the arguments. We’ve really met consumer need by being the good guys in the space. We explain what the service levels will be and we over-deliver and under promise. If someone pays off a loan early we’re fine with that – this never happens in financial services.”
Recent (Jan 11) online research, via Populus, with more than 15,000 customers indicated that overall satisfaction was up to 95%, from a previous level of 85% and Wonga is their preferred option for credit, over credit cards, bank loans, overdrafts and payday loans.
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