EKMH Innovators Interview Series
A new interview series spotlighting global tech influencers, disruptors, visionaries, and of course, innovators.
Earlier this month Atlanta-based Kabbage, Inc., a data and tech company which offers automated cash flow solutions to small businesses, closed a $200 million revolving credit facility to support its rapid growth providing U.S. small businesses access to flexible, online funding. Building on the momentum of Kabbage’s record-setting $700 million securitizationin April, the new four-year credit facility provides the longest period of committed debt funding for the company. According to the company, the senior tranche of the new dual-class transaction earned an A(sf) rating from Kroll Bond Rating Agency, Inc. The debt capital commitment is provided by a subsidiary of a leading life insurance company, managed and administered by 20 Gates Management, and Atalaya Capital Management.
Co-Founded by Kathryn Petralia and Rob Frohwein in 2008, Kabbage gives small businesses access to lines of credit up to $250,000 by analyzing their real-time business data. To date, Kabbage has provided more than 185,000 U.S. small businesses access to over $7 billion in capital. Funded and backed by investors, including the SoftBank Vision Fund, BlueRun Ventures and Mohr Davidow Ventures, all Kabbage U.S.-based loans are issued by Celtic Bank, a Utah-Chartered Industrial Bank, Member FDIC.
I recently caught up with Co-Founder Kathryn Petralia via email to learn more about her insight on topics including SMEs, disruption, Kabbage's community culture and how to achieve a more inclusive workplace. In addition to her work at Kabbage, Petralia also currently serves as a Board Member on PadSplit, CARE, Rented.com and the Atlanta Chamber Music Festival.
Our interview follows:
EKMH: To recap, Kabbage has provided more than $7B since founding, has raised nearly $500M in equity since its formation and more than $2B of debt. Please comment on your current role at Kabbage and your vision for Kabbage and its Kabbageheads.
Kathryn Petralia: Small business owners, such as local bakers, personal trainers, bodega owners or general contractors, didn’t start their company to spend 20-plus hours a week managing their cash flow. They started their company because they wanted to make a living pursuing their passion. We want business owners to focus on their business instead of their books. The role my co-founder, Rob Frohwein, and I have is leading our team to make that a reality for our customers.
EKMH: What are some challenges that you are currently problem solving?
Kathryn Petralia: Cash in, cash out and cash at rest are the three basic principles of cash flow for any business. The challenge is the majority of small businesses have to cobble together disparate data across a host of siloed systems to properly understand or forecast their cash flow for the day, week or month. It’s a terribly arduous task. With over 2 million live data connections with more than 185,000 customers today, we’re building real-time cash flow management solutions to give small business owners the same expertise and insight they’d get from a finance department, but without the cost and overhead that requires.
EKMH: How have your past experiences -- ranging from owning your first TRS-80 to your major in Literature -- stayed with you as a fintech disrupter and innovator?
Kathryn Petralia: I always had a fascination with technology, and at a young age was one of the few people I knew with a computer. Having a non-finance, non-tech background, I have a tendency to look at this industry with an outside perspective and enjoy technology’s ability to vastly improve customer experiences. That’s what attracted me most when Rob had the idea to use APIs to more efficiently underwrite small business loans. We didn’t set out to prove small businesses needed capital, it was clear they did. We wanted to prove there was a better way to do it.
When we launched in 2009, lots of people urged us to allow customers to upload paperwork to apply for funding—the same process as a bank, but online. We wanted to give small businesses a far better experience. For us, that meant customers could access a line of credit in 10 minutes or less with Kabbage. That decision continues to pay off. Our customers accessed more than $2 billion through Kabbage in 2018, and we now serve more 1,500 customers daily.
EKMH: What are you reading now? Which books do you recommend as must-reads?
Kathryn Petralia: This is embarrassing, especially considering that I studied literature in graduate school, but I spend so much time reading industry news I don’t have that much time to read anything else. I will say that a couple of the Malcolm Gladwell books have made a strong impression, particularly Outliers and David and Goliath. I enjoy things that challenge conventional wisdom and make us look at the other side of things.
EKMH: What are your predictions for the next year regarding fintech?
Kathryn Petralia: I expect more personalized services will come from FinTech as live data sets and AI lead to more products for consumers and small businesses. That will naturally bring up more discussion around privacy and giving customers control over their financial data. We already see this in industry discussions today, but I expect it to increase in 2020.
EKMH: As an influential and respected fintech leader, what do you aim to accomplish over the next few years?
Kathryn Petralia: The definition of a small business will evolve considerably in the next few years, from gig-economy businesses to AI’s impact in the workplace. Financial services will need to similarly evolve to match their needs and expectations.
EKMH: How can companies support all employees through life changes such as equal paternity and maternity leave? What steps have you taken at Kabbage to shift to a more inclusive workplace dynamic?
Kathryn Petralia: We take inclusion, diversity and equality very seriously at Kabbage, and have a team dedicated to making Kabbage a place for everyone. It starts with your people. Our culture is one that doesn’t just tolerate diversity but embraces it. We want people to bring their whole selves to work, so we’re constantly listening to our team and evaluating our processes to improve.
There are small, immediate tasks a company can take to improve equality. For example, don’t use words like “ninja” or “superhero” in job descriptions which don’t resonate with women, and be sure you have a diverse leadership team which studies show make companies more successful.
From a paternity and maternity standpoint, we know having a child is a big life adjustment and we give new mothers and fathers the flexibility needed to take care of life at home. We also ensure our new mothers have private nursing rooms in each office. One of our core values at Kabbage is to care deeply, and that extends across our customers, our team members and community. For example, Kabbage provides a bias-blind lending platform for our customers, and as a result we see a higher percentage of women and minority-owned businesses in our portfolio than the national average. We also have our Kabbage Kares program which provides our teams opportunities to go and serve in the local communities at each of our offices.
*Disclaimer: The views and opinions expressed in this series are those of the interviewees and do not necessarily reflect the views or positions of any entities they represent.
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