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Kabbage plants $17M B round for advances to online retailers

August 17th, 2011

KabbageATLANTA– Kabbage, Inc., a provider of working capital for online merchants, today announced it has secured $17 million in Series B funding, led by Mohr Davidow Ventures. Existing investors participating in the round include BlueRun Ventures, David Bonderman, founder of TPG Capital, Warren Stephens, CEO of Stephens Inc., and the UPS Strategic Enterprise Fund.

Several individuals also participated in the round including Jim McKelvey, co-founder of Square. Kabbage will use this funding to pursue additional marketplaces, distribution relationships, new financial products and international expansion.

“All businesses, but especially those online have an unquenchable thirst for capital to grow,” Kabbage Chairman Marc Gorlin told the TechJournal in an interview. “That thirst is not being quenched by the banks. They don’t understand the data for online businesses, and even if they did, they’re not in a position to provide advances or loans under $100,000 profitably.”

He adds, “Kabbage is doing what banks don’t.”

Thousands of online merchants advanced working capital

“Thousands of online merchants have obtained working capital and grown their businesses since our push into the market in April 2011,” said Rob Frohwein, Kabbage Founder and CEO. “Although small business fuels the majority of growth in the U.S., it is extremely difficult and time consuming for these businesses to apply for and actually receive financing from a traditional bank. Kabbage fills this need by providing money to these businesses in a quick, easy and painless way, helping them to further grow their businesses and boost the economy.”

Kabbage currently supports merchants operating on eBay, Amazon and Yahoo! platforms and over the next six months will add support for merchants operating on or through a variety of other channels including Facebook, Etsy, Shopify and Marketplace at Sears.com.

Gorlin points out that the company has advanced funds to online retailers such as a woman selling refurbished boots and an Atlanta seller of toy trains who does business on eBay and Amazon. “He had a truck coming back from Boston to Atlanta that $15,000 from Kabbage helped him fill for the return trip. “He since doubled his money,” Gorlin says. “Payback to Kabbage has been unbelievably good.”

Kabbage uses automated data sources to analyze the health of an online merchant’s business including transaction history, customer traffic and reviews, and products to deliver working capital within seconds of the merchant’s completed application. With Kabbage’s release of profile building in May, merchants can now proactively add information to their Kabbage account to immediately increase their access to capital.

“Small and medium businesses are the growth engine of the economy and more and more of these businesses are operating online,” said Bryan Stolle, General Partner, Mohr Davidow Ventures. “By using rich, multi-source data and advanced analytics to more fairly and accurately assess business performance, we believe Kabbage’s financial products will enable more businesses to expand inventory, hire new employees, and grow, thereby helping the economy get back on track.”

“There is a rapidly growing delta between small-to-medium businesses’ need for working capital and its availability from traditional sources. The knowledge gained from working with companies like Kabbage helps UPS refine its strategy of enabling global commerce,” said Joe Guerrisi, VP of Corporate Marketing at UPS.

Gorlin said Kabbage wasn’t looking to raise new money, but a number of funds approached the company after seeing what it was doing and the customers and data it was pulling in. “We thought it wise to go ahead and secure the capital now,” he said, “to get into more marketplaces faster.”

He continued, “Not a day goes by when some international company doesn’t contact us.” While Kabbage has yet to fund an international online retailer, the company plans its first several trips abroad in the next six weeks.

In addition to the funding news, the United States Patent & Trademark Office recently granted U.S. Patent No. 7,983,951 to Kabbage, entitled “Apparatus to provide liquid funds in the online auction and marketplace environment.”  [Please see today’s announcement “Kabbage Issued U.S. Patent”.]

 

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