Earlier this week I had the chance to chat with Anil Stocker and Charles Delingpole co-founders of Marketinvoice. These two young entrepreneurs started the company in July 2010 looking to disrupt a stagnant industry.
Hi Anil and Charles, great to have you guys on YHP today!
First off can you give us a bit of background about yourselves?
Anil: I studied economics at Cambridge University, where I met Charles my business partner. My background is in the private equity industry, first at Lehman Brothers Private Equity Group and later at the investment bank Cogent Partners. I spent a lot of time looking at small to middle market companies and family run businesses in the UK and Western Europe, always with a focus on working capital and cash flow management.
Charles: I previously worked in investment banking with technology, media and internet companies from a mergers and acquisitions perspective. I studied politics at Cambridge. I also founded a company called Acumen PI, which owns the world’s largest student discussion forum, currently with 4 million views per month, TheStudentRoom.co.uk .
So what is it that your business, Marketinvoice, does?
Marketinvoice (www.marketinvoice.com) is an online marketplace for invoices. Small companies can sell invoices due in 30 to 120 days from large corporate customers to a network of global investors. It’s the first marketplace of its kind in Europe, and is a solution to the problem of small companies trapped in a “double credit crunch” between banks who won’t extend overdrafts and their large customers who delay payment for long periods of time.
How did you know there was a market for it? What’s your USP (unique selling point)? How will you differentiate yourself from the competition?
The U.K. has one of the highest penetration rates of invoice finance in the world. If you add the total revenues of all companies involved in some form of invoice finance here in the UK, the result is a staggering £200 billion. Marketinvoice aims to disrupt this industry, as well as appeal to businesses which have not used invoice finance to date and are currently struggling to manage cash flow.
Marketinvoice is very different to the main alternative, which is factoring. Our three main advantages are flexibility, cost and scope. In terms of flexibility, using Marketinvoice you only sell the invoices that you want, when you want. Unlike traditional invoice discounting, there is no obligation to discount your entire debtor ledger, and no lengthy lock-in periods. Marketinvoice puts you back in control of your cash flow. It is lower cost, because by only selling selected invoices, you avoid expensive arrangement fees and monthly service charges. By building up a track record of successful invoice trades in the marketplace you drive down your cost of funding as investor buyers compete more keenly for your business.
It has extended scope because the buyer community is comprised of professional investors seeking to diversify their capital across invoices from a number of different industries. Businesses may post invoices that are not usually accepted by traditional invoice discounters to assess the level and pricing of investor demand. We are connecting global capital to the UK SME funding crisis, something that has never been done before.
We are completely unique in the U.K. Our competition is thus other kinds of funding sources, such as full turnover invoice finance or factoring, or bank overdrafts. Our mission is to make sure SME business owners know that there is a new alternative available to what has been offered them in the past.
When did you guys start the company and what gave you the idea for it?
Anil: Having been involved in SME working capital for quite a long time, I always thought of invoice finance as a very useful tool with a negative reputation – due to personal guarantees, lock-in periods, monthly service fees etc. With all of this in mind, I looked at what else was developing in the market, including the Receivables Exchange over in the USA. My business partner and I asked ourselves, why can’t this work in the UK? A lot more people here are aware of what factoring is, so we have the opportunity to educate those people as to how different we can be.
How did you raise money when first starting?
We are fortunate that we come from the investment world and were able to put together a group of 10 investors (angels, former work colleagues and friends) who were willing to fund our new concept. This process had begun in May 2010 and does take significant time and energy.
We had to take care to present our business plan in full detail and answer lots of questions from our prospective investors. Certain investors don’t like investing in start-ups and declined, but that is all part of the fundraising rollercoaster!
Where is the company based and how many staff do you have?
We are currently based in Old Street, London – an area that is increasingly becoming known as Silicon Roundabout. It’s great to be based here as there are lots of start-ups in the area, lots of networking events, and good development talent. There are some pretty tasty Vietnamese restaurants here as well!
Currently we employ 6 staff, and are in the process of hiring 3 more. By the end of the summer we should be 8-9 full time employees.
So what challenges did you face when starting the company?
Marketinvoice is not a straight-forward service. It is a reasonably complex platform that at the same time has very tangible benefits for a broad cross section of SMEs. The key challenge is communicating our new revolutionary message to a broad number of decision makers within SMEs and growing the volume on the platform. And we have to make sure we can do this in a cost-effective way!
And what advice would you give other potential young entrepreneurs looking to start their own companies?
According to Ronald Cohen, “start young, think big, and stick with it”. I think having a good idea is the easy part, actually implementing and executing on your plan is fraught with difficulty and angst. It’s good to have a co-founder as this provides support and a reality check when sales and marketing efforts and going slow in the beginning. Having a “never-say-die” attitude is also important. At the start of any project, everyone has to be a bit of a salesman and go out and sell the concept, and the dream.
What's next? How do you envisage the next few years?
Currently we have 20 companies who have signed up to Marketinvoice and monthly invoice volumes through the system are in the region of £250,000. We’d like to scale at a reasonable rate and have more than 50 companies by the end of the year, with monthly volume of £1m – £2m.
We appreciate that the business will take time to scale. Platforms like ours will not scale overnight – it’s hard work, and takes time, but, in ten years time, the invoice finance industry could look very different to how it does today. Hopefully SMEs will be more in the drivers’ seat!