Kabbage, an alternative source of financing for online merchants, on Wednesday announced a $17 million Series B round of funding led by Mohr Davidow Ventures, with participation from existing investors BlueRun Ventures, David Bonderman of TPG Capital, Warren Stephens of Stephens Inc., and the UPS Strategic Enterprise Fund. And new-comer Jim McKelvey, co-founder of Square, also joined in the round. The new capital brings Kabbage’s total raised to $25.6 million.
The Atlanta, Georgia-based company has developed a financial platform that picks up where traditional banks leave off when it comes to e-commerce. Online merchants who peddle their wares on sites like eBay, Etsy, Amazon, and Facebook tend to get the short end of the stick when it comes to financing their operations, since they often fail to meet traditional underwriting and funding criteria, which typically don’t cover e-commerce business models.
So, those online merchants who want to expand their businesses but can’t get a loan through a traditional bank can look to Kabbage, which will run a credit check and look at activity levels on an applicant’s channel, as well as his or her online transaction volume, to determine whether or not that person qualifies.
Currently, Kabbage only supports merchants selling on eBay, Amazon, and Yahoo, but over the next six months it will expand to support merchants on Facebook, Etsy, Shopify, and the Marketplace at Sears.com.
"Small and medium businesses are the growth engine of the economy and more and more of these businesses are operating online," said Bryan Stolle of Mohr Davidow Ventures in a statement. "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."
The company plans to use the new funds from this round to expand its marketplace reach, pursue new distribution relationships, support new financial products, and boost international expansion.