The following article was written by FastPay’s UK Directory of Business Development, Matt Byrne and published by CityAM
Much has been written in these pages about the dearth of British start-up success stories in comparison to our US cousins. Digital media companies are no exception. But what is causing this discrepancy? Perhaps most significant is the funding gap.
In the UK, there is a strong angel investment culture thanks to seed enterprise investment (SEIS) and enterprise investment (EIS) tax relief schemes. Introduced in 2012, SEIS acts as an incentive for UK taxpayers to make seed investments in early stage companies. Investors receive up to 50 per cent tax relief on investments up to £100,000. EIS offers investors up to 30 per cent tax relief on investments up to £1m a year. Thanks to these programmes, startups seeking investment can find seed capital of between £100,000 and £500,000 with relative ease.
The next obvious step for a growing digital media company would be to turn to a venture capital (VC) provider for a series A funding round. However, our clients tell us that, in the UK, a vacuum exists between the amount they can raise via seed funding and the entry level for most VC funds.
Although some funds do offer seed and pre-series A funding, this is far less prevalent than in the US. UK based VCs, if specialised at all, tend to focus on fintech, edtech or healthtech rather than adtech or martech.
Why is this? Non-specialised VC funds tend to have a negative perception of adtech due to a history of poorly performing initial public offerings. Rocket Fuel’s stock, for example, is down more than 80 per cent since its flotation in September 2013. But despite the bad press, adtech and martech are continuing to grow, with Gartner predicting that chief marketing officers will spend more on technology than chief investment officers in 2017.
In the US, specialised funds continue to invest. But in the UK, the negative perception remains, meaning that digital media companies looking to grow – often at a crucial stage when they are signing big deals with brands and media agencies – must look for alternative options or face difficult choices. With banks’ persistent scepticism of digital media companies, this is the point when they are often bought by rivals or, regrettably, the company fails. They may consider debt instead of equity, alternative lenders, or a venture debt hybrid model to enable their growth until they reach the point where VCs regard them as a safer bet.
FastPay announced today that it has surpassed $1 billion in cumulative loan volume. The company’s strong performance is reflective of its commitment to delivering innovative financing solutions to digital media.
“Surpassing $1 billion in origination volume is a significant milestone that reflects not only our success in providing financial solutions for increasingly sizeable enterprise clients, but also points to a significant shift happening in media,” said Jed Simon, Founder & CEO of FastPay. “With digital ad spending poised to overtake TV as the largest advertising category, FastPay is uniquely positioned to continue helping digital companies fuel their growth.”
Since its founding in October 2009, FastPay has become the leading lender in the rapidly growing digital media industry. According to industry research by the Interactive Advertising Bureau (IAB), digital ad revenue has seen the highest level of growth since 2011 with indications that this revenue acceleration will continue into 2016 and beyond. By using a combination of industry specific data and proprietary technology, FastPay is able to underwrite and fund clients more quickly than traditional lenders.
As a FinTech leader, FastPay has expanded its offices in New York, San Francisco and London to better serve its rapidly growing international client base, and continues to innovate and develop its proprietary technology platform.
Founded in 2009, with offices in Los Angeles, New York, San Francisco and London, FastPay is the leading financial partner to the global digital media industry. Through its proprietary technology platform, FastPay can dynamically assess the creditworthiness of digital businesses and provide lines of credit from $5K to $20M in 48-hours or less. The company is a prominent financial leader that has originated over $1 billion in loans across thousands of clients.