Hello friends! Axel from Gilion here.
Another week, more intriguing developments in the world of tech and funding. Let’s dig in.
Niche lenders: Transforming SME Financing
Dagens Industri, Sweden's leading business paper, recently spotlighted the rise of non-bank lenders in the SME sector. The article argues that niche lenders, with their advanced digital processes, can lend profitably to smaller companies. While I question the notion that niche lenders universally outpace banks technologically (considering our own tech development journey), the article underscores a crucial trend: a shift from one-size-fits-none lending to specialized financial solutions.
Two primary reasons underpin banks' struggles with niche sectors, which we also observe in tech lending:
Specialized Knowledge and Tech: Assessing high-growth companies is complex, far beyond the capabilities of generalists relying solely on audited accounts and basic metrics.
Regulatory Constraints: For banks, lending to perceived high-risk areas like scaleups can negatively impact their regulated risk scores, making such ventures economically unfeasible.
As challengers like us continue to encroach on the traditional banking territory, I expect banks to hone their expertise in niche sectors. While regulatory hurdles remain, this evolution promises to be a compelling development.
Insights from European Tech
One of our seed investors, Localglobe, recently shared valuable insights with TechCrunch regarding the European tech landscape. The discussion highlighted a critical gap: the scarcity of later-stage capital for European growth companies. This shortfall often forces mature startups to relocate or sell to the US, a significant systemic flaw.
Addressing this gap is essential for fostering a robust, self-sustaining European tech ecosystem. As entrepreneurs, recognizing and advocating for solutions to this issue is crucial for our collective growth and success.
One last thing before we go..
Rap and tech, a cautionary tale
As a rap aficionado with an unfortunate history of karaoke rap I was intrigued when I saw headlines of a successful Australian startup, Canva having an ambitious rap delivery at a large event in LA. The end result was, well, a bit cautionary.
Let us know what you think!
Stay tuned as we continue to explore the ever-evolving landscape of technology and its financial ecosystem. And as always, do let us know if there’s anything you’d like for us to cover.
/Axel
