With VC investments slowing in 2022, some startups have turned to private credit, including debt capital, as a way to supplement their operations in the meantime. However, the policies and paperwork that accompany these agreements are not always easy to understand.
The CEO FinleyJeremy Tsui explained that private credit is a sector that moves 1,2 trillion dollars and represents 90% of all corporate debt in the middle market. However, while working in debt capital at Goldman Sachs, he witnessed two things: private credit, or lending by non-bank parties, filling the void of banks lending less to corporate, and then companies finding difficult to understand the hundreds of pages of their agreements.
“With consumer credit we have seen a lot of innovation, but credit to companies or loans to companies have really stuck in the past,” he says.
It was then that he got together with his brother, Josiah Tsui, and his friend Kevin Suh in 2020 to create Finley, a software company that helps clients manage their private credit loans, turning hundreds of pages of documents into digestible morsels, including storing key dates, so that businesses taking out these types of loans can more easily meet loan terms and reporting requirements.
Finley raised $3 million in 2021 and has now closed $17 million in Series A capital after spending the past two years focused on building out its product and hitting some key revenue and product milestones, Tsui said.
CRV led the round and, as part of the investment, James Green, CRV's general partner, will join Finley's board.
Green explained that he met Tsui and his co-founders in 2021, when they had just left Y Combinator and raised the seed round. What Finley was making is similar to other investments the firm has made, including Mercury and Jeeves. He said that interest in debt capital has grown, even among non-tech companies.
“The reality is that with rising interest rates and rising cost of capital, debt requirements have become more stringent, and there's still plenty of it,” Green says. "But between the covenants and the warranties and the documentation, reporting is all much more complicated than it was when capital was much cheaper three years ago."
Joining CRV in the round are existing investors Bain Capital Ventures, Haystack, Y Combinator, Nine Four Ventures and specialty lender Upper90.
Finley is working with companies like Ramp, Parafin and TripActions to manage hundreds of millions of dollars in debt capital and tasks such as digitizing credit agreements, disbursing funds or analyzing portfolios.
"Finley is helping us manage our $300 million credit facility with Goldman Sachs," Loraine Tang, TripActions' vice president of tax and treasury, said in a written statement. “There are many compliance, reporting and optimization tasks to coordinate to get the most out of our funding. Finley's software helps coordinate these tasks by pulling data from all of our systems and streamlining many aspects of debt capital management for this facility.”
Meanwhile, the new funding will go toward expansion into new verticals, across-the-board contracting and into new software offerings for debt capital providers and lenders, Jeremy Tsui said. In addition, the company has doubled its workforce in the last year to reach 18 employees.
Tsui declined to disclose hard revenue or valuation figures, but said the company grew revenue fivefold last year, was able to save one to two finance clerks for the average customer, and unlocked access to capital that companies didn't have. before.
"Having access to capital can be the difference between stagnation and growth," he added. “We work closely with CFOs to make sure they not only guarantee the loan, but also do the reporting and adhere to the rules so we can maintain access to those loans.”
