THEY HIT THE ROAD FOR AN IDEA THAT’S ON THE MONEY
by DONATA HUGGINS
BUSINESS FEATURES / CITY A.M. December 5th, 2011
Donata Huggins meets two men responsible for improving access to funding for small
firms – by starting a company of their own
WHEN the shadow business secretary makes a speech calling your seven-month old business “the lifeblood of the lifeblood of our economy,” it’s fair to say you’ve made quite an impression. This happened to the co-founders of MarketInvoice Anil Stocker and Charles Delingpole two weeks ago: Labour’s Chuka Umunna described their business as “turning straw into gold.” Certainly, for small and medium-sized businesses (SME) at the moment, raising short-term finance is no easy matter.
The magic comes in the form of an online trading platform. SMEs in need of cash can use it to auction their invoices on for one or two per cent of eventual face value plus a small data processing fee to MarketInvoice – this gives SMEs instant liquidity and the buyers a healthy return.
“There isn’t really a substantial medium-sized business market in the UK,” says Stocker. “This gives huge power to big companies and allows them to exert punishing payment terms over small businesses. In some cases, 120 days.”
Stocker and Delingpole got the idea after going on what they fondly called their “SME road trip” last year. After quitting their City jobs (Stocker worked for Lehman Brothers and Delingpole for J.P. Morgan), they went looking for a small business to buy. “Initially I thought we should buy a business. We travelled all over the country speaking to people until we concluded that you bore as much risk buying a small business as you did starting your own. We kept hearing the same list of problems: cash flow, punitive payment terms, the banks aren’t lending – which gave us the idea.”
Delingpole says: “We were advised by our investors that we should stick to areas that built on our unique selling points. Ours were the internet and finance. We had both worked in the City and I had already set up and sold an internet business when I was younger.” Indeed, Delingpole founded The Student Room website when he was 17.
They credit much of their success to playing to these strengths. “Working in the City gave us the contacts, credibility and capital to get going,” says Delingpole.
The pair chose to involve lots of investors. “Yeah, we gave up a little equity for each, but having the investors was vital for developing a track record. They were our first buyers,” says Stocker. Strangely, they found that persuading SMEs to start selling was the hardest bit. “They either said ‘great idea’ – but I don’t need it right now; or they were locked into a contract with their bank.” Thankfully, it only took three months for the situation to change.
They’re now up and running with 30 SMEs and 15 investors, channelling over £3m worth of funding since they launched. “We’re a team of six at the moment, but we’re growing really fast.”
Where do they see themselves in five years? “The eBay for invoices sounds weird, but that’s what we’re after,” says Stocker.