As Israel observes Hanukkah – a celebration of the light among the darkness – it’s time to highlight the tech trends creating sparks within the Startup Nation.
Note, these trends are based on our deal flow – what our team sees on the ground.
Trend 1/8: Online Lending
How a trend is born:
According to estimates, lending institutions generate $870+ billion each year in fees and interest from over $3.2 trillion in lending. The lending industry is larger than the automobile and airline industries combined!
Here’s the issue: the Global Financial Crisis of 2008-2009, when consumers and small businesses needed access to credit more than ever, many banks stopped offering loans and lines of credit. The combination of this liquidity crunch, new bank regulations and increased dissatisfaction with the quality and cost of banking services resulted in significant friction in the traditional lending industry and set the stage for the emergence of one of the hottest sectors of innovation in the world today: alternative finance and online lending.
Who’s who:
In Israel, not only are companies aiming to build the online lending industry; many local startups are actually bringing these opportunities for alternative financial solutions and peer-to-peer options to Israelis themselves.
- Behalf: Instead of sticking to the existing method – based on credit worthiness – Behalf takes a new tack for small businesses seeking credit to pay their vendors. The question: “If we could rebuild a credit model from the ground up, how would we do that?” Their answer: taking into consideration the small business/vendor relationship. It’s a new model that approves 5x the small businesses for loans than traditional financing.
- Blender: A new player to the online lending market, Blender [Hebrew] was launched officially in October 2014. The peer-to-peer platform was created by Israelis for the Israeli market, and, according to Globes, “nearly NIS 7 million has been invested in establishing the venture thus far.”
- eLoan: Not to be confused with an American company of the same name, this Israeli online lending service was actually the first to appear within in Israel, launched a little over a year ago. eLoan.co.il [Hebrew] is about bringing “the peer to peer lending gospel to Israel” and uses Big Data underwriting techniques along with traditional ones.
- Tarya: Another native Israeli lending platform with solutions for its native audience, Tarya [Hebrew] uses “stringent underwriting algorithms” to deliver a platform for investing in peers by offering consumer credit. Viewing the Startup Nation as too dependent on traditional financial institutions and systems, Tarya’s aim is to offer a radical opportunity to “change the credit structure in Israel.”
What’s next:
While still in its infancy, online lending is already a massive market experiencing tremendous growth. Lending Club, an online peer to peer lending marketplace for unsecured consumer debt, began trading last week on the NYSE with a valuation of over $5 billion, and currently trades at a market cap over $9 billion. OnDeck, a web-based small business lender, has filed for an IPO that could value the business at $1.5 billion.
There is plenty of more space to fill in this market. In fact, OurCrowd is currently investing in Borro, the leading personal asset lender, ranked by KPMG as #8 on its list of 50 leading global fin-tech innovators, directly behind Lending Club and OnDeck.
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Check back with us each night of Hanukkah to learn about another tech trend sparking the Startup Nation!
Find out more about investment opportunities in Israeli startups.
Thanks to OurCrowd’s Etan Efrati for contributing to this piece.