Talk us through the capital raise.

Essentially, Heartland’s investment provides Spotcap with $20 million of debt financing to fund Spotcap’s balance sheet in Australia.

Lachlan explains that, as a startup, Spotcap had $100 million in equity and debt during the first two-and-a-half years of operations. Most of the funding, nevertheless, had been from European investor in euros. Now, because Spotcap has expanded into Australia and New Zealand, there is a need for diversified funding currencies. That is why the investment from Heartland is such a vital part of Spotcap’s international growth.

What are the benefits of a partnership with Heartland?

One. It diversifies Spotcap’s funding currencies. The financing from Heartland is in Australian dollars — an essential asset for the new Spotcapoperations in Australia and New Zealand.

Two. Heartland is a listed bank and a nod of approval from them means a sigh of relief for Spotcap. Although Lachlan recalls the approval process being arduous at times, around one year after the process began, Spotcapreceived the green light from Heartland. Because of Heartland’s listed status, the bank has to undergo due diligence procedures, internal risk processes, and adhere to specific governance structures. Spotcap was then, during that due diligence process, subject to those same procedures.

“It was actually a massive vote of confidence from them that they conducted a significant amount of due diligence on our operations both here in Australia and on our platform, and we came out of it on the other side with a big seal of approval from them” says Lachlan.

Lachlan shares wisdom about how partnerships are a critical part of the startup journey. Although some partnership deals happen in a short time, most of the time, it is an extensive process.

“One thing that I would encourage anyone from the fintech community listening to this is that partnerships take time and there is no way that you are going to get around that” Lachlan advises.

Banks like Heartland and others are literally giving you cash to then lend out yourselves. How is Spotcap managing to get that at an affordable rate, such that there’s still enough in it for Spotcap to profit?

Lachlan explains how, like any startup, Spotcap started out with no track record. Therefore, the first step was to raise substantial equity. Once raised, this equity served a dual track purpose. First, the equity funded the operations of the business. Second, the equity was used to lend to customers.

After a couple of loan cycles, Spotcap began to make a margin. Then, they were able to build a track record and get more investors — specifically different types of investors —to become comfortable with the business model. Spotcap was then able to raise four different debt pools to fund operations in Europe and in Australia, with Heartland as one example of that investor trust.

“So, as a business, we like to have quite a diversified funding arrangements with a.) different types of investors from b.) different geographical locations and c.) in different currencies” in order to mitigate risk, explains Lachlan.

Lachlan thanks Stone & Chalk for being instrumental in this start up journey.

Lachlan and the Spotcap team

As one of the founding startups at Stone & Chalk, Lachlan talks about how he went from a one-man team in his bedroom to leaving Stone & Chalk with a twelve-person powerhouse.

Lachlan explained how Stone & Chalk gave Spotcap a huge amount of flexibility. Stone & Chalk allowed Spotcap, as it does with other startups, the option to purchase extra desks as they started to scale.

On another note, Stone & Chalk provided a vibrant social environment for Lachlan’s team. Lachlan imagined a situation where there was a big office with only two or three people to occupy it. There would be little social interaction, and it could have been quite a depressing place to work. Whereas, the community at Stone & Chalk offered a group of like-minded people doing like-minded things.

“So, I would say to anyone who is thinking of starting a fintech and wants to have a little bit of fintech space, definitely come and check out the space here and talk to Alex and the team. You won’t regret it” says Lachlan.

Stay tuned to hear more from Lachlan about the small business lending market in Australia…