Tala, a digital lender in emerging markets that provides loans of $10 to $500 to small- and medium-sized business owners as well as consumers, has raised $145 Million in Series E funding.
The round was led by Upstart, which was founded by former Googlers Dave Girouard and Anna Counselman. Along with new investors Kindred Ventures, the J. Safra Group and DeFi network Stellar Enterprise Foundation, they participated in the round.
Tala's total funding has risen to just over $360 million thanks to existing investors IVP and Revolution Growth. Lowercase Capital joined the round. According to a source close, the new investment will bring Tala's value to $800 million.
However, this round was different from the previous financing round, where Tala secured $100 million in debt financing along with its $110 million Series A, but the microlender raised equity.
After leaving her job in investment banking, Shivani Siroya created Tala in 2011. While conducting research for the United Nations Population Fund, she came up with the idea. She found that many of the people she spoke to in emerging markets were creditworthy, but had limited access to credit or quick loans.
Moreover, more than 2 billion people in these countries have restricted access to financial services or working capital according to statistics from the World Bank.
Siroya studied the causes of this problem and concluded that the financial system was not built to serve the needs of those who are most vulnerable. Tala could make this change, and it has so far (to a certain extent).
Tala launched its first mobile app in 2014 to provide credit and collateral-free loans for consumers in Kenya. It has expanded to India, Mexico, and the Philippines since then. To determine how much credit a user is eligible for, the company uses their phone data and their activities (e.g. frequency and timeframe of paying bills).
Tala has served more than 6,000,000 customers in these four markets. The company claims to have issued credit worth $2.7 billion since its inception.
With 12,000 new users signing-up every day for credit, Tala is making the transition to offer a wider range of financial services and more value to its customers.
Siroya told TechCrunch that our Android app has enabled over 6 million people to access our first product which was credit access. We are now looking to offer full financial accounts for our customers. This is what we wanted to do with the fundraise.
The CEO and founder of the company stressed that customers will be able to use, save, protect, and grow their money with these new products.
This is a credit-led digital banking approach that leverages a card or similar offering (in Talas' case credit via mobile phones), and offers other services around a bank accounts. This model has been explored by Neobanks like Brazil's Nubank, Neon, and Nigeria's FairMoney or Carbon.
What was it that prompted Tala's decision to take this route? Siroya says that users decreased cash use during the pandemic, which showed Tala other pain points and prompted him to offer more financial products.
Siroya stated that because of our relationship with customers and the trust we have, we wanted to respond quickly to their needs.
Tala users can access an account and other tools to borrow and save money. Tala also claims that it will provide a wider range of personal credit options, including loans with longer terms to match customer income cycles.
This new direction includes the use decentralized finance and crypto to support the company's roadmap.
PayPal-backed company Tala plans to create the first mass-market cryptocurrency product and make crypto more affordable for its users. Tala will then use blockchain-based financing to improve its capital market strategy, connect investors, and borrow on the Tala platform.
Two investors in the round were Upstart and Stellar Development Foundation (SDF), who are crucial to Tala's next phase of growth. Upstart is an AI lending platform that has helped banks and credit unions to obtain loans in excess of $13 billion. SDF, the non-profit arm of the Stellar network, leverages interoperability to the existing financial systems around the globe.
It really does match both. Siroya said that one is improving our credit offerings and continuing to improve them. The other is thinking about how to accelerate this experience and use crypto with these platforms.
Paul Gu, co-founder of Upstart, and Denelle Dixon (executive director and CEO of Stellar Development Foundation), will join Talas' board of directors following the announcement.
During our conversation I mentioned Branch, a competitor to Tala. It was interesting that both platforms simultaneously thought they could provide other services than credit.
Branch, like Tala, started out as a digital lender that offered loans to customers in India, Kenya, Tanzania, and Nigeria. The company is now backed by Visa and IFC as well as Andreessen Horowitz. It offers bill payment, money transfer, and investment features.
Siroya is able to spot the coincidence but she does not shy away from praising her company over any other apparent competition.
In all markets, I believe that we are seeing many fintechs coming in to see the same opportunity. The CEO stated that there was no one that can design these platforms or products with the same global reach as Tala for the underserved segments in our four markets.
Tala intends to expand its workforce in the four markets it serves as well as the U.S. where it is headquartered with the new capital. Although the company stated that it would also pursue plans for geographical expansion, it was unable to specify which markets.