The unbundling and rebundling of the bank: Prospa co-founder reflects on 10 years of business financing

Beau Bertoli and Greg Moshal founded Prospa back in 2012. The company, celebrating its 10th birthday this year, was borne of personal frustration — Bertoli and Moshal had run businesses themselves and experienced firsthand the difficulty of accessing capital. The idea of Prospa was to make funding accessible and easy for small and medium businesses.

Current estimates, says Bertoli, are that up to $20 billion per annum is needed by small businesses, and that’s just not getting funded. The big banks are great at taking care of personal banking and large-scale enterprise banking, Bertoli says, “but when your local café needs $14,000 because their air-conditioning broke, or a plumber is tendering on a job for a builder, then wins it and needs $20,000 of materials to get the job going and completed, there’s no real solution for that”.

Prospa has grown significantly since its foundation. In 2016, it topped the Smart50 list, something Bertoli says affirmed Prospa’s business model, and reassured the two founders that their business was on the right track. Since winning, its revenue has grown tenfold, and its headcount has expanded to around 300 people all over Australia and New Zealand. Bertoli reflects on why he entered the Smart50 and the ways online finance has both changed and remained the same in Prospa’s 10 years.

Why did Prospa enter the Smart50?

In 2015 and 2016, we were looking at ways, including Smart50, to get that external recognition of what we were doing and what we were building as a company. While the Smart50 looks at revenue growth in particular, it is a well-regarded publication, it talks to a lot of our target customers — obviously businesses — right across Australia. We really wanted to benchmark ourselves against other businesses out there, and think about ‘how are we going?’

We never thought we would win, that was quite a surprise in 2016. Obviously we knew had a fast growing business, but we didn’t know that we’d be the fastest, so to speak. And it was really wonderful. We had seen previous brands and companies that had won the Smart50, or even just been on the list; it was quite an accolade for a business.

And it creates a really good conversation point with a lot of different stakeholders. For example, future employees, you know? If they hear that you’re on the Smart50, or a winner in particular, that’s a really well-regarded feat.

Investors, they care about the companies they’re investing in benchmarked against other fast-growing companies out there. So, again, us being one of the top leading companies in Australia, that opened up a whole bunch of conversations with investors, about ‘how do I get in and become an investor in these fast-growing companies?’

It also helps with meeting other businesses. Fast growing companies go through very similar challenges, they’re not easy to manage, there can be a lot of chaos and a lot of change going on inside these companies. We knew that by entering, and particularly if we were right up there in the top echelons, we’d get to meet an alumni, if you like, of other companies. That’s always very helpful for founders, because you get in touch and you get to know other people running businesses and going through similar kinds of challenges. You can learn from each other, you can share ideas, and you can create a little network.

So that was the impetus, I guess. As mentioned, we didn’t think we’d win and be the fastest growing, but that was a wonderful surprise for us, and again, a great affirmation of the business model we’ve chosen, the challenge or the problem space that we were trying to solve, clearly, was very big, and it was really successful from what we were doing, and I think winning gave us sort of a really good rounding for ‘we’re on the right track, so let’s keep going, let’s double down on the business strategy’.

Things are always changing quickly for small businesses. Have you noticed any differences in your customers, or your type of customers and their need? Does this change your approach at all?

I would describe the need as… it hasn’t changed. The need for small business owners to access capital to run their business, that problem existed when we created commerce, and it will exist for a thousand years. That’s a permanent problem.

That’s one thing we like about the model we’ve chosen and the space we’re playing in. It’s a permanent problem, it’s never going to go away. But the access, though, or the delivery of that product experience? That has changed.

When we started the business, I know it sounds strange, but things like the cloud were very nascent technologies. Obviously businesses have been online for some time, but the way the ecommerce worked and the way that, particularly, people’s willingness to buy products online worked, was nowhere near what it is today. We were trying to be an online business, we were trying to create a more digital experience. In some ways we had a product experience that was ahead of what the market was ready for. That has definitely changed.

In the fintech space, in the first five years or so of our business, there was almost this unbundling of a bank. So different fintechs focused on very specific product categories within a bank, and you could take 100 of them, and that’s how you’d build the bank. Well, what’s happening now is actually a rebundling of product experiences, because the customer is saying: ‘Well, sure I can have lending from Prospa, but do I really want to have a credit card from someone else, and a bank account over here, and maybe a payment platform from over there?’ They want to have it all in one.

So there’s almost this convergence of products that’s now happening. And that’s definitely something we’re trying to lead at Prospa. Since we won Smart50, quite a number of things have happened, actually. In terms of that customer experience, the way customers are shopping for and looking for our products and the categories that we’re in, that has definitely evolved. We’ve been able to 10X our revenue in that time since we won Smart50 as well. Back then we were doing about $20 million of revenue, we’re now up on north of $200 million a year run rate. It goes to show the breadth and depth of this problem that we’re tackling. The fact that we can go so far in quite a short period of time, again, just illustrates the demand and the fact there are these businesses out there, millions of them, that are underserviced by the traditional system.

From a broader product perspective, we have definitely started our business in this ‘access to capital’ world, but we’ve now expanded and broadened our offering. We’re now in product categories like B2B payments, and how businesses are making payments. We’re looking at transactional accounts and helping businesses with things like the receipt of money as well as the act of making payments. We’re also looking at things like expense management and invoicing, and how we can actually help a business owner with a day to day almost admin management within their business as well. So, a lot has changed in the way that a business owner goes looking for the products we choose to play in, but the core need, that hasn’t changed at all in 10 years, and I don’t think it will change, certainly not in the near future.

How is the outlook for small businesses over the next year or two?

Definitely, from an economic perspective, we see all the same economic data as everyone else in market. It definitely feels like it’s going to be a bit more turbulent for the next 6-12 months. But I must say, small business owners just came through COVID-19. And, you could not create a more difficult set of circumstances for small business owners, with rolling lockdowns, with restrictions, changing their ability to operate, and supply chain issues. Everyone’s talking about inflation now, but if you were a business owner 12 months ago, you still had supply chain issues, it wasn’t going away, labour force issues, they were very real a year ago. So one thing I think the pandemic has taught us is that small business owners are incredibly resilient and they’re also adaptable at short notice. They can make changes to their business and their operations. So, we’re looking at the future with a lot of optimism.

We’re definitely aware of some of those economic challenges that have flowed through. The RBA’s putting up rates, and that’s blown through the economy, inflation is running too high, everyone wants to see that come down. The labour market’s very tight, and we need to figure out ways to expand the base of employable Australians. So there are  a lot of challenges out there, for sure, but I think business owners are in good shape, and they’re going to battle through the next 12 months and come out the other side just fine.

Want to join Prospa and a network of Smart50 alumnists, get the recognition your business needs and benchmark yourself against other high-performing SMEs? It’s not too late to enter the 2022 Smart50 Awards.