EXALOAN Wants to Bridge the Funding GAP of SMEs Across the Globe

ABOUT THIS EPISODE

Executive Summary

Exaloan started out as a rating agency for digital assets. They developed into a global platform to connect crowdlending platforms and institutional investors. They started out with the rating of digital assets. Soon they realized that it makes more sense for them to help investors with the access to lending platforms and building of their portfolio in crowdlending assets using tokenization.

Our mission is to close the global financing gap, which is a staggering 5.2 trillion US$, which means there are more than 100 m SMEs that are lacking financing.  Luca Fignani, co-founder and CEO of ExaloanWith our partners we have created a tokenization engine, a digital asset platform, on which we can create a digital token for the loans, we have sourced from crowdlending. This is really a step to the next level. We are joining digital assets with digital lending.  Luca Fignani, co-founder and CEO of Exaloan 

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The Founder

Our guest today is Luca Frignani (https://www.linkedin.com/in/luca-andre-frignani/), the CEO and co-founder of Frankfurt based fintech Exaloan (https://www.exaloan.com/). He is an original Frankfurt boy, with roots in Italy and Czech Republic. Since he is already very international, he spent quite a bit of time studying in France Lille and Nizza. He also spent time in London and Zürich. At one time he also worked as a quant analyst, developing investment strategies.

Development banks are seeing crowdlending platforms are a very important tool.Luca Fignani, co-founder and CEO of Exaloan 

The Startup

Exaloan (https://www.exaloan.com/) is a Frankfurt-based fintech company. They are a rating agency for digital assets. It is also working with its clients to give them access to international crowdlending platforms and help them to build a portfolio. They are cooperating with platforms in Germany, Vietnam, Singapore, Indonesia, and the Philippines, just to name a few.

Venture Capital Funding

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Welcome to start a brand that I own, your podcast and Youtube blog covering the German startup scene with News, interviews and live e fits. Hey, guys, hello and welcome everybody. This is Joe from start up rated. I owe your start up podcast and you do block from Germany. Today I'm bringing you another interview incorporation with invest in Hessan, and this time I would like to welcome Luca. Not, as his name suggests, he's not from Italy. He's born and raised here in Frankfort, even though I do believe on your parents side, one side is from Czech Republic and the other side is from Italy. But since you're born and raised here in Frankfort, I would like to welcome with you, you with Gouda v Good. Yeah, thanks, sorry, fairly my pleasure. I'm totally a pleash to heppy here and you are the founder of a start up. I would say you are more or less somewhere between Finn Tech and big data, data analytics. The company is called ex alone, but what they do will soon get to first, as always, I've been looking at your linked the profile, and everybody who's listening to this or watching this can go down here in the show notes and learn more about you or reach out to you pirately. I'm I have seen you've spent quite some time abroad internationals studying. Where have you been and what did you do? Well, yeah, you're right, I've done my favorit of traveling. So I spent some time in France, actually quite a lot of time, so in total before and a half years of my life. So I started after graduating from high school. I did my bachelor's in the Rhineo and in this Paden, but did a double degree program in Yale and the north of France, and then, after working, I decided to quit go back and do my masters, and that I did in Sunny Nice and the suffer fronts and the coult that's you. And Yeah, other stations included than professional stations while working included also Zurich, Switzerland, and a bit of time in London, very nice. I know this is a tricky question, but what did you like more than North or the south of France? That is a very good question because had I not traveled to both parts, I wouldn't have believed that it's basically two countries. I would say because I enjoyed the beach quite a fair bit. I would say I'm a big fan of the south of France, although I felt that the people in the north of fro months, which the French C has basically be in Belgium, you know, to be a bit more open and stare. Was a bit of a more relaxed and down to Earth start towards it, which I really appreciate. It a lot belt my brain. Blue Circuit Beer, chilcot he getting to the more serious part now again, I've seen you've been working with investment bank UBS from Switzerland. You've been a quantitative researcher, client put folio manager and more. Can you take us a little bit through your professional positions and what you learned there? Yeah, sure so. By background from my studies, I studied finance, so I spent my fair bit of time and financial markets, as you rightly pointed out, the UBS and investment banking. That was not the transaction site but really the capital market site, so and fixed...

...income sales and trading. I traded both cash bunds as well as derivatives. So that was really a lot of fun. But after we may add for our audience with know banking background, that basically investment banks there two parts. Capital Markets. We do all the trading, more or less, sorry for oversimplifying it, and the other area is in investment banking divisions, usually called that is where you buy and sell companies, more or less. And we worked on the capital market side, meaning the trading. Just to clarify here, go ahead, exactly and the specifics were and the focus was fixed incomes or anything to do with interest rates and credit. So that was a little fun. And then after some time, after a couple of years spending at, as I like to say, the dark side of the force, I chose to do a reboot and essentially transfer more towards the by site, meaning to the investment management part, making investment decisions, credating portfolios, and also add a data analysis and quantitative component to the to the entire process. And because I'm very passionate about two things, it's financial markets, but also technical stuff, so data analysis and data science. And so I did that and ended up being a quantitative researcher, so doing a lot of statistical modeling and coding and Developing Investment Strategies and at as a quant researcher at a startup. After my studies also in the self of France, which was pretty awesome. And Yeah, then after that I ended up in Switzerland running systems and technology for a hitch fund, where we created Quantitative overlay models in ethics and fixed income markets. So always combining these two aspects, data analysis and and financial markets, always in the context of credit and interest rates. And it was at that time where I actually met one of my co founders and we were experimenting with different investment strategies and we're also looking at different markets where you could find yields and that would segments that would allow you to capture some some interesting, you know, returns, and that's actually how we started looking deeper into what was going on in lending and in credit, and that's how the origins of ex alone emerged. I will not even start to playing quantitative analytics for hedge funds, but I'll link a hell lot of articles down here in the show notes. Guy, no trouble, you can read everything you want. If you're done with reading and let's say three or five years, will add the questions right. One question here is you. You met you co founder there. What was almost like the moment won't when you decide. Okay, let's jump ship from this hedge front and do some real cool fin tex startup stuff. What was like the moment? What was what was the inflict point? Yeah, it wasn't exactly a plan move, to be honest. It's not like I've always wanted to become a founder. It never or seriously crossed my mind until, how you say, The star is aligned and you're all of a sudden, all of a sudden facing the opportunity to actually do it and go ahead and found your own company. So and at that time we were just, you know, playing around, experimenting and looking into different leanning segments. What's really cool is that we saw that, with the entrance of technology, traditional core financial segments, like the lending space, like currencies,...

...like trading, or starting to become disrupted and also more technologically driven. So what we were really keen and observing, the observing was the change of basically lending shifting towards more digital channels. So, you know, borrower supplying more online. Over, they can be bothered to go to the bank subsidiary and fill out a lot of paperwork, but you know, you can do everything in a digital fashion. And the interesting with there is really when you're looking at the market. What's happening is that a lot of these Finn Technical Lenders, as we call them, more digital lending platforms. They are really opening up an asset class, they are opening up a market segment, that is that was before predominantly dominated by by banks and which was not really accessible for investors. And that was the moment when we realized this is actually an interesting, interesting segment, because this is a really cool space to invest in, but at the same time you're also providing kind of a real economic impact, because a lot of the borrowers that apply for loans through these digital channels they either tend to apply for loans as a function of convenience or they apply because they are underserved by their home bank. So they are looking for an alternative, and that's actually the interesting bit. And Yeah, we were looking into into the segment and that realized, yeah, this is a pretty cool space to actually be in and when you're looking at it from a data driven point of view, you can do a lot of analytics, you can compare prices, you can compare interest rates and really make data driven funding decisions. So that's what we really felt like. You know, this is coming in life and you can actually create a really, really scalable business model out of it. And what were talking right now is basically lending, meaning credit, for example, from online banks, and basically you never have to meet a person, facetoface, but basically you get a credit. And that is what you call digital landing right. Yes, exactly, exactly. So it's not necessarily only online banks, but it's really any platform that enables borrowers to apply for loans online, and so a lot of the segment is also dominated by intermediaries that act as market places. So all of these players, for that emerged as peer to peer lenders or crowd lending companies. They are also very active in the space, and what's interesting is that they they serve borrowers right by helping them to apply for loans. But what's really interesting is that they do not have access. They do not have a balance sheet themselves, so they do not have money, but they really source then investment demand or funding demand from investors. It can be private individuals or also institutional investors. So having access to a financing base is crucial for them, and that's what we saw as an opportunity for a business model, because it's really hard for institutional investors to actually make a sense out of this market, and so that's how we chose to position as a software company, as a as a BT market place in between institutional investors and these FINTAC lenders, because you really address the pain points of one another, so of both sides of the market, and we basically help them find each other and and create a match. The I had to smile when I was going through your press releases because in November two thousand and twenty one, you announced the corporation with Credit Shelf and actually I had Daniel cofound that in CEO of credit shelf in an interview. It was published...

...back in October two thousand and eighteen. If you get down here in the show notes, I'm sure. I'm sure you will find the link and enjoy the interview. So basically, let us make this very stample break it down Barney style. So basically I go to credit shelf, they want to give me loan but they don't have the money themselves. So there's an institutional investor on the other side. He gives me, through credit shelf, the money. And what a supplace you're coming in here. Yeah, so we help credit sholf get access to a wider range of institutional investors and we also help them in the fundraising process, so in the matching process of finding institutional investors, by providing them also all sorts of analytics. So, for instance, like one book, analytics is g analytics and some some other aspects. So we really give lending platforms the tools to grow so that they can scale their business. That is a little bit abstract, but when we talked before, I had you in mind as I would simply describe the rating agency for what we now described as digital lending. Would this be appropriate? Exactly? It's a rating agency with technology, so we don't only provide the ratings and the transparency, but actually also an infrastructure that investors can use in order to connect to many different lending platforms and then also automate some of the financing processes. Oh, that means, let's say I have a lot of money on one account as an institutional investor. I can hook up your tool and basically it will give me the best offering force from something like a dozen platforms where people are trying to get the money, and what I would be interested in is where are the platforms. Are we talking about Germany? Are We talk about Gusa? Are we talked about European Union or all of Europe? And who's on the other side? Is it only small companies? Is it individuals, or is it like the big corporate that's a great question. So we are global. So the most lending platforms, or a lot of lending platforms, are in Europe, but we also have pretty good ties in Southeast Asia. So Indonesia, Vietnam, Philippines are very exciting markets to be Singapore as well. And Yeah, so we can cater or at the moment we're catering to both consumers, so private individuals, as well as Sam's, as I'm E. is a way through the border to like really big corporates. What is a maximum revenue we're talking about here? It's probably less related to the the revenue. It's more the loan sizes and the borrower segments. That would be probably to combersome for even, you know, local savings banks to serve. So in terms of loan sizes, we're talking about two hundred K to five million, and usually you have revenues of a thing between well up to up to twenty thirty fifty million random, but that is really the bigger brackets. So usually it's it's a lot smaller companies. And then again it also depends on the region. So in Southeast Asia it's very fascinating. You even have like micro sames, really mom and pop shops who want very short term loan, maybe thirty to sixty days even, and you know, a loan size of maybe a hundred two hundred dollars and apply for it and they wanted to to refinance. So that's pretty exciting. I totally understand that. We talked...

...about that, like the very little shops. I was wondering, DC sorry, really, really really going Geeki here. D see any impact, for example, if there's a big typhoon going across the Philippines, going across Indonesia, for like a lot of small loans by those minism easy would talking about that want to rebuild after damage from such a storm. It's not just disaster related or relief related, because there is like public funds for that, but it's really organic growth and really fueling the backbone of the real economic backbone of a lot of these economies. So Southeast Asia as a fantastic space. You have a cross maybe four or five countries. You have roughly six hundred million people. You have over sixty million SMS or microsumes, and about two thirds of them don't even have access to a bank or are underserved by bank, so they are just simply not given access to traditional credit. And all of this is moving to digital channels. So it's really about bringing credits to small shops in order to expand their businesses organically. That's pretty fascinating. Is this also ways see your biggest growth opportunity for that? Yes, definitely, definitely. That's the space where you need to be if you want to have the maximum growth opportunity. And it's also a great story because you are really making an impact with your investment. And there is a reason why even development banks, like the add for instance, see fintach lending and technology as one of the most important drivers for financial inclusion, because if credit is moving to digital channels, then you can reach entirely underserved or entirely new borrower segments, which is really cool. But the fascinating thing is that the same question remains, like for lending platforms over here in Europe. Where do I get the refinancing from? So who gives me the firepower. So digital lending is growing really rapidly, but what's missing is a digital refinancing channel, and that's exactly what we're building. Like someone I see it, though, you're on a really big global mission. Would I would also like to talk about a little bit here, is that you also do some digital asset rating, blockchain integration. There was just recently press release. Can you talk a little bit about that? Sure. So I was referring to the investment infrastructure that we have, when you when we empower investors to actually automatically source the right loans that they want to put in their portfolio. So what's really cool with our partners and light, who are on the BES on Investment Company, they have created a tokenization engine. They have created a digital asset platform which we can create a digital token in which we can book or on which we can source these loans that we that we actually sourced from loan originators. So this is really a step to the next level. So this is joining digital assets with digital lending, as we call it, and this also revolutionizes the entire booking infrastructure and the the investment vehicle that is actually used, because we're no longer talking about traditional investment funds that can be then invested in by investors, but you can have a digital token, and what this does is it solves another headache for a lot of investors when you're investing or when you're allocating your money into some of the alternative investments and and illiquid asset classes like real estate and credit and...

...so on, because you always have the problem of lack of secondary market liquidity. And the great thing about distributed ledgers and blockchain technology is that it allows for a seamless transfer of value through the Internet. So by booking all of these loans, by booking a loan portfolio, which as such, as a liquid on a digital token, you have transferability of the token, which is great from an investment perspective, but it's also great, great value add for an investor's perspective, because you can really leverage the power of this vehicle and also capture attractive risk premia in the lending market. So we're really paving the way towards digital financial assets. Let me try to get this a little bit wrapped up. So basically, what you're enabling is there's a loan from Maine in the media. Maybe the Philippines, maybe also from Germany, France, Italy, and you can basically wrapt this in in a token, and then it's a digital token you can transfer because it's unique, it's trackable. You can transfer it across this dis reviewed ledger, assuming your technology, which then can be transferred between institutional investors, meaning before that they had only loans on the balance sheet. It was heavy on them, so to say, in terms of required capital, but now they can easily trade them between each other, hopefully in a very standardized manner. Exactly. Okay, I I I understand that. Oh, we this is we really say, this is next level stuff. To the best of our knowledge, nobody has ever done this before. So this is really a groundbreaking, groundbreaking innovation that we're that we're doing. That is really, really cool. I'm we seeking out here a little bit on the finite side. I really know that. Rum Sorry, guys, everybody who like to learn more about about all of that. We link, of course, your linked the profile and the company website down here, and I'm sure people can directly reach out to you and ask you more questions. But let us go a little bit on to the other side. Like you company, how are you guys currently funded? Because Um as, as we discussed before, purposefully are crunch based. There's nothing to find about you guys. Right yet? Right, yeah, exactly what everybody who's listening to this. He is smiling. There is a reason on smiling. No, you it's exactly right that you don't find a lot of information on crunch base. I think that is okay. So we started out as a wood strap company and we also do have external money on board, so some business angels and local vcs. And the reason I was smiling is that we actually just closed another funding round and we're really excited about the potential and the growth opportunities these unlocks for us in order to ramp up the business, scale the business and add exciting new features. When are you looking for new funding? Probably in twelve to fifteen months. And I guys currently hiring? Yes, yes, definitely. So we're always on the lookout for good developers data scientists, but if you want to help us increase our outreach and exciting destinations like steffeast Asia or in sub Saharan Africa or in the US, then we're also looking for motivated growth managers in order to connect with digital lending platforms and investor talking about this here. Are you a digital come the meaning people can stay...

...where they are all would they be required to relocate to Frankfort? So relocation is more fun because we have a really cool team, but of course we also office in flexibility to, you know, partly work from home. I think this is the normal thing from covid we have made pretty good experiences. So one fun story is I worked with a bunch of team members we work fully remotely during lockdown out of Singapore because our flights got canceled. So we ended up spending, you know, having half the company working out of Southeast Asia and the other half being being in Frankfort for about three months. So we have a fair bit of experience of also working fully remote it. So there are always solutions to be shop and am I right to assume that the specifics of your average customer are pretty much of the chart of as compared to other companies we're talking to here, because my understanding is your addressing institutional investors that are either investing a small share of their investments in, as you said, alternative investments, for example credit by those credit platforms, or they're very specialized investors. But I do assume if you just manage so financial terms, you just manage a few million durers, that's most likely not a tool for you. Yeah, so, being a marketplace, we're really juggling two different types of customers and, as you rightly say, the one part of the customer basis institutional investment managers, typically asset managers, so accounts, the professionally manage money for others who in turn have a lot of institutional plans, like P engine funds or insurance companies, who are the end investors. And Yeah, so we are targeting especially institutional asset managers and in general, also the ones that are interested in adding digital lending exposure or interested in adding new product offering in the lending space or in the private debt space to their portfolio. Last question for this part. What do you future plans? I understand taking off the world, enabling all the digital landing platforms with their refinancing and connecting, on the other side of your platform, institutional investors to it best, would be both across the CLOB right. Yes, exactly. So our mission is to close the global financing gap, which is a staggering five point two trillion dollars, which means that across the globe there's more than a hundred million SMS that are underserved or that are lacking financing, and we really think that digital channels or Fintech long originators are in a prime position to tackle that segment and we will not stop providing and connecting them with funding sources until that mission has been completed, until the funding gap has been closed. Sounds really good and I really big numbers around. Since this interview is sponsored by invest in Hassan, we do have a few more questions for you, especially why are you head quoted in Frankfort? What do you like about it? Being from Frankfort? It's obviously the best city in the world, one of the best. No, Frankfort is fantastic because logistically you have access to the whole world through one of the biggest airports in Europe. Probably less well known fact is...

...that Frankfort, or Eshbahn, is actually the biggest internet not in the world. So you have a lot of a lot of great mixture of technology as well as, you know, financial players. So a large part of ultimately our customer base and target customers is based in Frankfort. And I love the proximity. So it's always a good idea to be near your target customers. I see I'm and last question for this interview because we were running almost at thirty minutes recording time here. If you have one concern, one question, one opportunity to address the decision makers of the state of Hessan here, what would you like them to do? Make it easier for fintech startups to connect with financial institutions, but I guess it's also a question of, you know, the readiness of established players to actually, you know, diputoe into the water and really try to cooperate. And if I'm talking directly or if I'm allowed to directly address all, so some of the decision makers reduce some of the administrative burdens for small companies because, yeah, reporting requirements are, especially when you're applying for subsidies or for funding, can be very burdensome and can be very complex. So it would definitely also help if we could, if we could reduce some of directly. Great, awesome, great closing words. Thumps pressed for your for your role in closing the global financing gap. Thank you very much. I enjoyed the interview. A Lot. Thanks, Joe. It was my pleasure. That's all. Folks find more news streams events at, interviews at www dots start up rad io. Remember Sherry is Carri.

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