Recently it was reported that Fintech platform Tala raised $ 145 million in Series E funding with Upstart as leading investor. Since Upstart was leading the round, I was enticed to take a closer look.
Background:
Tala is an emerging markets digital lender that offers loans between $ 10 to $500 to consumers and small business owners in Kenya, Philippines, Mexico and recently India.
Tala has 6 million customers with $2.7 million worth of credit since its inceptions.
Tala has been a regular on lists of Fintech top 50 for Forbes and CNBC for consecutive years.
The mission of the company ‘digital financial services for the next billion’, basically serve the deeply underserved customers in emerging markets (Upstart’s mission on steroids)
Tala’s main technology is that it has identified proxies using customers phone data and activity to (for ex. paying phone bills on time) to emulate a traditional credit score.
Similar to Upstart in each market Tala only focuses on the ‘deeply’ sub-prime customers for which it uses it’s credit scoring technology. (sounds familiar right?)
The CEO Shivani Siroya has experience as part of her work with the UN population fund, where she experienced first hand in emerging markets lending what works and what does not.
If you want to learn more about the CEO, see this interview:
https://www.cnbc.com/video/2021/10/14/cnbc-techcheck-chats-w…
With the series E funding Tala wants to create a ‘full account’ experience similar to other NEO banks using decentralized finance and cryptocurrencies.
Take-away: No wonder Upstart is leading series-E funding for this company. The mission and vision between Upstart and Tala are closely aligned. Basically Tala is the Upstart for the micro financing in emerging markets and has a ‘good cause’ vibe to it. However based on the interviews with the CEO AI/ML is never spoken of, implying that Tala’s technology is more limited in the sense that it found proxies for traditional credit scoring, instead of getting rid of the entire model like Upstart does.
Upstart’s play:
The CEO mentioned the following interest tidbits in the article when talking about Upstart and Stellar Development Foundation:
“Upstart and the Stellar Development Foundation (SDF), two investors in the round, are critical to this next phase of growth for Tala.”
“For us, it really kind of matches both things. One is continuing to refine and become even better in terms of our credit offerings,” said Siroya. “And then the other side is really thinking about how do we accelerate this experience and leverage crypto with these platforms.”
Following the announcement, Paul Gu, the co-founder of Upstart and Denelle Dixon, the executive director and CEO of the Stellar Development Foundation, will join Tala’s board of directors.
My take-away: When I am reading between the lines Upstart is going to help Tala upgrade it credit scoring capabilities maybe also introduce ML/AI in the mix in order for it to have a more broader loan offering. This is also why Paul Gu takes a seat on the board. In return Upstart’s management can get international experience with strategic markets and learn about alternative ways to evaluate credit worthiness maybe not yet in their model.
In terms of international opportunity I think the economics of micro financing are not as attractive as Upstart’s current business and that Upstart is inclined to help Tala, because they are never going to enter this segment of this market itself. Instead when international expansion will happen, they will first focus on English/Spanish speaking more mature markets, since there will be plenty of opportunity.
The beauty here is that if Tala really takes of and micro financing becomes more profitable, then they can always acquire it to complement there international market offering in the future.
But first auto lending off course 