In this Finterview I talk with Martin Sulte- CEO and Cofunder of Mintos from Riga. Mintos is a p2p lending platform nominated for the European Fintech 100 List in 2016.
1.Please describe your company and product
Mintos is a technology-enabled peer-to-peer lending marketplace from Riga that launched in January 2015.
Mintos is a unique peer-to-peer lending marketplace where investors go to invest in loans originated by non-bank lenders. In creating this service, the Mintos team offers investors an asset class that previously was not generally available — the opportunity to finance loans originated by non-bank lenders who traditionally have funded loans using their balance sheet. In this model, non-bank lenders become loan servicers, dispersing proceeds and collecting interest and principal payments from a borrower.
On the Mintos marketplace, investors can finance business loans, car loans, invoices, mortgage loans, and personal loans.
Investing in the loans available on the Mintos marketplace equals investments made on a number of different platforms. In other words, we provide outstanding investment opportunities within a single platform.
- Why did you start your business?
I come from the investment banking where I spent six years before going for an MBA at INSEAD. That, actually, was the first time I heard about the peer-to-peer lending because I borrowed from Prodigy Finance, a platform that provides funding to international postgraduate students attending top-ranked business schools, while also delivering competitive financial returns to institutional and private investors. After the graduation from INSEAD I was eager to prove myself in entrepreneurship and peer-to-peer industry seemed to be a dynamic place with the great potential.
- What customer problem will you solve? Your main USP?
First, I would like to note that we have fundamentally changed the model of peer-to-peer lending. Before, non-bank lenders that wanted to use the peer-to-peer lending model to fund loans were in need to create their own investor-facing platforms — now, non-bank lenders can join the Mintos marketplace. This means non-bank lenders no longer have to spend huge amounts to create technology solutions and market their platforms to investors. Instead, they can focus on what they do best – originating loans.
On the other hand, the main advantage for the investors is that they have access to much broader investment opportunities as part of a single marketplace, both in geographical terms and in terms of various loans originated by various non-bank lenders. Different loan products and geographical locations, combined with the fact that the minimum investment in one loan is EUR 10, means that investors can easily build well-diversified investment portfolios. Our secondary market is very liquid as a result. It is also important that non-bank lenders whose loans are available to investors on our platform are experienced in underwriting.
Moreover, the loan originators on the Mintos platform are required to retain part of each loan on their balance sheet, i.e., to have “skin in the game”, to align their and the investors’ interests.
Finally, all loans on the platform are prefunded by the loan originators; investors can start earning from the moment of the investment and there is no cash drag.
Essentially, we create favorable conditions for the growth of the whole non-banking sector thus making funds more accessible to individuals and small and medium size businesses.
- How is your startup financed? In what funding phase are you?
At the beginning of this year we concluded a seed-funding round, attracting 2 million euros from Skillion Ventures, a Riga-based venture capital firm. We will invest these funds in product development, significantly expand the team, and accelerate growth in Europe by attracting more non-bank lenders to the marketplace and giving investors more investment opportunities.
- Please describe your business model!( You can use a canvas picture)
Our business model is fairly straightforward. Borrowers apply for a loan at the loan originator. The loan originator evaluates the application, sets an interest rate and lends money from its own funds. The loans are then listed on the Mintos marketplace, where both individuals and institutional investors can select loans to invest in, therafter receiving monthly principal and interest payments. By investing in a loan investors are buying claim rights against the borrower based on assignment agreement.
- Please tell us some facts about your team? Who are the founders and what are their skills?
The Mintos marketplace was co-founded by me and Martins Valters, our CFO, who came on board with his 11-year experience from Ernst & Young where he audited some of the largest financial institutions in the Nordic region. However, we could never have grown so fast if it was not for our team of experienced professionals in the fields of IT and finances.
- Short answer: Disrupting banks or enabling banks? In what are you better than banks? What are the biggest future challenges for banks and for your company?
Disrupting. If previously the central financial institution was a bank, now part of the market has been taken over by the non-banking sector opening doors for new and innovative financial services due to the technological progress. The rapid development of fintech companies has been facilitated also by changing consumer habits. Today the demand is growing for a convenient, simple and user-friendly service.
I believe that in the long run new and progressive companies will offer a full range of basic banking services, while banks will only maintain the infrastructure and become a place where numismatists will keep banknotes and shiny coins so that they do not become worn-out.
- Are you satisfied with the progress of your startup? Are you on target?
Yes, we are satisfied with the progress we have made so far. Over the past year, more than 30 million euros in loans were financed through the Mintos marketplace. To date, ten non-bank lenders have joined the platform; they provide loans in Czech Republic, Estonia, Georgia, Latvia, Lithuania and Poland. More than 6300 investors from 40+ countries across the world currently use the Mintos marketplace.
- Any tips for people who likes to start a fintech startup?
If in one line: in the search of a brilliant idea don’t forget that it is the execution that usually trumps anything else.
- What are your plans and milestones for 2016?
In order to further diversify investor opportunities we are continuously seeking to add new loan originators, new types of loans from different countries. It is equally important for us to strengthen our team so we could retain our standards as high as possible and ensure excellent investor relations.
- Additional Question: For what more private thing you would leave everything behind?
People I care about.