Startup of the Week: HeavyFinance
This time “Startup of the week” presents you a Lithuanian startup called HeavyFinance which is a crowdlending platform specializing in financing solutions for SME’s. Haven’t heard about this startup yet? Don’t miss the article and know more.
So what is HeavyFinance? How does it work?
All the loans we provide are backed by heavy machinery, such as tractors, combine harvesters, wheel loaders and other machines worth hundreds of thousands euro.
We also enable investors to invest in safe and regulated financial instruments which were not available in the market before us. A mission to open a new asset class to investors is a challenging one. However, the first couple of months since the official launch gave us many indications that investors perceive our novel service as secure and financially viable.
What are your competitors and competitive advantages?
Like any other marketplace, we have competition on two sides, investment services and borrowing. On the investors’ side, we compete with all other investing opportunities small and medium-size investors have, whether it is investing in a stock market, peer-to-peer platforms or other crowdlending platforms.
However, we mostly compete against non-investing. Several months ago The Central Bank of Lithuania released statistics, which indicated that the Nasdaq Vilnius Stock Exchange had only 8.813 investors in 2019. Furthermore, different calculations show that there are around 12.000 investors in Lithuanian peer-to-peer market. These numbers are significantly low, even though, it is widely known that investing is a straight way towards financial independence. We wish that our product will encourage more people to start investing. Therefore, there are plenty of opportunities to grow without getting ourselves in fierce competition.
On the borrowing side, we compete with traditional financial institutions, such as banks or credit unions. As it is common in many EU countries traditional institutions focus on large customers leaving smaller ones behind. Therefore, we made procedures in a way that suits small and medium-sized companies. Our advantage against traditional financial institutions is speed, personalization and specialized risk assessment methodology.
What were the reasons behind coming up with this idea and launching this product?
Laimonas Noreika, who is one of the most prominent alternative financing experts in Baltic countries, met an experienced heavy equipment entrepreneur Rytis Darginavičius. While having a conversation they both understood that adopting the crowdlending model to agriculture and other areas, where heavy equipment is crucial in daily operations, opens up a blue ocean in this enormously huge market.
When exactly did you launch, what were the main challenges before launching?
We had an official launch on 8th of June and around 400.000 Eur were invested through our platform since then. Nevertheless, I will not lie that we had an easy launch. Establishing a company is always hard, especially when you are in the area of financial technologies.
There are so many moving parts starting from the team and business strategy, to software development, legal challenges. However, I think that our main challenge was to find the best methodology to evaluate the risks of borrowers. We need to look at some specific variables that are not relevant to, for instance, real estate crowdlending platforms.
We aim to attract small and medium-size investors who want to invest from 100 Eur. It is important to mention that legal entities can also invest through HeavyFinance platform. Besides, our platform is open to any geographical location and we already have some registered investors from other European countries, the US and Asia.
Considering borrowers, we have the biggest presence in the area of agriculture. Our client is often a farmer who has 70-200 hectares of arable land and needs a bridge loan to prepare for the season or to take crops. But we also work with small and medium-sized companies in areas of forestry, mining, road infrastructure, and other markets where heavy equipment is being used on a daily basis. Geographically we will continue working with Lithuanian companies for some time before we will be ready to attract borrowers in other countries.
What are the main challenges while working on this product and how are you overcoming them?
As for any other marketplace, probably the main challenge is to find the right balance between supply and demand. We have constant conversations with all the parties involved in how our product can become more convenient and attractive to both investors and borrowers. The technical development of the platform is also crucial in making a seamless experience for our customers.
How are you funded? Do you seek extra funding?
Currently, we bootstrap using our own funds. Due to the lean approach and successful start, which guaranteed us a revenue stream from day one, we can continue bootstrapping to achieve the best product-market fit.
Looking to the future, we are in early talks with business angels and venture capital funds. They show a great interest in our company and we see closing a funding round as a great opportunity to expand into other countries.
Please introduce your founders, your core team, and your broader team?
Our team consists of four co-founders with substantial experience in different areas. Our co-founders are as follows:
- Laimonas Noreika, our CEO, is a well-known fintech entrepreneur, who previously founded a P2P platform FinBee. Before starting FinBee, he was the board member of Viena Saskaita, a utility bill consolidation provider.
- Rytis Darginavičius is a heavy machinery expert and entrepreneur with more than 13 years of experience. He is a founder of three successful companies: Nova Rent, Litrental and Kauno Kelių Statyba. Before starting his first company, Rytis spent almost a decade working for Dojus Agro, the largest supplier of Western agricultural machinery in Lithuania.
- Darius Verseckas used to be a widely known tech journalist and editor. While working as a Technology Editor for Verslo žinios – the leading business outlet in Lithuania – Darius established a strong reputation in the startup ecosystem. Consequently, before becoming a co-founder of HeavyFinance, he helped many other startups to develop and execute communication strategies for international expansion.
- Domantas Šiupšinskas started his career in a direct lending peer-to-peer platform FinBee, where he quickly became a crucial asset to the company taking care of some of the largest clients and complicated risk assessment tasks. Here, at HeavyFinance, he’s helping our clients to make the best of all the benefits our crowdlending platform can provide.
How has the business been so far? Could you share some numbers to illustrate this (users, sales, etc)?
As of the 29th of July, four projects got financed through our platform totalling close to 400.000 Eur invested. The average annual return for investors is 12,68%, which is a pretty sweet deal for investors. Actually, the current pool of investors makes us confident about our prospects to reach 1 million Eur in money lent pretty soon.
Future plans, ambitions? Simply speaking – what’s next?
We believe that by providing top-notch service for both borrowers and investors HeavyFinance can become profitable in around two years from now.