Growth Capital Ventures recently led an Investment Round in B-North, a startup challenger bank aiming to transform the business lending process for loans ranging from £500,000 to £5 million.
With the Management Team making solid progress towards their initial value creating milestones, we wanted to share what attracted us to B-North and why we decided to lead the recent Seed Round.
Why GCV backed B-North
We see B-North as the next wave of challenger bank. The B-North business model is unique; the combination of people and technology allows B-North to deliver face-to-face banking quicker and better than the competition.
For our private investor network, G-Ventures, this was an opportunity to invest in an exciting start-up with high growth potential at the start of B-North’s journey.
Here are the key factors that influenced our decision to lead the round and for GCV Investor Members to co-invest.
Experienced board and management team
The team were focused on drawing on their deep sector experience and detailed market knowledge to address a clear problem and market failure.
Led initially by Craig Iley – previously a co-founder of digital only challenger – Atom Bank. Craig assembled an impressive team with a strong demonstrable track record in business banking and retail deposit-taking.
Joined initially by Jonathan Thompson (CEO), Richard Baker (CIO) and Dave Broadbent (CFO). The founding team comprises highly experienced banking and financial services professionals with an extensive track record spanning new bank startups (Atom & First Direct), business banking, retail banking, regulation, risk and compliance and business development amongst others.
Track record of gaining a banking licence
Importantly, key members of the team have significant experience in gaining a banking licence, launching and scaling a challenger bank.
Well defined addressable and obtainable target market
The SME business banking market presents an attractive, tangible opportunity of a large, clearly defined target market, that is poorly served by the High Street banks and is valued at circa £154bn with over £48bn of annual unmet market demand.
The market for the delivery of bank debt (£0.5m+) to SMEs is evolving rapidly. New banking technology and the inherent difficulty of integrating it with legacy systems is resulting in a new era of challenger banks. B-North considers its speed and flexibility, supported by its unique business model and innovative technology, as key competitive differentiators.
Focused target market
A laser like focus on a target customer where the team has a clear and deep understanding of the market and customer needs. The B-North team has direct experience of the problems faced by many SMEs, particularly those requiring loans of between £0.5m and £5m. The team has observed increasing competition and innovation in banking, but this is not often focused on delivering for SMEs, and specifically, the scale of incumbents leaves parts of the market underserved, and the time to secure finance can take months.
B-North is focused on setting new standards for delivery and customer service in the SME marketplace, with highly experienced bankers supported by best in class technology.
Key features of the business model includes:
- Unique regional Pod distribution model, designed around the customer journey.
- Key decision makers in one place: bankers, underwriters, property valuers and legal processing.
- Sensible proportionate risk management.
- Groundbreaking proposition focused on the £100bn intermediary channel.
Clear market entry and scale up strategy
Designed from inception to achieve scale, B-North aims to become a highly profitable and stable business-focused lender. As a bank, B-North will fund its loan book primarily with retail fixed-term deposits, a large, stable and low cost source of funding. Deposit-taking activities will be outsourced to a reliable third party to reduce execution risks
Compelling value proposition
Focus, speed, flexibility, competitive risk-based pricing and a customer-centric approach to deliver a best in class business banking solution.
B-North aims to deliver lending to SMEs up to 10x faster than incumbent banks.
Transformational technology enabled approach
In September 2019, B-North announced a market first partnership with two FinTechs: Mambu, a banking-as-a-service provider; and nCino, a cloud-based loan origination platform. The two companies have chosen B-North as their strategic partner to support a seamless integration of their systems that will form B-North’s core infrastructure.
Credit decisioning will be enhanced by sentiment analysis, integration with client financial reporting systems, innovative use of open data sources and AI.
Significant commitment from Management
The founders and management invested over £1m in seed capital. The vesting of founder shares is linked to key value creation milestones (banking licence, launch, break even and significant profitability).
B-North strive to have a transformative impact on businesses by employing thousands of people and boosting the economy, B-North will help to revolutionise and revitalise the entire SME banking sector.
Growth focused forecast
Market opportunity, an agile operating model and latest generation systems drive fast profit growth. Investment will drive the business towards launch with base case return for investors forecast at 12.3 x money on money.
Watch B-North’s investor pitch