They are referred to as the Carnegie Cubs. For every one of the digital startup successes we read about, there are thousands that occupy the corporate graveyard.
Molnar and Dash are definitely in the minority.
They have built companies that fall under the broad ‘digital’ umbrella but that’s about where the similarity in their businesses ends.
Afterpay is the first and largest among the crop of new buy now pay later offerings. As such it is a true fintech disruptor – with a fresh product that will ultimately present a major challenge to the credit card market.
Dash is creating a more digitally sophisticated and personalised take on the established online market website for comparisons on lending products.
While Dash’s Credible Labs got much of its seed funding from Australian investors, including Phil King’s Regal, Alex Waisltiz’s Thorney Holdings and Carthona Capital and is listed on our local index, the business was in fact born in Silicon Valley and operates in the US.
Loan comparison outfits are certainly not new. Credible Labs is a challenger to the number one operator in the US market, LendingTree.
While there are a range of views on whether Murdoch’s offer is a little low-ball relative to its Credible Labs’ prospects to become a billion dollar company over the next couple of years, the reality is that having Fox as a parent wildly improves the chances that this young company will live long enough to reach that ambition. Fox has already agreed to inject A$110 million into Credible Labs which to date has not turned a profit.
The offer price of $2.21 per share represents a revenue multiple of about ten times – and compares with the revenue multiple of 4.8 times currently commanded by its largest competitor, LendingTree.
While Credible Labs offers a far more personalised service because it has access to customer credit history and boasts a rapid approval time, the business is still in its infancy in a sector that appears to have few barriers to entry.
Meanwhile for Fox it is an interesting choice for its first major acquisition since it slimmed down from 21st Century Fox to Fox Corp – on the back of the divestment a large part of its entertainment and content operations to Disney in March.
The Murdochs (primarily Lachlan) have dabbled in digital businesses previously – in particular real estate cars and employment.
And while Credible Labs is lumped under the banner of fintech it displays many of the characteristics of those businesses – it matches buyers with sellers – or customers with products.
It is logical to see why Fox thinks thinks that it can grow Credible Labs into a much larger player by embedding its services into its digital platforms as well as providing it with space for blitz advertising.
The addressable market for Credible Labs products in the non-mortgage loans in the US is about US $200 billion. And Credible has just extended its product suite to mortgages – a market worth US$1.6 trillion.
And Dash is the first to admit that his company is in need of capital and distribution in order to achieve scale.
For Lachlan Murdoch, who is now executive chairman and chief executive of Fox and the driver of this transaction, this deal will be vital to establish his digital credibility and his ability to pick a winner.
Elizabeth Knight comments on companies, markets and the economy.