Beau Bertoli and Greg Moshal founded Prospa in 2012. The company, which celebrates its 10th anniversary this year, was born out of personal frustration – Bertoli and Moshal have run businesses themselves and have experienced the difficulty in accessing capital. Prospa’s idea was to make financing accessible and easy for small and medium-sized businesses.
According to current estimates, Bertoli says, up to $20 billion a year is needed by small businesses, and that’s just not being funded. Big banks are great at handling personal banking and big business banking, says Bertoli, “but when your local coffee shop needs $14,000 because its air conditioning broke or a plumber submits a tender for a builder, then wins and needs $20,000 in materials to start and complete the job, there’s no real solution for that”.
Prospa has experienced significant growth since its founding. In 2016, it topped the Smart50 list, which Bertoli said affirmed Prospa’s business model and reassured the two founders that their company was on the right track. Since his victory, his turnover has increased tenfold and his workforce has grown to around 300 people throughout Australia and New Zealand. Bertoli reflects on why he entered the Smart50 and how online finance has changed and stayed the same over Prospa’s 10 years.
Why did Prospa enter the Smart50?
In 2015 and 2016, we were looking for ways, including Smart50, to get that external recognition for what we were doing and what we were building as a business. Although the Smart50 looks specifically at revenue growth, it is a much-loved publication, reaching out to many of our target customers – obviously businesses – across Australia. We really wanted to compare ourselves to other companies and ask ourselves “how are we doing? »
We never thought we would win, it was quite a surprise in 2016. Obviously we knew our business was growing fast, but we didn’t know we would be the fastest, so to speak. And it was really wonderful. We had seen previous brands and companies that had won the Smart50, or even just made the list; it was quite an honor for a company.
And it creates a really good talking point with a lot of different stakeholders. For example, future employees, you know? If they hear you’re on the Smart50, or a particular winner, that’s a much appreciated achievement.
Investors, they care about the companies they invest in over other fast growing companies. So again, us being one of the leading leading companies in Australia, it’s opened up a whole bunch of conversations with investors, about “how do I get in and become an investor in these fast growing companies?”
It also helps to meet other companies. Fast growing companies face very similar challenges, they are not easy to manage, there can be a lot of chaos and a lot of changes going on within these companies. We knew as we walked in, and especially if we were up there in the upper echelons, we might run into an elder, if you will, from other companies. It’s always great for founders because you connect and get to know other people running businesses who are facing similar challenges. You can learn from each other, you can share ideas and you can create a small network.
So that was the impetus, I guess. As mentioned, we didn’t think we would win and be the fastest growing, but it was a wonderful surprise for us, and again a great affirmation of the business model we chose, the challenge or of the problem space that we were trying to solve, clearly it was very big, and it was really successful from what we were doing, and I think winning gave us a kind of really good flare because ‘we we’re on the right track, so let’s continue, let’s double down on the business strategy”.
Things always change quickly for small businesses. Have you noticed any differences in your customers, or your type of customers and their needs? Does this change your approach at all?
I would describe the need as…it hasn’t changed. The need for small business owners to access capital to run their business, this problem existed when we created commerce, and it will exist for a thousand years. It is a permanent problem.
It’s one thing we love about the model we’ve chosen and the space we’re playing in. It’s a permanent problem, it’s never going to go away. But access or delivery of this product experience? This has changed.
When we started the company, I know it sounds strange, but things like the cloud were very nascent technologies. Obviously businesses have been online for a while but the way e-commerce worked and the way in particular the willingness of people to buy products online was far from what it is today. We were trying to be an online business, we were trying to create a more digital experience. In some ways, we had a product experience that was ahead of what the market was ready for. That has definitely changed.
In the fintech space, in the first five years or so of our business, there was almost this unbundling from a bank. So different fintechs have focused on very specific product categories within a bank, and you could take 100 of them, and that’s how you build the bank. Well, what’s happening right now is actually a product experience aggregation, because the customer says, “Sure, I can get loans from Prospa, but do I really want to get a credit card from someone else, and a bank account here, and maybe a payment platform there?” They want to have it all in one.
So there’s almost this product convergence happening right now. And that’s certainly something we’re trying to lead at Prospa. Since we won Smart50, a number of things have happened, actually. In terms of the customer experience, the way customers buy and search for our products and the categories we’re in, that’s definitely evolved. We have been able to increase our income by 10 times since we also won Smart50. Back then we were making about $20 million in revenue, now we’re north of $200 million a year. This shows the breadth and depth of the problem we are tackling. The fact that we can get this far in a very short time, again, just illustrates the demand and the fact that there are these companies, millions of them, that are underserved by the traditional system.
From a broader product point of view, we have definitely started our business in this world of “access to capital”, but we have now extended and broadened our offer. We’re now into product categories like B2B payments and how businesses make payments. We review transactional accounts and help businesses with things like receiving money as well as making payments. We also look at things like expense management and invoicing, and how we can really help a business owner with almost day-to-day management within their business. So a lot has changed in how a business owner researches the products that we choose to play with, but the basic need, which hasn’t changed at all in 10 years, and I don’t think that will change, certainly not in the near future.
What is the outlook for small businesses over the next two years?
Certainly, from an economic point of view, we see all the same economic data as everyone else in the market. It definitely looks like it’s going to be a bit more turbulent over the next 6-12 months. But I have to say, small business owners have just been through COVID-19. And, you couldn’t create a tougher set of circumstances for small business owners, with continued lockdowns, restrictions, altered ability to operate, and supply chain issues. Everyone talks about inflation now but if you were a business owner 12 months ago you still had supply chain issues it wasn’t going away labor issues they were very real a year ago. So one thing that I think the pandemic has taught us is that small business owners are incredibly resilient and also adapt in the short term. They can make changes to their business and operations. We therefore look to the future with great optimism.
We are certainly aware of some of the economic challenges that have arisen. The RBA is raising rates, and that’s trickling down to the economy, inflation is too high, everyone wants to see that come down. The labor market is very tight, and we need to find ways to broaden the base of employable Australians. So there are a lot of challenges, of course, but I think business owners are in good shape and are going to fight for the next 12 months and do very well.
Do you want to join Prospa and a network of Smart50 alumni, get the recognition your business needs and compare yourself to other successful SMEs? It’s not too late to take part in the Smart50 Awards 2022.