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Fintech online market lending place RainFin, has announced the buyback of shares from their majority shareholder, Barclays Africa Group (Absa). The banking institution held a 49% share in RainFin.
Ventureburn had a chance to sit down with RainFin CEO Sean Emery to talk about the reasons behind the buyback as well as the startup’s future post-buyback.
In February of this year, Emery spoke to us about the inclusion of its products into Absa’s offering. This came about through the 49% equity purchase Absa had with RainFin.
The buyback and independence
In March this year, Barclays Group announced its intention to sell its 62.3% stake in Barclays Africa Group. The announcement caused worry in the financial market and to the bank’s invested entities, such as RainFin.
“My personal view is when an organisation is going through that much technological change in the next two years, I think dealing with… both technology-wise and business model-wise, dealing with a small startup, we were definitely last on their priority list.”
“You need to have deep strategic focus on that business’s business model and its technology and its services. In that context, if you no longer see or immediately have that deep strategic alignment in that and the focus is elsewhere, then why hold onto the shareholding?”
Since the initial purchase in RainFin, much had changed within Barclays Africa Group. “The people that were involved in RainFin, the physical people within the bank, are no longer there… If you don’t have someone in the exco that thinks it’s a strategic priority, then perhaps it isn’t.”
Emery says the founding shareholders made an offer to purchase the shares from Barclays, which the bank accepted. For months, the offer wasn’t contemplated, but later came to fruition within the last 30 days.
When Ventureburn asked about the amount RainFin paid for the shares, Emery said the amount was confidential due to the nature of their business and contracts in place. He did state that it was “significantly painful” and that it was more than was invested into them. To date, the original investment amount has not been publicly disclosed.
Moving on from big bank investment
According to Emery, since the investment, RainFin was in a better place with regards to its growth and finances. “The business is now in a better shape than it was before we did the transaction with Barclays in terms of our capitalisations and our balance sheet and in terms of our debt.”
Breaking away from Barclays will allow the startup to spread its wings in terms of catering to other clients. “I believe we have the ability now to collaborate with many financial institutions, who often felt, in my mind, that when I went into the doors that the fact that Absa had a shareholding in us often turned other financial companies away from working with us. It limited the amount of new business I could grow because I had a big shareholder that some companies didn’t like working with.”
Splitting from a major shareholder does have its drawbacks. RainFin has shrunk the size of their team in order to streamline the business. “We have got to try bootstrap ourselves out of this period, back into independence… and then restructure ourselves again.”
This doesn’t mean that Barclays won’t be replaced by other investors. Emery says it’s necessary for the company to have strategic business partners. “We are at the moment in discussions with quite a few new parties to become involved… It’s unlikely to be another bank.” Instead, RainFin wants more partners with less share as opposed to one entity with majority share.
When asked about future products, Emery told Ventureburn to expect to see loans ranging from R5-million to R15-million. This split will allow it to expand even further and concentrate on their own needs.
“Instead of building bespoke things for one partner, we can focus on the platform and rolling it out as it exists.”