One of Wonga’s greatest achievements is that it scarcely needs an introduction. In four years, the online money lender has invested heavily to try to build a reputation in a market whose ethical credentials are often regarded with suspicion.
Errol Damelin, chief executive, started Wonga in 2006 when he realised short-term credit was one of the few consumer industries the internet had hardly touched. With models such as Amazon and Facebook in mind, he and technical director Jonty Hurwitz set out to create a website that would challenge competitors by offering instant decisions and total transparency over what borrowers would end up paying.
New customers can borrow up to £400 and nobody can get more than £1,000. The maximum loan period is 30 days, and Wonga can deposit money into a customer’s account within 15 minutes.
Damelin, who built and sold two tech companies before founding Wonga, says all the technology was developed in-house. “Nothing like it existed in the market. People thought it wasn’t possible to deliver loans this seamlessly,” he says.
Not everyone has appreciated the achievement. Wonga has attracted a great deal of bad press over its high APR (annual percentage rate), which can exceed 4,000%, with £127 to repay on a three-week loan of £100. Damelin vigorously argues that the APR figure is meaningless given that loans have to be repaid within a month, and adds that the website could not be more upfront about its fees and charges.
Meanwhile, the company has hit back at accusations of “loan sharking” with a storm of publicity, including its sponsorship of Blackpool FC, quirky television and radio advertising, and charm offensives such as distributing vouchers for strawberries and cream at Wimbledon. Wonga still has detractors, but the tone of press coverage has softened, suggesting the PR effort may be working.
The company has attracted more than £100m from backers such as Balderton Capital, Accel Partners, the Wellcome Trust, and early-stage investor TAG. Most recently, it raised £73m in March in a funding round led by Oak Investment Partners. But Damelin says Wonga’s fundraising days may be behind it, with the company well able to support further growth from cashflow.
It is able to draw on the expertise of its investors. Robin Klein, who owns TAG, is Wonga’s chairman. He has backed a number of success stories, including Lastminute.com, Lovefilm.com and Last.fm.
Based on the edge of London’s Regent’s Park, Wonga serves only the UK but there are plans to expand into other markets. In Damelin’s view, there is plenty of opportunity to grow domestically too, targeting professionals whose income is around the national average and who sometimes need a few hundred pounds to tide them over.
Sales, which consist of interest and fees, soared 361% a year, from £752,000 in 2007 (annualised from three months’ revenue) to £73.8m in 2010. Damelin is highly ambitious and says the growth curve is, if anything, becoming steeper.
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