FinTech Interview Series: Eamonn McMahon of EquipmentConnect
Eamonn is the cofounder and managing director of EquipmentConnect, a new direct lending platform focused on asset finance. The service is offering SMEs in the UK a fast, flexible and affordable means of acquiring the equipment and machinery that is core to their business through finance leasing, hire purchase and secured lending.
Tell us about yourself
I started working in London back in 2006 after a completing a degree in Economics and Finance. Long days as an investment banking analyst were followed by over five years as a salesperson focused on asset-backed finance investors.
What inspired you to start EquipmentConnect?
With my background in asset-backed finance I was exposed to many segments of secured credit including equipment finance. I was surprised by how slow equipment finance was extended (averaging over three days) and also by the level of margin generated by banks and leasing companies. Having followed FinTech for a number years I was aware of the impact that technology could have on improving outcomes for both borrowers and funders. Pushing all of this was the fact my former clients, mostly credit funds, have been eagerly exploring new avenues allowing them to finance SMEs directly. With my cofounder, Enzo, we are determined that equipment finance should be fairly priced and delivered with ease.
Which of your achievements are you most proud of?
It's still early days, just three months since our seed funding closed, but we are delighted to have secured final sign off on a £65k grant from Innovate UK to improve data integrity in equipment finance. This is a collaborative project to apply blockchain and smart contract technology so as to decentralise and strengthen the sharing of equipment ownership and financial information.
While we are some way off launching the platform commercially, we are already rolling out features. As a business, we firmly believe in the importance of education and stakeholder engagement. Just yesterday we launched a pilot feature which helps SMEs decide how best to acquire large ticket equipment.
Finally, I would say we are quietly satisfied with our credit model that is almost finalised. We have forged relationships with some of the best providers of data and this will help us secure equipment finance at a fair rate for every creditworthy SME using EquipmentConnect. We have forged relationships with some of the most insightful providers of credit data and this will help us with our aim of securing equipment finance at a fair rate for every creditworthy SME using EquipmentConnect. Ultimately though it is our approach to gauging asset risk by using data to predict depreciation, recovery and logistics costs that ensures our platform will best facilitate credit to the right SMEs without seeking personal guarantees or external security, what we consider 'get out of jail' blunt instruments.
Do you think being based out of Makerversity keeps you closer to the real world?
Makerversity is a hub for startups in the engineering and product design segments and provides a valuable community setting for young companies advancing UK manufacturing and design. It is very real... saw dust and circuit board real. On a daily basis, it's great to be surrounded by practical, no-nonsense, determined engineers who are pushing forward with innovation. One type of equipment that EquipmentConnect will finance are 3D printing machines and here at Makerversity there are over a dozen machines buzzing away. Of course, it's great to hear the perspective of member companies on when equipment finance isn't working for them.
You are focussed on the UK right now - do you think that your model will transfer internationally?
For the foreseeable future, the UK is more than sufficiently large to disrupt. We estimate the more than £25bln a year of equipment is financed in the UK by SME companies. Will the model transfer overseas? There are some exceptions such as Italy where the government subsidise equipment finance but yes, absolutely. Some markets are more competitive than others while others can be less commoditised and more relationship driven. Fundamentally we will apply our technology and data to local customs and as long as we are adding efficiency we expect success.
Do you think the regulatory environment has been a constraining factor for your growth?
While it would be tempting to scape-goat regulation it would also be disingenuous. In our view, the FCA have by and large provided well balanced protection. Signals on future regulation tend to be well marked and the industry as a whole has benefited from the fact competition being prioritised. Of course, compliance is time consuming, and sometimes unnervingly expensive, but we surely agree that the direction is right.
Is the London-based FinTech machine losing steam?
Just last weekend I read an article that investment in the sector is picking up after a Brexit slump. While Brexit forced pause for thought, there was also a much-needed rethink and rationalisation drive. A lot of early stage FinTech has been conceptually interesting but too advanced for its intended commercial host. AI is probably the area that had suffered most from intellectual sprinting.
More generally I sense there has been a shift from the silicon valley approach of pumping cash towards highly qualified people with promising ideas to more sensible drip-feeding of investment to fix every day hurdles in our financial life. Most high growth startups I speak to now tell me that focus is on cash flow generation within the first three years and profitability within 3-5 years. It was great to see the government accept the importance of EIS in the last budget by increasing the cap from £1mn to £2mn for knowledge intensive companies.
Favourite Fintech companies:
1. Big fan of what ConSensys are doing in the blockchain space. Good guys, collaborative in nature and 'in tune' with real-life commercial obstacles.
2. Both Enzo and myself are using Starling Bank as our main account and are impressed by how seamless the experience is. Critically there is always first class human support available on chat something we have
3. Lendinvest. Christian and Ian are true entrepreneurial vanguards in direct lending having transformed Montello, a more traditional financing vehicle into the digital juggernaut LendInvest is today. Moreover they have raised standards in what, lets face it, is a very competitive/somewhat commoditised industry.
For both Enzo and myself the best of fintech emerges when technologists combine their skills with experience from different segments of finance and a apply a 'customer problem' first approach.