Errol Damelin, founder and chief executive of short-term online lender Wonga, is the popular choice for Europe’s Entrepreneur of the Year. He won the top prize from the European Tech Tour Association at a recent gala awards ceremony in London and was named e-commerce and technology entrepreneur of 2011 by Ernst & Young.
Damelin is being lauded for the phenomenal growth of a company that until now has limited itself to one product and one geography. That is about to change as the U.K. start-up prepares to expand into new countries and develop new products. “The scale of the opportunity is huge,” says Damelin. “ We have the opportunity to build something from Europe that is genuinely world class in a big space.”
Wonga has revolutionized the UK’s huge consumer credit market by developing technology that assesses people’s credit worthiness and approves or denies loans within 15 minutes. “To be successful you have to understand a need,” says Damelin, “ and people need short term cash frequently at quick notice, in a frictionless way.”
In just four years Wonga has approved over 2.5 million loans, handling more a month than all of the financial institutions in the UK combined. It recorded 2010 revenues of £73 million, up from £17 million from the previous year. But Damelin – and Wonga’s investors – insist the best is yet to come.
“Wonga has only scratched the surface of the opportunity with its UK business,” says Sonali de Ryker, a partner at investor Accel Partners. “At its core, Wonga is a ground breaking consumer credit platform–its proprietary risk algorithms allow it to give instant access to credit to consumers whenever and wherever they need it. And like our other category leading businesses, the network effects are very powerful: the bigger it gets, the more data it collects and the smarter it becomes.”
Prior to founding Wonga, Damelin co-founded two other businesses, on different continents and in completely different markets. Most recently he was founder and chief executive of Supply Chain Connect, a provider of hosted supply chain collaboration solutions. The company, which attracted some 250 blue chip customers, was acquired by ChemConnect in 2005.
After the sale of Supply Chain Connect Damelin says he wanted to “build something bigger and more impactful.” As the global economy worsens demand for services like Wonga’s is likely to continue to grow. A key differentiator is its technology, which claims that it can determine–with a very high success rate–which customers are most likely to repay loans. However, such services remain controversial since they require consumers to pay very high interest rates.
Damelin stresses that Wonga offers a better deal than the banks and is more ethical because its fees are more transparent. “We use our sophisticated credit decision technology to ensure we only help appropriate people and give customers unique control,” he says.
Given the success of Wonga in the UK, it is natural to expand into other countries, says Damelin. “Having grown up in South Africa and Israel I am preprogrammed to think internationally,” he says.
Wonga plans to move into “a couple of new markets” in 2012, he says. Damelin won’t say where Wonga will move next but industry speculation–fueled by information on job boards–is that Wonga is targeting Canada and South Africa.
To that end, the company has been building up its war chest. In February of this year it raised a £73 million round of funding led by venture firm Oak Investment Partners. Other investors in the round included Meritech Capital Partners, Wellcome Trust, the UK’s largest charity and health-funding organization and existing backers Accel Partners, Balderton Capital, Dawn Capital, Greylock Partners and TAG.
Short-term lending businesses have to be adapted to each country so the roll-out will be more akin to that of Amazon’s than the viral global take-up of a Facebook, says Damelin. But he says he is ready to do what it takes to build out the business globally over the next ten years.
Damelin is currently taking a short break: he was scheduled to spend the first week of December running in the Antarctic Ice Marathon, which will take place at 80 Degrees South, just a few hundred miles from the South Pole. The goal is to raise money for charity: water, a non-profit organization.
His investors expect him to hit the ground running when he returns to London.
“Wonga has an enormous potential abroad,” says Bernard Liautaud, a Wonga board member and a partner at investor Balderton Capital. “The core user need it resolves is applicable globally. But most importantly, I believe Errol has the smarts, the openness, to other ways of doing business, and the formidable drive that is required to make Wonga an international success.”