On the day of our interview, Lex Greensill has spent all morning and much of the previous weekend answering questions from the financial media about the day’s big news; that Japanese tech colossus Softbank is investing $800m in his eponymous company through its Vision Fund. The fund believes, says its promotional copy, that ‘a founder’s ambition determines a company’s potential’ – no surprise, then, that it set its sights on Greensill. If there’s one thing Lex can’t be accused of, it’s lacking ambition.
Since he left Citi to start the business in 2011, Lex has grown Greensill through a combination of personal drive, astute networking and an innovative approach to working capital finance. Along the way he’s attracted both admiration – from those who see a financial pioneer staking a claim to a vast untapped market in receivables and payables finance – and concern, from those who say Greensill’s business model allows companies to profit from extending payment terms to often hard-pressed suppliers.
What isn’t in doubt is that Greensill has done more than most to popularise supply chain finance as an investment opportunity, making capital available to fund growing businesses that might otherwise have been unable to access it. The company is the funder behind some very large supply chain finance programmes but rarely takes the limelight, leaving that to the SCF platform providers – such as Taulia – with which it partners.
It’s a model that has seen Greensill grow to a valuation of $3.5bn, making it by far the biggest player among the wave of SCF startups. Yet it has reached this milestone at a time when some are questioning whether we may have reached ‘peak SCF’, with too many players chasing too few opportunities. Lex disagrees – the market, he says, is on the verge of a fundamental change.
‘I foresee considerable changes coming, in no small part driven by the fact that I expect the rating agencies to change the way that they think about supplier credit from the perspective of actual indebtedness of companies,” he says. “What that’s going to mean is that the SCF that you know and understand today is going to look very different in two to five years’ time; and in future, we’re moving away from something that looks like buyer-confirmed SCF toward something that is data-confirmed SCF. That’s the move that people are underestimating at the moment, and that’s where we are investing.’
So that’s where at least some of Softbank’s $800m will be going – to help build the capability to combine multiple data sources to offer finance. ’We’re already delivering SCF solutions today to clients solely based on data, and I expect that to be the future of our business,’ says Lex. ‘We’re plugging into networks now where we’re capturing data from multiple sources within a supply chain. And as a consequence of that, we’re getting richer data that enables us to predict and deliver credit in a way that is equivalent to, or in some cases superior to, old-style supplier finance.’
Any of Greensill’s technology-driven platform partners reading this might pause to consider what this means for them – is Greensill developing its own technology to service this ‘next wave’ of supply chain finance?
‘That’s a good question,’ admits Lex, before offering some reassurance. “We want to continue to work with and integrate with the leading technology providers in the world. We see that today – and in the future – being our core strategy. So, no, we’re not planning on developing something that competes with the partners that we work with today. Rather, we think that we can do even more with those partners.’
So there’s change coming to supplier finance – but isn’t it true that much of that change is being driven by a mistrust of the ‘dark arts’ of supplier finance on the part of ratings agencies and regulators? Lex is refreshingly open about why working capital has been the ‘cash source of choice’ for increasingly regulated corporations.
‘The megatrend is that, as Basel III has been fully implemented globally, it’s caused firms to finance themselves using the most ‘regulatory light’ assets that they have on their balance sheet, which is their working capital, and to focus on that,’ suggests Lex.
‘ That means the tectonic plates of how capital is delivered to supply chains are consequently shifting and the media, the regulators, the accounting firms are catching up with that trend, trying to understand what this new world means and how we respond to it.’
‘I actually welcome the kind of scrutiny, the conversation around this emerging asset class, because it is the way that the economy is going to be financed to a much greater extent in the future. So, rather than running away from it or being concerned, I think we embrace it and have a grown-up conversation about what it means for our economy – because it is going to be different. I think that’s a good thing.’
Room for growth
For Lex, then, there’s plenty of room for growth in a rapidly-changing market for financing based on receivables as assets. Greensill estimates the total unfunded working capital requirement in the world at $55 trillion – and even allowing for the fact that estimates like these are notoriously unscientific, that’s a huge market to address.
The interesting question is what the 42-year old billionaire, now used to advising prime ministers and flying around the world by private jet, still sees as exciting about the back-office world of supply chain finance?
‘ The great thing about our company is that we ‘re in the business of democratising access to capital,’ he insists, still enthusiastic after days of interviews with journalists in the wake of the Softbank deal. ‘Every day, I hear about businesses where we’ve helped the entrepreneurs achieve their dreams by delivering ultra-low cost capital to them. In the same way, I guess my dreams have been able to come true in growing this business – frankly there is no cooler thing that you can do than to help others grow.’
‘Our market share is less than 10 basis points out of that $55 trillion global working capital market today. So, clearly, I’m convinced there’s room for us to continue to grow and to make a positive impact on more and more businesses and the lives of entrepreneurs the world over.’