Kamil Kurmakayev: How Scramble Innovates Consumer Brands Financing
In this interview, we hear from Kamil Kurmakayev, the founder and CEO of Scramble, about the innovative ways Scramble is transforming investment opportunities in Europe. Scramble provides a unique platform for investors to fund consumer goods brands, spreading risk across various industries. Join us as we delve into Kamil’s inspiration, the selection process of investments, the team behind Scramble, and the company’s goals for the future. Discover how Scramble is making investment accessible and rewarding for everyone.
Can you briefly describe Scramble and what your investment platform offers?
Scramble enables Europeans to invest in loans to consumer goods brands. Every month we validate and present to our investors a group (we call this group our “monthly batch”) of promising consumer brands, each seeking extra funding for inventory. These brands represent a variety of industries, including Food, Beverages, Beauty, Baby Products, etc.
As an investor, you do not need to select individual brands, but rather invest into the batch as a whole, spreading your risk across multiple businesses. The loans are for six months, with repayments starting from the first month. All in all, investing with Scramble takes literally a few minutes per month, and over 30% of our customers have never invested in their life before they joined Scramble.
What inspired you to start this company?
I’ve been an entrepreneur since 2008, so Scramble is my third business. As a founder, I have raised over $100M in funding from venture capital investors and know first-hand how difficult it is to obtain capital to grow your business. This is a particularly acute problem for companies outside of the latest technology bubble such as Artificial Intelligence. Very few people want to fund your business if you’re not a “hot technology startup”, but simply produce innovative toys or healthy snacks!
My experience as an investor was also frustrating. Over the course of my career, I’ve always preferred to focus on building things and didn’t actively invest in the stock market or other startups. What I always wanted to have was something like a “traditional, small town community bank”, where I would be able to put part of my savings into the businesses from which I purchased my daily shopping for a reasonable return. A local bakery, a local diary shop, a local restaurant and so on.
Unfortunately, modern banks in big cities do not allow that – not only they pay near-zero interest, they also put my money into all sorts of shady loans to large corporations, to businesses destroying the environment and so on. Scramble enable me and thousands of our customers to invest into promising consumer businesses while making fair return on our personal savings.
How do you find potential investments?
Most banks and traditional lenders rely on online marketing in getting their borrowers. They aggressively advertise online, spending millions of EUR, and generate what they call “customer leads”, i.e. requests from businesses that want to get a loan. After that, banks use algorithms to review each request and typically reject up to 80% of them. It’s a vastly inefficient approach – very expensive, highly frustrating for borrowers, and leading to massive fraud.
Our approach at Scramble is the reverse. We never advertise for the borrowers and we do not screen any requests. Before reaching out to a potential borrower, we screen large pool of publicly available data, such as founder’s profiles on social networks, brand’s website and social media accounts, brand’s presence with prominent retailers, and so on. Only when we see clear signals that a brand has promising profile, we initiate the conversation with them. Once Scramble establishes the relationship with a brand, we typically keep funding the brand as it grows and as we obtain more and more actual performance data. As a result, we do not require hundreds or thousands of new borrowers each month!
Who is on your team and how do you complement each other?
We’re a small team of about 15 persons, with our core based in Estonia. As a founder, my primary focus in our product development (this includes not just the website, but also the financial terms that we offer brands and investors), raising funds from venture capital investors, and managing the company. Our COO and Head of Brands Operations Irina is in charge of our brands portfolio. She is managing our search team, helps brands onboard the platform, populates a new batch every month.
Our Head of Marketing Ruslan manages all of the aspects related to investors, starting from the customer care (we’re very proud of our in-person, zero robots customer care), onboarding process, and a variety of acquisition channels. Our Head of Compliance and Risk Maria is ensuring that we comply with various regulations (AML/CFT, GDPR, and others), as well as supervises the company risk management framework. Our Head of Product Natalia is managing the product and engineering team.
As a company, we’re fortunate to be backed by very knowledgeable and successful venture capital investors, which include founder of Wise, former Chairman of Skype, former CTO of Pipedrive and others.
How are you regulated and what does that mean to your investors?
Scramble operates across two different jurisdictions: our investors come from across the EU, while majority of the brands that we fund are based in the UK. Our current model is the so-called “loan claims assignment model”, which has been used by multiple financial platforms in Europe since early 2010s. This model is not regulated in Estonia and does not require a European Crowdfunding Service Provider license, and Scramble currently does not operate under any license in Estonia.
While Scramble does not operate under any license and investments made via Scramble platform are not protected the way your savings in a bank account are protected, there are certain investor funds protections in place. First, investor funds are kept separately from Scramble own operational funds, in a dedicated customer funds account at our banking services provider LHV bank. Second, Scramble implemented AML/CFT protections at the same level as would be expected from a regulated company, including KYC procedures enabled by prominent third-party provider Veriff. Third, Scramble maintains own safety funds (provided by our prominent venture capital investors) that we use in case of late loan repayments by defaulted brands, so that investors are not affected while Scramble goes through the recovery and collection efforts. We can’t guarantee that these safety funds would be sufficient to cover any possible defaults in the future, but based on our operations since early 2022, Scramble has been able to compensate investors for each defaulted brand.
What are the potential earnings for an investor on Scramble?
Scramble provides two simple options to invest – in loans A (senior, more protected loans) and in loans B (subordinated, riskier loans). Loans A are partially repaid each month, which allows you to either invest your money again or take out of the platform.
Loans A generate 0.75% or 1% income per month on outstanding balance depending on if you’re a regular investor or not. For instance, if you keep €100 invested in Loans A in a particular month and you’re a regular investor, you will earn €1 in that month. Loans B generate 9% income for 6 months. Loans B are repaid in full at the end of 6 months. If you invest €100 in Loans B in a particular month, you will get back €109 after 6 months.
Have there been any changes to the types of investments or do you plan on offering other types in the future?
We are very satisfied with the customer response we have for the Loans A and Loans B in a monthly batch of consumer brands. We do not plan to introduce other loan types (real-estate loans, consumer loans or else). So far, each Scramble batch was fully funded by our investors, meaning there’s more investors’ demand than we can satisfy. Our main focus in on increasing monthly batch size while maintaining the quality of the borrowers.
What are the key milestones or goals you aim to achieve in this year?
Until now Scramble has relied on the financial support of our shareholders (venture capital investors). While we appreciate that support from our investors, we obviously want Scramble to become a fully self-sustainable business, so that we can invest more and more in the platform development, increasing batch sizes and so on.
With the increased volume of the loans made through platform, we expect Scramble to become profitable in early 2025. This is a major milestone for us and based on our progress in early 2024, we’re very optimistic about reaching it.