Step back to a time when there were no Fintechs or Fintech founders. The year is 1998. The place is Scotch College in Perth. And two year seven students, David Brennan and David Weir, are about to meet for the first time and form an enduring friendship. Fast-forward to today, and these two school friends have done what few people ever achieve. In just five years, they’ve created a unique Australian Fintech; and a whole new model for funding innovation that’s being replicated across the world. In the process, they’ve scaled a business that began as a side project into a successful operation. This month, Radium Capital marks the fifth anniversary of its first loan. So we sat down with Radium’s two Davids to find out how they made their business the success it is today, and what advice they have for other founders scaling up.
Working on a friendship
Although their alliance dates back more than two decades, it wasn’t until 2015 that the duo’s personal relationship became a business one. David Brennan had co-founded a successful consumer lending Fintech startup called Enably with his father Tony Brennan, in 2014. Then the following year, their backers approached them about branching out into business lending, and they launched Kikka Capital (now the ASX-listed Fintech company Propell). David Weir was forging a successful career in Perth’s burgeoning mining services sector. But after seeing what David and Tony Brennan had created, he wanted to join the emerging field of Fintech.
Radium Capital Co-founder David Brennan says, “When Dave said he wanted to join us, we immediately said yes because we knew his dedication and natural enthusiasm would only add to Kikka’s success.”
A Gap in the market
David Weir had been with Kikka Capital for almost two years when, together with Tony and David Brennan, he started to explore the opportunity they’d identified in R&D lending.
Radium Capital Co-founder and Chief Executive Officer, David Weir says, “We identified that start-ups and SMEs were underserved by debt markets and traditional lenders.”
The friends and co-founders brought a fresh perspective on issues facing entrepreneurs and small businesses and fresh ideas on how to solve these challenges. They firmly believed that entrepreneurs shouldn’t have to give away their businesses by trading equity for capital and diluting their ownership before their companies take off. Businesses of all sizes deserve help to grow, but that shouldn’t mean they have to risk everything for finance. R&D financing already existed but it was expensive, uncertain and difficult to access for many companies doing R&D. The Radium Capital co-founders wanted to change that. So they created the neat concept of making R&D loans more efficient and readily available to any eligible business regardless of their size or loan requirements.
“When we realised that we couldn’t modify the Kikka platform for R&D loans, Dave put his hand up to look at how we could build a fit-for-purpose platform for R&D financing,” David Brennan explains.
Creating an R&D product and lending platform started as a side project. But once the co-founders were sure the Radium Capital business opportunity had legs, David Weir was the obvious choice to lead the company as Chief Executive Officer.
“We had no idea back then that Radium Capital would go on to be the success it is today,” David Brennan says.
“Once we realised we had found this underserved market with large loan sizes, and we had built a unique fintech platform to serve it, we knew Radium Capital had tremendous capacity to scale,” David Weir says.
Then and now
In the five years since launching, Radium Capital has funded more than 1000 R&D loans varying from a few thousand dollars to $20 million in size. While Radium Capital’s platform enables loan approvals within two business days and clients to receive funding within three days of signing their loan agreement, the company’s first loan took much longer. And it had nothing to do with technology.
“We had built a seamless fintech platform, but we still had to build trust with clients and convince them to try a new product from a new business,” David Weir explains.
Radium’s first R&D loan was $40,000 for a media business called Formulr, and it was funded by David Brennan’s father Tony.
“It took months of meetings and discussions before Formulr took a chance on a new product with a new Fintech,” David Weir says.
With the first loan written, Radium piqued the interest of investors, including the New York-based hedge fund Brevet Capital. Brevet supplied Radium with a ring-fenced pool of capital that allowed them to grow their loan book and business.
Today, Fintechs and their financing solutions such as Prospa and Radium Capital are mainstream. And increasing numbers of businesses include their products routinely as part of their capital mix. But that wasn’t the case five years ago. At that time, fintechs existed on the fringes and were labelled as alternative finance. After launching in 2017, Radium Capital took around six months to deploy its first $10 million in R&D funding. Now, the business more than averages that amount every month. And with its loan book hitting the quarter-billion mark in September 2021, Radium has more funding milestones on the horizon as it continues to scale exponentially.
Indeed, Radium Capital has been so successful that its backers, Brevet Capital, bought the business outright in 2019. Brevet has since replicated the Radium Capital business model in Canada and has other overseas markets in its sights.
Disrupting R&D lending
Both co-founders agree that Radium Capital has disrupted and reinvigorated the R&D financing market in general and created two seismic changes to innovation funding.
“The first is that we’re the only lender to offer a truly mass-market product. Any business, big or small, can borrow from us, whether it’s a four-figure or an eight-figure R&D advance. We don’t dictate a minimum or maximum loan amount. It’s client-driven,” David Weir says.
And the second area where Radium Capital has broken new ground is loan frequency. Using its platform solution, Radium pioneered a truly flexible and scalable model for how clients could use Radium Advances and made it possible for businesses to access R&D financing whenever they need it.
“Before Radium Capital, innovators were using R&D loans once a year as one-off bridging capital. We’ve shown that R&D financing can be much more than that, and how regular Radium Advances make sense because they make your R&D dollars go further,” David Brennan explains.
Although its co-founders never doubted the concept and technology behind Radium Capital, they faced significant challenges to make the company the success it is today.
“We faced an uphill battle because we were a brand new business with a brand new product, using brand new technology,” David Brennan explains.
“We had to connect with clients, educate them about Radium Advances and build trust all at the same time.”
Faced with the daunting challenge of unlocking the huge market potential of Radium Advances, the co-founders devised a strategy to reach out to accountants. Initially, Radium designed the portal for accountants to apply for and upload loan documents on behalf of their clients.
“By working closely with accountants, we realised that’s not what they or their clients wanted,” David Weir says.
The co-founders and their team went back to the drawing board. They kept the product and platform concept the same but redesigned it so clients could log on and easily apply for a Radium Advance themselves.
“It was a win-win because our clients gained more control, and we improved our business model,” David Weir says.
The trust issue and novelty of the Radium Advance product was the co-founders biggest challenge. It took grit, dedication, hours of travel and countless meetings with accountancy firms to overcome market hesitancy.
“Partners, Directors, phenomenally busy people at accountancy firms gave up their time to meet with us about Radium Advances, and we’re incredibly grateful and appreciative,” David Weir says.
The feedback from accountants helped shape Radium Capital’s offering. “Companies trust their accountant, so having an accountant’s blessing and receiving referrals from them made all the difference to Radium in the early years,” David Brennan says.
“Once accountants started getting referrals and requests for Radium Advances from clients, it was the real game-changer for us.”
Then, less than two years into their growth journey, a $20 million Radium Advance for a major resources client firmly established Radium Capital as a lender that businesses with R&D could count on.
From Radium’s early years to the present day, referrals from accounting firms, industry partners and other Radium clients have continued to be a mainstay for both Radium and its clients.
The secret of success
Real success involves staying-power. So how have the cofounders managed to sustain the momentum of their early success and maintain a strong friendship and working relationship?
David Weir points to having a shared vision, good communication and having buy-in to their plan from their team as essential.
And as he looks back on Radium’s growth journey, the investment the business made in marketing was pivotal.
“Rebranding, investing in our messaging and how we marketed ourselves took us from being a good business to being a great one,” David Weir says.
But whether it’s their friendship, business relationship, their interactions with their team, or external R&D advisors and accountants, the duo are in agreement. Trust is the key to their success and underpins everything they and Radium Capital do.
“We approach our business with ultimate professionalism and the entire team that sits behind the business is exceptional. Our people make us the high-performing business that we are,” David Weir says.
“We set out to have Radium Capital build strong relationships with clients and replicate the trust our clients have with their accountants, and we’ve achieved that,” David Brennan says.
Both co-founders also wholeheartedly acknowledge their co-founder Tony Brennan as integral to Radium Capital’s success.
“From providing the funds so we could build the platform and write our first loan to putting in the hard yards to raise equity and devising the ownership structure, Tony was front and centre for us,” David Brennan says.
“Tony connected me to his network in the accounting world which in turn helped us shape the Radium business into the success it is today. His advice and guidance have been invaluable,” David Weir adds.
And for David Weir, Radium Capital’s success story wouldn’t be complete without mentioning his mentor Mitch Taylor.
“Mitch pioneered R&D financing in Australia. He was and continues to be an inspiration to me personally. His groundbreaking achievements in R&D finance paved the way for us to create Radium Capital,” David Weir says.
Five years on from the first loan, Radium Capital plans to continue its laser-like focus on client outcomes and to build on the company’s success with its Radium Advance solution.
“There’s still huge potential in the R&D financing space and despite our success, we’ve only scratched the surface,” David Weir explains.
But the business is also considering lending opportunities outside of R&D financing.
“We’re looking at diversifying our products in a way that will give our clients huge benefit,” David Brennan says.
And according to both co-founders, the future of Australian innovation has never been brighter.
“Australia used to be behind the eight-ball on innovation but now homegrown businesses are leading it,” David Brennan says.
“Now we’re seeing a genuine belief among Australian innovators that they can be pioneers in Australia then take what they’ve created and replicate it overseas.”
David Weir agrees.
“From grassroots start-ups to high-growth scale-ups, we’re seeing exciting innovation particularly in the alternative energy, biotech and mining sectors,” David Weir says.
The pair are pleased Australia has started to attract more investor capital over the past two years. But they know an R&D capital shortfall remains from many of the nation’s early-stage businesses. And Radium Capital will be there to fill that funding gap because all businesses deserve help to grow.