Bag raises $3M for its Loan Discovery platform to tie in with financing options for women and minority entrepreneurs

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Despite years of efforts to improve diversity in venture capital and startups, 2.6% of venture capital dollars went to minorities; 2.2% went to women in 2021. Now with economic constraints on all trade and investment activities, dollars are even more scarce. Despite this, 40% of new businesses are set up by women. They need financing solutions and Bag is a small business loan search platform to connect with women and underrepresented founders to lending opportunities at the most competitive rates. The platform has focused on streamlining the application process as well as providing education on various options so that businesses can truly understand the process from inception to closing and servicing. The company will facilitate loans ranging from $5K to $5M with flexible terms. Since its inception last year, BAG has facilitated $5M+ in loans through community lenders at no cost to borrowers.

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AlleyWatch caught up with Daniel Taylor, CEO and cofounder of Bags, to learn more about the business, the company’s strategic plans, the latest round of funding that raises total funding to $4M, and more…

Who were your investors and how much did you raise?

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We raised an oversubscribed $3M seed round led by Slauson & Company and with participation from Connecticut Innovation and the Schultz Family Foundation’s Entrepreneur Equity Fund. Following on from previous investments by Altrinsic Global Advisors and angel investors Tim Armstrong, Owen Van Natta, Edith Cooper and Andre Swanston.

Tell us about the product or service that Bags offers.

Bag is a debt search and management platform, built by and for Culture. We connect diversified and women-owned businesses with similar lenders at the lowest interest rates in the market, saving small business owners the time and money they can build. Our partners are impact-driven lenders who leverage our platform to increase loan origination and approval rates for underrepresented entrepreneurs, while unlocking economic potential in diverse communities.

What inspired the introduction of the bag?

BAGS is inspired by the vibrant experiences of our founding team and the knowledge that millions of businesses owned by women and minority entrepreneurs still lack access to the capital critical to business sustainability and growth. While there are existing sources of capital for these entrepreneurs, many of them are unfamiliar with the lenders in the CDFI category, and traditional search engines do not consider business metrics that are important for loan discovery.

How is the bag different?

While loan origination is not a new idea, we maintain our focus on diversified and women-owned businesses, our commitment to integrated products for debt management and data infrastructure, and our ability to help people with multiple loans. Let’s plan on a long-term financing journey. cycle.

What market does the bag target and how big is it?

There are 9.2M minority-owned small businesses and 11.7M women-owned small businesses in the US, and these segments are growing rapidly. Yet 99% of businesses will never raise venture capital, and according to the Minority Business Development Agency, minority-owned businesses are less likely to be approved.

Our mission is to help diverse entrepreneurs get the working capital they need, understand the implications of debt financing, and manage their repayment process, all in one platform and with lenders who have the capacity to support those communities. They have vested interests that they serve.

What is your business model?

When referred entrepreneurs take out loans, our lending partners pay an origination fee, and those fees do not come out of the capital that the entrepreneur receives. Additionally, we provide debt management software and lending infrastructure solutions in SaaS model to entrepreneurs and lenders respectively.

How are you preparing for a possible economic downturn?

In the current growing rate environment, diversified and women-owned businesses need access to proper funding which is difficult to find through existing channels and not available from traditional institutions. An economic downturn does not mean that entrepreneurship stops, and we see a change in the macro environment as an opportunity to provide better opportunities for entrepreneurial success in an economic reality that makes our solutions more important than ever. .

How was the funding process?

We reached out to over 200 investors and booked 80 calls, starting through our first commitment, and finally through the round close, before starting the mobilization process. The value of the pre-built network was extremely important in the later stages of fundraising.

What were the biggest challenges you faced while raising capital?

The macro-environment led to a bias against lending-related startups, and we in particular ran into a lack of alignment with our mission to support underrepresented entrepreneurs and a lack of understanding of the problem we are solving. Which is very clear to small businesses and community lenders but less clear to many institutional investors.

What factors about your business inspired your investors to write checks?

Ultimately, we chose to work with investors who have a similar commitment to solving a problem that has inhibited community development and wealth creation for historically marginalized groups of entrepreneurs. Our pragmatic approach to business development, focused on revenue generation first, helped convince investors that we had the right team and approach. It also helps that we have a wonderfully smart group of people on the team.

Ultimately, we chose to work with investors who have a similar commitment to solving a problem that has inhibited community development and wealth creation for historically marginalized groups of entrepreneurs. Our pragmatic approach to business development, focused on revenue generation first, helped convince investors that we had the right team and approach. It also helps that we have a wonderfully smart group of people on the team.

What are the milestones you plan to achieve in the next six months?

1000 small businesses funded and $1M in revenue.

What advice can you give to companies in New York that don’t have a fresh injection of capital in the bank?

Use the bag to find the best sources of nonrefundable funding to get you work.

Where do you see the company going in the near term?

We are using this injection of capital to develop critical tools for debt discovery and management to ensure that businesses led by women and minorities have a clear path to sustainable growth.

Which is your favorite restaurant in the city?

All you can eat on Monday is Miss Lily’s 7a for Ribs and Jerks.

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