Zippy

In the beginning, lending is personal. For Zip, the BNPL Larry founded, the equity raised to get the business started was the initial lending capital. The Zip founders (Larry & Peter Gray) put in their own money. They raised a bit more from angel investors. Looking back, it was expensive capital - not because of the interest, but because it diluted ownership. But it was the only option.

Zip needed cash to write loans as it grew. Without an extensive track record or a big enough lending book, it couldn’t borrow from a bank. So it used equity to fund its first borrowers - enough to prove the model, test its underwriting, and get some early wins on the board.

Then came the second wave: a credit line from friends and family. Not institutional, not heavily negotiated - actually it was Eldium’s other half, Matt who wrote the first cheque.  It wasn't big, but it got a few dominos to fall & some others jumped in too. 

Once Zip had traction - with more retailers adopting BNPL and with that, repeat borrowers, consistent repayments, and good data (aka a loan tape) - Zip attracted its first institutional lender: a forward thinking credit fund out of the USA, Victory Park Capital. They offered a two-year warehouse facility for $100m. Boom!

Zip used it to fund new loans, then repaid the line once those loans were sold or refinanced. The cycle repeated. It was faster, more efficient, and definitely cheaper than equity. It also meant Larry didn't need to run around the eastern suburbs (or fly to Perth) going cap in hand for more lending capital. 

It also came with structure. The credit fund imposed conditions: loan quality thresholds, portfolio reporting, and a haircut - they’d only fund, say, 95% of the value of the eligible loans. Zip had to fund the rest itself or find capital to do so. That remaining slice, often called the first-loss piece, ensured Zip stayed aligned. If loans were no longer eligible (i.e. late on repayments etc) Zip had to buy them out…..if loans defaulted, Zip’s own capital would absorb the first hit.

Eventually, a bank (NAB) stepped in when they got to around $200m in receivables. With Zip’s track record established, the bank was willing to provide senior funding - lower cost, but more conservative terms. 

Larry’s “capital stack” evolved. The bank now sat at the top: low risk, lower return. Earlier debt investors, at their election, sat beneath it: less protections, but more return. And Zip, as always, held the equity / first loss piece - small, but crucial. 

Eventually, as Zip started to write 100’s of millions of BNPL loans and its book grew, it launched a securitisation program. It pooled loans into trusts, had them rated, and sold notes to institutional investors. This unlocked scale - and brought new complexity. But it followed the same logic: layered capital, aligned incentives, and disciplined funding.

Zip’s journey.... from Larry’s initial savings, to equity & debt from friends, to private credit funds, to banks then to securitisation - isn’t unusual. Most great lenders, that build scale, follow a similar path.

Now that Larry’s got the t-shirt from that ride, his job is to help Eldium find the next Zip and make sure they have the support to grow smart & win and allow Eldium to have the best access to quality loans for us to fund with our investors.