Sunday, August 14, 2016

Borrower Selection - Why We Listed Tamsin

At SymCredit Peer to Peer Lending is lending the old-fashioned way.  Our P2P lending platform is like a small town community bank. We list loans on the platform for two reasons. We believe in the businesses and we believe in the people behind the businesses.
Our P2P platform is running and has real borrowers and real stories to tell.  I hope the stories I tell here can encourage good lending practices at other platforms and give P2P investors more insight on how to select investments.   I welcome comments and suggestions, so please write to me at

Case Study - Tamsin

Last year Marcus O'Neil, co-owner of Tamsin, approached me and presented Tamsin to me as a potential investment for the Symfonie Angel Fund. He told me the story of how he and how wife Lenka O'Neil developed an internet clothing business that had a growing base of customers.  He wanted to find extra capital to continue growing the business.

As I listened to Marcus I became convinced that his business would be an ideal candidate for a peer to peer loan.  Marcus left my office that day with more questions than answers.  He's a careful fellow and doesn't jump to conclusions.  This is something I especially appreciate as a creditor.  I want to invest in businesses that are run by practical people who put serious thought into their businesses.

Over the next few months I got to know Marcus and Tamsin better.  We collected the usual financial data - balance sheet and income statements.  We looked at the Tamsin website.  We looked at the order flow and the the customer traffic.  We collected personal credit histories of Marcus and Lenka.  Here's what we learned:

1. Tamsin is the brain-child of soft spoken Lenka.  She studied fashion in London. She worked for several years at Burberry's as a merchandiser.  There she learned how to understand the needs of Burberry's customers, identify products the company could sell and negotiate purchase terms that left a margin in Burberry's pocket.

2. Tamsin is a family business.  The family lives the business and the business feeds the family.  This is a double-edged sword, but fundamentally it means the owners and the management care about the business and want to make it succeed.

3. Tamsin has found a profitable and growing niche in the on-line clothing market.  An increasingly prosperous community of women visit London, find clothing they like at good prices on the high street.  Upon return to the Czech Republic and Slovakia they find it difficult to buy such clothing in the local market. Few of the British retailers service the on-line market and provide good delivery and return policies.  Getting the goods here takes a long time.  Returning merchandise that doesn't fit will or is defective takes a long time.  There isn't much flexibility around delivery either. Many consumers prefer to pickup the goods at a local fulfillment center that offers more flexibility than having to sit at home and wait for delivery.

4. Tamsin has a flexible and dynamic business model.  Lenka scours the UK market for clothing that would appeal to her customers.  When she finds interesting items she posts them on the website.  After her customers order the merchandise Tamsin buys the items.  Marcus manages the logistics of getting the clothing from the UK delivered to the Czech Republic where a local logistics partner handles final delivery.

5. Marcus and Lenka invested heavily in technology.  They hired a smart IT specialist, Michal Dolezal, who codes the website and develops the commercial tools. Michal has 18 years of experience and owns some equity in the business. This is no easy feat.  Tamsin have more than 6,000 SKUs on their website and this list is continually changing.

6. Tamsin found its market.  Over the last year the number of unique visitors to its website has doubled, from 33,000 monthly, to more than 60,000 monthly.  Orders have increased from 150 monthly to 630 monthly.  The increased conversion rate is means Tamsin is turning more of its visitors into paying customers.  Sales have tripled, from 360,000 CZK (about 13,000 EUR) per month to more than 1,000,000 CZK  (about 40,000 EUR) per month.

7. The business has plenty of growth opportunity.  Research suggests that in the Czech Republic 81% of internet users have used on-line shopping, compared to just 59% elsewhere in Central Europe. Electronics is the most popular, followed by clothing and cosmetics. Many users wish to avoid giving their credit card details on-line.  Tamsin and many other on-line retailers in Central Europe offer merchandise Cash on Delivery.  Many international retailers don't offer cash on delivery service, yet cash on delivery can represent upto 40% of sales, according to industry research.

8. Tamsin can expand across product lines as well as across markets. They recently added men's clothing to the website and are looking at opportunities to add children's clothing.  Smart move! Women browsing the website can find clothing not only for themselves but also for their partners and their children.  Tamsin are investigating the possibility of expanding the site services into Hungary and Poland, where their research indicates they can find a similar customer base. No firm decision has been made yet. Marcus told me last year that cross border expansion was an objective.  However, he needs to ensure he can setup a logistics infrastructure to support the business and of course, the website needs to be translated.  Marcus wants to ensure the business is on a stable footing in the Czech Republic and Slovakia before he goes into new countries. Marcus seems to share my view that  adding men's and children's lines to the website is less capital intensive and can generate income faster launching in a new country.

9. Numbers and cash flow complete the story.  Sales have risen to nearly 1.5 mn CZK (EUR 60,000) per month.  Tamsin reported nearly EUR 18,000 in profits in the Czech Republic last year and a further GBP 17,000 in the UK.  The business is clearly profitable. The major IT development of building and deploying the website is complete, so the largest fixed costs already absorbed.  The next level of cost is incremental - translation of the website and addition of more product lines.  There is practically no long term debt in the business.  The company was funded largely from equity capital and shareholder loans from Marcus and Lenka.

10. A P2P loan supports business expansion.  The rapid growth of the business means more working capital is required to support sales in process.  Many retailers require an inventory of goods on the shelf.  Tamsin requires little in terms of goods on the shelf but still must finance the payment cycle.  Customers order goods, Tamsin purchases the goods and delivers them, Tamsin then collects the cash.  Last year the sales base was nearly EUR 12,500 per month.  This year the sales base is over EUR 60,000 per month. 

11. Tamins' working capital need is counter cyclical.  If sales decline Tamsin needs less cash to support the sales cycle so their cash so working capital would be freed up. Contrast that with traditional bricks and mortar retailers, where a decline in sales creates an inventory overhang and makes stock replenishment more difficult.

12. The debt is sustainable. With profits of nearly EUR 40,000 annually, Tamsin should have more than enough free cash to pay interest and amortise down the P2P loan we designed for them, which has a five year term.

Incidentally, I made a point above of describing Lenka as being soft spoken.  Upon meeting Lenka I was reminded of  Good to Great ,written by James Collins.  It's a wonderful read.  Collins finds a common thread among the leaders who developed great companies.  The truly great people among us are high on performance, low on ego.  This doesn't mean they have no self-confidence.  On the contrary, their self-confidence is strong enough that they really feel no need to draw attention to themselves. In the words of Collins:

“The good-to-great leaders never wanted to become larger-than-life heroes. They never aspired to be put on a pedestal or become unreachable icons. They were seemingly ordinary people quietly producing extraordinary results.”

As with any investment, there is no guarantee of success.  We encourage investors in P2P loans to diversify their portfolios and invest no more into any particular loan than they would be willing to lose. We hope to be able to report in the coming months and years good results from companies on our platform such as Tamsin.

Special thanks to Marcus, Lenka and Michal for their inspiration.

Questions?  Comments?  e-mail me at

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