Magic is exciting and illusionary
In March 2021, Founder Lex Greensill, from Bundy to Billions had Greensill Capital file for bankruptcy. The story is fraught with questionable practice, decisions and high powered people. The scaleup had real potential but in its pursuit for growth, took the wrong path and ultimately got derailed.
Founded in 2011, Greensill Capital started off like any other financial services firm, highly connected but conservative. The support of former British PM, David Cameron, put Greensill front stage and its networking exploded.
Together they wanted to 'rescue' supply chain financing (SCF). SCF firms are typically safe aka 'boring'. Dressing itself as fintech and revolutionary, made it sexy but really the scaleup had set its course.
How does SCF work?
SCF firms advance the invoice amounts to suppliers before the customer is due to pay. SCF receive a % discount as their fee and collect the full amount from customers as invoices become due. This financing type is short, simple and prevalent in the agriculture and manufacturing sectors.
Growth and Inflection
Help from the ex British PM David Cameron, powered up Greensill's networking, leading to a deal with steel magnate Gupta. Eventually snowballed to deals with various industry leaders.
In 2019, the rapid growth eventually landed Greensill on the radar of profilic investor Masayoshi Son and the Vision Fund. Son injected $1.5B, setting Greensill's valuation at $6B, 82x its earnings the year prior.
So where did it all go wrong?
The short - financing imaginary invoices and packaging it up as safe securities that were on sold to investors eventually caught up.
The long - pressures to meet high expectations created and widened the divergence between the narrative and reality.
In an alternate universe...
Greensill could have been a true fintech company. Here, Greensill stays within SCF and adds inventory financing (loans that firms use to buy inventory to on sell).
Builds software and products that serve manufacturers, wholesalers and merchants down the entire vertical.
Starting with its real customer base, manufacturing and agriculture. Expand their service down the supply chain. SCF have visibility into their customer's business model, supplier/customer lists and financial health. Visibility at scale is immensely valuable.
Scaled visibility into the supply chain and customer financials enable better risk management and ultimately an economic moat (competitive edge).