Home improvement the next Brighte idea

Mike Cannon-Brookes-backed energy finance group Brighte is making a concerted push into the home improvement sector.

Brighte CEO Katherine McConnell at her Kent Street offices in Sydney. Picture: Milan Scepanovic

Mike Cannon-Brookes-backed energy finance group Brighte is making a concerted push into the $35bn Australian home improvement sector, as it seeks its next leg of growth and targets a $1bn loan book.

Brighte chief executive and founder Katherine McConnell said the lender, after closing its fourth equity capital raising, was moving into the personal loan market and financing home renovations.

“It (buy-now-pay-later energy finance) translates very well to the home improvement category,” she said, referring to the size of one-off purchases such as pools and patios.

“A lot of the characteristics of the sale are the same.”

So far, Brighte has focused on signing up retailers and other vendors to provide consumers finance for purchasing solar panels and home batteries. It will use a similar approach in the broader home improvement sector.

Brighte has just ruled off a $15.5m equity funding round to accelerate its transition from a buy-now-pay-later solar financier to a more diversified platform. The fourth capital raising, which attracted new Singapore-based venture firm Qualgro Partners, brings the total equity raised to $41.5m.

As well as Atlassian co-founder and billionaire Mr Cannon-Brookes, Brighte has assembled one of the nation’s highest-profile shareholder registers, drawing support from the Farquhar family, venture firm AirTree and fashion stalwart Naomi Milgrom. Ms McConnell was coy, though, on the company’s valuation, refusing to reveal how the latest raising values the group, saying only it was a “significant increase” on the last funding round in May 2018.

Players including Brighte and ASX-listed Afterpay Touch and Zip will, however, have to navigate the threat that global entrants pose in Australia.

Players such as Swedish group Klarna are preparing an Australian onslaught, particularly in the buy-now-pay-later space. Commonwealth Bank in August unveiled an investment of $US100m into Klarna and they will partner on a local rollout.

But Ms McConnell, a former Macquarie Group executive, isn’t fazed by the threat, saying Brighte has a clear strategy and plenty of growth opportunities.

She said Brighte was on track to have a loan receivables book of $1bn by 2022. Break-even could be achieved ahead of that given the push into home improvement, as solar and battery financing could “be volatile” depending on government incentives and policies, Ms McConnell added.  Since inception three years ago, Brighte has approved credit of $260m.

Brighte has a credit licence and conducts credit checks that include drawing on data and artificial intelligence. The move into personal loans means the credit assessments of customers will have to be more stringent in order to meet responsible lending laws.

Brighte’s arrears of 90-plus days on its finance product sit at 0.3 per cent of its book. Ms McConnell said the low level was helped by Brighte pre-vetting vendors and contacting customers quickly if an issue was identified.

Qualgro partner Peter Huynh said one of the reasons for backing Brighte was the “quality of execution” of strategy.

Qualgro is also interested in helping Brighte assess an international expansion in Southeast Asia over the medium term by conducting research and speaking to potential partners.

While Australian companies, including some in the finance sector, have not had a good track record in Asian expansion, Mr Huynh said Qualgro had experience in taking other portfolio companies, including Data Republic, into Asia.

Mr Cannon-Brookes, a big backer of renewable energy, has invested in Brighte through his company Grok Ventures.

Grok’s investment boss Jeremy Kwong-Law said that as an early investor in Brighte, “it’s been fantastic to watch the growth and evolution of the company”.

“We’re really excited about continuing the mission to provide affordable, smart and sustainable energy for Aussie families,” he said.

AirTree managing partner Craig Blair said his firm was supportive of the push into the larger home improvement market by Brighte.

He isn’t, however, in a hurry for Brighte to be plotting a run at the ASX.

“It’s far too early in the journey,” Mr Blair said, noting that any such plans would likely come into play in three to four years.

National Australia Bank and Bank of Queensland provide funding to Brighte. The company’s new personal loan is charging a 7.99 per cent fixed annual interest rate.