Australian 'pay as you use it' fintech coaXion closes $2.65m in Pre-Series A funding

coaXion, an Australian start-up that has created AI-driven ‘pay as you use it’ technology to disrupt the national equipment financing market, has closed its Pre-Series A funding over-subscribed at $2.65m.

CEO Colin Armbruster said coaXion’s proprietary technology had been developed over the past 18 months and the Pre-Series A round had sought $1.5m for initial commercialisation.

The $1.15m additional funding achieved this round will help accelerate product development in Australia, with a view to entry into the $215b US “yellow goods” equipment finance market.

“We’re a new fintech lender in this very specialised space, with proprietary technology that will make us an attractive partner to a broad range of financial institutions in Australia, the US and beyond,” Armbruster said.

“Our ‘pay as you use it’ lending technology provides a new type of finance flexibility for yellow goods owners: if they use the equipment more they’ll own it earlier, use it less and their repayments are lower.

“This technology, a point of difference in the Australian market from the Big Four banks and major non-bank lenders, offers real benefits for businesses reliant on yellow goods and looking for capital.”

Armbruster said this market is ripe for disruption: 22% ($9b) of Australia’s estimated $41b commercial equipment finance market is for yellow goods finance for assets such as excavators, dozers, loaders and graders.

coaXion’s initial target market is SME heavy machinery businesses and over time coaXion’s technology and data will be refined to target larger operators and other construction equipment categories.

“Our leadership team has 30 years’ experience in this yellow goods market and deep experience in start-ups and fintechs, giving us a deep understanding of what these businesses need to succeed,” he said.

Global move towards usage-based finance

Co-Founder and CTO Chris Maycock said coaXion will shake up an Australian equipment finance market that has been slow to adopt technology being used overseas to benefit end-users.

“Other markets are more advanced in using software to drive usage-based finance: for example, the European and US trucking sectors are using finance based on kilometres or fuel burn,” Maycock said.

“coaXion’s machine learning algorithms deliver variable pricing and variable terms based on how, and how much, the asset is being utilised,” he said.

Armbruster said coaXion’s step into this market is a boost for the local fintech sector – an Australian business with the proprietary technology to allow financiers and customers access to a style of lending fast gaining traction overseas.

He said this gives the business owner balance sheet flexibility, with repayments based not on a set time period but on how fast the business consumes the equipment.

“The customer benefits with improved cashflow, term flexibility and being able to redeploy capital. The financier benefits from better asset risk management and being able to offer an innovative product.

“As we seek the right go-to-market partners, we are actively talking to equipment dealers and yellow goods asset finance brokers about the opportunities our variable ‘pay as you use it’ model offers them,” Armbruster said.

coaXion’s Series A funding round is planned towards the end of 2022.