INSUBCONTINENT EXCLUSIVE:
Credit cards have become all but ubiquitous for consumer transactions, and it isn’t hard to see why
By intermediating payments, networks like Visa allow buyers and sellers to exchange money for goods and services without knowing the
financial risk profile of the counter-party
Rather than applying for credit at every merchant you shop at, you apply once at your issuing institution, and then can transact with every
It’s the simple formula: reducing friction means more sales, and therefore more profits.Yet for all the innovation in the consumer side of
the economy, there has been an astonishingly limited amount of innovation in the B2B world
Payments between businesses are still conducted through invoices, with net payment terms that can exceed 90 days and with little knowledge
of the financial risk of the counter-parties
There is no FICO score for business as there is with consumers, nor is there a system that can intermediate those transactions and reduce
their friction.That’s where Fundbox comes in
The SF-headquartered startup wants to ultimately transform B2B payments by creating a Visa-like payments network that allows businesses to
transact with each other without having to know counter-party risk while also getting everyone paid faster.It’s a vision that has pulled
in the attention of even more venture capital
The company, which was founded in 2013, announced today that it has raised $176 million in a series C equity financing led by a consortium
of funders, including Allianz X, Healthcare of Ontario Pension Plan, HarbourVest and a litany of others
Existing backers Khosla, General Catalyst, and Spark Capital Growth also participated
With this new round of capital, the company’s total equity funding reaches upwards of $300 million.In addition to the equity capital, the
company also announced that it has raised a $150 million credit facility to underwrite its product.Fundbox CEO Eyal Shinar said that a
priority in this fundraise was to select backers who not only could invest in equity, but also had large balance sheets who could expand the
company’s underwriting capability as it scales.Today, Fundbox’s core product is a revolving line of credit for small businesses
Cash flow is a huge concern for many companies, since they often have to wait for a payment from an invoice to arrive before investing in
their next projects or hiring more employees
A revolving line of credit allows companies to flexibly draw down and pay back a loan, while only paying fees on what a company uses.To
apply for the loan, companies connect Fundbox to their financial data store (for example, QuickBooks), and Fundbox slurps in the data and
offers a credit decision in as fast as minutes
Companies can then tap their line of credit almost immediately and use it as working capital
As invoices are paid, companies can then pay off their line of credit and stop paying fees.From that product base, Shinar ultimately sees
Fundbox as a GDP-scale startup, given the value it could potentially unlock for companies and the economy at large
“There are more than $3 trillion locked in those invoices,” he explained to me, “$3.4 trillion flows through consumer credit cards,
but $23 trillion are in invoices … and even if you focus on [just] small and medium business, it’s $9 trillion.”As the company
collects data from all the players in the market, it wants to build upon those data network effects to ultimately operate the payment rails
So instead of offering a line of credit to the seller, it could facilitate both sides of the transaction and get rid of the root complexity
in the first place.It’s a bold vision, and certainly one that has attracted a variety of players
In the startup world, Kabbage (whose co-founder and president Kathryn Petralia I will be interviewing at TechCrunch Disrupt SF next week)
has built a business around line of credit lending and has similarly raised large amounts of venture capital.Larger companies like Square,
PayPay, and Intuit (which owns the popular accounting software QuickBooks) have introduced various lending products to B2B customers
And in terms of payments, Stripe through its new credit card and Brex offer the means for companies to empower their employees to make
purchases on behalf of the company.Shinar said that a huge priority for Fundbox has been to make underwriting more efficient
He said that a large percentage of the current employee base at the company is data scientists, and the company has built upon the wave of
digitalization that has taken place among small and medium businesses
“Every company has at least one set of APIs … and it is accessible, and it is granular,” Shinar said
By just tapping into those existing data feeds, Fundbox is able to avoid the human underwriting common with much of business lending
today.One initiative the company has undertaken is a tool dubbed “X-Ray” to better describe how the company’s machine learning models
are really underwriting its loan products
Shinar noted that payments is a highly-regulated space, and that the company has to be able to explain its decisions and how they are
unbiased to any regulator that might start asking questions.The company today has 240 employees spread across SF, Tel Aviv, and a recently
launched office in Dallas
Shinar says that he wants to use the new funds to “go on the offensive” and “double and triple down on what is working.”
