Payments-and-lending startup Fundbox just nabbed fresh funding, and now its CEO has his sights set on making it the 'Visa of B2B'
- Payments and lending startup Fundbox just nabbed $176 million in Series C funding and secured a $150 million credit facility.
- The company caters to small and medium businesses, and has its sights set on being the 'Visa of B2B payment and credit,' Its CEO told us.
- Though it is competing with payments and lending companies like Stripe and Kabbage, Fundbox's CEO says he sees more than enough room in the business-to-business market.
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Fundbox, a lending-and-payments startup that's focused on speeding up how money changes hands between businesses, just nabbed a mix of equity and debt funding.
It raised $176 million in Series C equity funding while also securing a $150 million credit facility. The San Francisco-based fintech firm, which was founded in 2013 and specializes in small business lending and business-to-business (B2B) payments, did not disclose a valuation tied to the latest round.
And that's a process the startup's founder hopes he won't have to go through again, even as he has his eye on what the company sees as trillions of dollars of possible transaction volume.
"This should be our last fundraising," Eyal Shinar, Fundbox's founder and CEO, told Business Insider in an interview.
"Especially with sophisticated investors, and institutional investors like we have now, it is a stamp of approval that the business model works. The market opportunity is huge, but the burden of responsibility is increasing exponentially."
The startup is looking to spend that new money on hiring and adding new products, Shinar said. He also mentioned the possibility of expanding outside of the United States.
According to a study by Fundbox and PYMNTs, there is as much as $3.1 trillion in the US alone stuck in accounts receivable, meaning cash that is owed between small business buyers and sellers.
"Over time, we hope to be the Visa of B2B payment and credit," Shinar said.
B2B payments have been relatively slow to digitize, especially compared with transfers that happen between individuals.
But that's starting to change, and some think the space could also see other trends spill over from the broader payments industry - consultant McKinsey said in a report published on Monday that traditional B2B payments that have big scale but are also fragmented could be part of a fresh M&A wave.
Investors in Fundbox's latest round included Airbnb and Stripe backer General Catalyst, Spark Capital Growth (backer of Slack and Warby Parker), and Allianz X (backer of Lemonade and N26), along with several others. With this funding, Fundbox has raised $585 million to-date.
Two-month delay
The startup says it is tackling opportunities it sees in both the credit and the payments parts of the equation for transactions that happen between businesses.
Fundbox offers short-term (12- or 24-month) small-business loans, with fixed fees starting at 4.66%. Additionally, through Fundbox Pay, B2B sellers can be paid at the time of sale, and the buyers can then repay over a 60-day period.
Small businesses can struggle with cash availability in traditional B2B payments setups, the company says.
"The core of the issues is the delayed payments," said Shinar. "The average delay in the US today is more than 58 days, meaning once you complete a transaction, you're waiting for two months roughly to get paid for something you've already provided."
Still, at some point the company may have to pick a lane. Once the it reaches a certain chunk of market share, it may have to choose to be more of a payments or more of a credit company, Shinar said, and payments is the more important piece for Fundbox.
Limited visibility
Part of the reason for the delays in payments is the infrastructure. The B2B payments and credit space has seen less innovation than the B2C market, and small business payments are often managed through paper invoices and physical checks.
"The visibility into the B2B side of the market is limited, so innovation is limited and the importance of that segment is kind of hidden from most of us," said Shinar.
On the lending side of the market, companies like digital small-business lenders Kabbage and OnDeck are providing similar invoice lending. There are differences in size and terms of the loans each company offers, but they all offer quick access to capital, with creditworthiness determined based on a borrower's invoice history.
And there has been more blurring of the lines at companies that started as B2B and business-to-consumer payments processors transform themselves into lenders.
Stripe just recently jumped into small business lending for existing customers, and also has a new corporate card that offers cash back perks. That's following a push from Square to offer more credit to merchants.
Meanwhile, Mastercard has announced a new service that is looking to simplify and digitize B2B payments by offering a central payments platform to connect buyers and sellers.
But even with the space becoming more sophisticated, Shinar said he is confident that there is enough room for Fundbox and others to grow.
"The market is so old and inefficient, you could probably start ten new companies, all of them big companies, without feeling that it's too competitive," Shinar said. He noted that different companies are taking different approaches to B2b payments.
"Payment and credit for Fundbox for the B2B side is the same product, so we're solving the problem from both sides," said Shinar.