When I saw the announcement today that there is a new player in B2B supply chain finance –that is linking specific invoices to cash advances– I thought “Wow, how many companies can go after the same market!” After all, invoice networks and pure play supply chain finance providers are teaming up all over the place:
- Ariba/Discover (sorta)
- Taulia and Somebody
- Tradeshift and Capital Aid
- Oxygen Finance, C2FO (dynamic discounting)
- Prime Revenue, Orbian, Demica, and others
- Banks and their technology providers
- Not to mention P-card providers and
- Not to mention specialized providers like Cass, PowerTrack, Fast Pay, etc.
But when I looked at Fundbox a little closer, I realized that it is going after an interesting niche in this market. Specifically Fundbox seems to be targeting small services providers, such as accountants and freelancers. This is a market the major providers are not too eager to pursue, that has no hard collateral, and that is not easily suitable for P-cards.
Based on the website, Fundbox looks pretty slick. Fundbox appears to integrate quickly with Quickbooks, Freshbooks, and Xero and aims to make it easy for small businesses to load their invoices and essentially sell the receivables they choose to. (I’m not sure if the legal structure is a receivable sale, but it seems like it.) Fundbox claims to use algorithms, historical data, and public data to assess risk automatically in under a minute.
Based on the website, Fundbox appears to lend by taking a 5-7% fee, as opposed to p-cards which take a 2.5% discount. But Fundbox gives the borrower a three month installment plan to pay back the advance. (Figuring out the effective APR would hurt my brain, but it’s probably similar to p-cards for net 30 terms)
Fundbox raised $16.5 million in their series A round from a list of A-players: As the press coverage states:
The round was led by Khosla Ventures, with investors, Vikram Pandit, the former CEO of Citigroup, Tom Glocer, the former CEO of Thomson Reuters and Jay Mandelbaum, the former Head of Strategy & E-commerce at JP Morgan Chase also participating, among others.
The small business financing market, especially factoring, is an example of a market that is being disrupted through use of automated transactions, granular lending, and big data. Whoever builds the best risk assessment model and on-boarding process will have a great business. The Fundbox team joins a lot of smart people trying to figure these two challenges out.