SME-Focused Fintech Fundbox Raises $ 100 Million at $ 1.1 Billion Valuation – TechCrunch

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Fundbox, a company that provides loans and financial products to small businesses, today announced that it has raised $ 100 million in a Series D round for a valuation of $ 1.1 billion.

Or more simply, the company aims to meet the working capital needs of SMEs through its credit and payment offers. It is particularly focused on small businesses with a B2B focus.

“We use artificial intelligence to deliver financial products that small business owners use to better manage and grow their businesses,” CEO Prashant Fuloria told TechCrunch.

The Healthcare of Ontario Pension Plan (HOOPP) led Fundbox’s Series D funding, which brings the company’s total equity raised to $ 410 million since its inception in 2013. Existing funders Allianz X , Khosla Ventures and The Private Shares Fund joined new investors including Arbor Waypoint Select Fund and a series of BNY Mellon funds managed by Newton Investment Management North America.

Based in San Francisco Fund of funds last raised in 2019 – a $ 175 million Series C that valued the company at $ 700 million post-money. That same year, the company also opened its Dallas office, now the largest in the United States, “to capitalize on the talent pool there,” according to Fuloria.

Fundbox is refreshingly transparent about its finances, at least when it comes to income. The startup, which has seen an acceleration in its activity linked to the pandemic, crossed the milestone of $ 100 million in annual revenue earlier this year. Today is “way beyond” that, Fuloria said, although it is not yet profitable because it is growth-oriented, he said.

Since the company launched its first product in 2013, it has “connected” to more than 325,000 small businesses and processed more than $ 2.5 billion in working capital, the executive added. In 2021, Fundbox tripled its acquisition rate of new customers. But the majority of her income comes from existing customers, whom Fuloria describes as “incredibly loyal”. He believes that one of the biggest differentiators of the business – besides its use of AI and data – is that it focuses on SMEs whose customers are other businesses, rather than consumers.

For example, Fundbox works with SMEs that serve customers such as restaurants, such as companies providing food or companies providing cleaning and staffing services to these restaurants.

“These B2B SMEs have the same challenges as everyone else, except they bill their customers and then wait to be paid,” Fuloria told TechCrunch. “All this capital tied up in unpaid debts is a huge drag for these SMEs. So one of the things Fundbox is doing is providing tools to unlock that working capital that’s tied up in unpaid bills, which is actually over $ 1 trillion in the United States alone. Clients, he added, can receive approval within minutes, with access to capital as early as the next business day.

Khosla led Fundbox Series A in 2014 and founding partner and managing director David Weiden said his company was initially – and remains – impressed with the ability of Fundbox founders to recognize that there were “dramatic increases. the availability of relevant data on the small business market “.

“A lot of companies are talking about data and AI; ironically, only a few have data demonstrating the real effectiveness of their approach, ”he wrote via email. “Fundbox, including during the exceptional pandemic period, has had strong results and is on a path of continued growth and scale. “

The company’s clients range from sole proprietors with a few dozen employees and as little as a few hundred thousand dollars per year to businesses with up to a few million dollars per year in annual revenue. Fundbox requires its customers to log in through certain aspects of their transactional system, such as their billing application or even their bank account.

“We look at these business transactions in their systems and put together what we call a trade graph where you can imagine the nodes of the graph are all these little businesses negotiating with each other with customers being their suppliers and the connections being theirs. transactions, ”Fuloria explained. “And that graph becomes our picture of the small business economy to derive signals or characteristics that can be used to assess the risk of a B2B transaction or a small B2B business.”

Image credits: Fund of funds

The business then uses these risk assessments to provide tools, such as available working capital or the ability to get instant financing against an invoice. It also integrates with technology from other companies. For example, it is in partnership with Intuit and is natively integrated with QuickBooks. It also shows up in places like FreshBooks’ accounting software or in the Synchrony mall (Synchrony is an investor in Fundbox).

The small end of small businesses is often overlooked by big banks, argues Fuloria, because the average bank spends more than $ 3,500 (largely in human capital) to assess a small business’s risk. For loans that are not much more than that, it is not really worth it. However, to be clear, Fundbox says it is offering up to $ 150,000 in lines of credit.

“Our focus on using AI to make these decisions really helps us shine as over 99% of all of our decisions are fully automated without any human involvement,” said Fuloria. “And that allows us to really grow and serve customers in a very, very efficient way. “

Although primarily serving as a lender, Fundbox is now expanding into payments and membership-based offers (with the intention of generating a stream of subscription revenue). The company recently launched Flex Pay, which is designed to give small business owners additional payment options and greater flexibility for business expenses.

For example, Fundbox Line of Credit customers now have three additional days to pay for these expenses. Repayment options include a bank account, credit card, or line of credit draw, essentially giving small business owners another tool to buy now and pay later, according to Fuloria.

Going forward, next year, Fundbox plans to develop a product aimed specifically at entrepreneurs with multiple small businesses as well as new businesses that do not have the financial history to access capital through traditional means.
Shrirang Apte, vice president of HOOPP, believes that Fundbox’s performance this year is a testament to the market opportunity “in disrupting the very underserved world of small business finance, which has traditionally lagged behind consumer finance ”.

Fundbox plans to use its new capital to expand its team of 300, acquire customers and expand its product offering. He recently hired a handful of new executives, including two former Capital One veterans – Khary Scott and Shawn Haigh to serve as VP and Head of Partnerships and VP of Growth Marketing, respectively.

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