contempoLtd., a startup offering Now, Pay Later (BNPL) and interest-free installment plans for business-to-business (B2B) customers, today announced that it has raised a $30 million seed round in a mix of equity ($6.5 million) and debt. Is. ($25 million). CEO and co-founder Matthew Meehan told Meczyki.Net that the new cash will be used to hire employees, grow Contempo’s merchant network, and further develop the technology under its platform.
While BNPL has gained a lot of play in the consumer market, with giants such as Klarna, Afterpay and Affirm doing their best to corner it, the traditionally conservative venture to enter alternative, installment-based payments. Plans have been slow. While most B2B purchases and purchases are spread over time (for example, pure 30-day terms), deals are not structured the way consumer-style BNPL plans typically are. High processing fees are often involved, with 35% of businesses being held in an Ardent Partners Survey Reporting that it costs $8 to process a single supplier payment. And there are frequent delays. different report good It found that it takes an average of 30 days to complete a payment and 47% of suppliers are paid late for their products or services.
Meehan says that he and Contempo’s other co-founders, Antonia Marino and Quasi Steele, saw an opportunity to address these challenges in a single platform.
“Three key insights we gained from our previous work formed the basis for the rationale for starting Contempo,” Meehan told Meczyki.Net in an email interview. “Most companies selling to small and medium-sized businesses need to offer sales financing, or ‘net terms,’ to be competitive. Furthermore, there are currently no viable alternatives to outsource this function. Lastly, fast and flexible payment terms at the point of sale lead to higher average order value and higher overall sales – much like with BNPL in the consumer segment.
Meehan was previously an analyst at Morgan Stanley and an associate at Lehman Brothers, before becoming VP of business for Latin America at Merrill Lynch. Marino was a senior regional operations manager at Uber in Mexico City, while Steele was a senior sales manager at Google.
Kontempo allows sales teams to approve credit for offline or online purchases with net terms of 30, 60 or 90 days. Alternatively or in addition, enterprises can use Kontempo’s API to deploy a BNPL option at checkout that does not require credit card or bank account information.
Meehan says that, to mitigate risk, Contempo captures data from merchant partners to feed an algorithm that determines creditworthiness. The algorithm – which takes into account a number of factors that Meehan declined to disclose – allows Contempo to reach a broader segment of small and medium-sized enterprises (SMEs) that are typically declined for credit. Is.
“Contempo with its BNPL product is an early proponent in expanding the use of digital payments in the B2B space, helping SMEs boost sales for both online and offline distributors and suppliers, and building critical payments infrastructure for the still small but fast Sees an opportunity to become a growing B2B ecommerce market,” said Meehan. “Contempo is a leader in this segment where suppliers themselves are the primary providers of point-of-sale finance to SMEs. We’ve built technology that allows suppliers to outsource this function.”
The question is whether there is a strong appetite in B2B for the products that Contempo sells. To some extent, invoice factoring platforms solve the problem that Contempo seeks to solve – guaranteeing payment – by providing suppliers with substantial cash advances. With invoice factoring, a supplier sells his unpaid invoices to a factoring company (for a fee) and receives an advance (usually around 90%) in return, while the rest of the value is paid by the buyer to the supplier by the factoring company. done after it is done. Invoice (plus a fee) to the factoring company.
But Meehan says factoring does not provide the “immediate, point-of-sale financing” that BNPL can. “They are a post-transaction liquidity solution,” he said, referring to the factoring platform. “For credit cards, they can solve for similar pain points, but are not typically used by SMEs to fund inventory purchases because credit limits are low and interest rates are very high.”
The detail by Kontempo’s competitors shows that to be true. Funding Circle, a fintech lender for SMEs, began offering a BNPL program called Flexipay to business customers after a successful pilot. Berlin-based Billy, another B2B BNPL vendor, is valued at over half a billion dollars and recently secured funding from Klarna and Chinese tech giant Tencent. Smaller entrants to sectors with massive funding rounds under their belts include Platter, Hokudo, Mondu and Trench.
In fact, while consumer-focused BNPL startups have seen their valuations plummet and stock prices plummet in recent months, investors are broadly bullish B2B as a product category on BNPL – Payer insolvency risk aside. As a recent CNBC excerpt notesBNPL services are proving particularly popular with SMEs, who are feeling the pinch from rising inflation.
related to Spreading In the case of paperwork in B2B, Meehan acknowledged that this is a difficult problem to overcome, along with rising interest rates, which make the terms of some payment plans less attractive. But on the first point, Meehan noted that the pandemic prompted a migration to the e-commerce model for many B2B industries.
“Contempo has signed contracts with 26 merchant partners in Mexico. These 26 merchant partners represent access to over 100,000 SME ‘buyers’ or end users of our product,” Meehan said of Contempo’s initial market traction and closeness. Asked about the growth prospects of the period, he said. “The company is on track to process payment volumes of approximately $1 million each month by the end of the year 2022 … we have a runway for more than three years.”
Contempo plans to “at least” double its 11-person workforce by the end of the year, Meehan says. To date, the company has raised $32.5 million in venture capital. Portage led the seed round with participation from Score P&C Ventures, Upper 90 (who also provided the credit facility), Ignia, Tectonic Ventures and Asymmetric Capital Partners.