Kontempo, a startup providing purchase now, pay later (BNPL) and interest-free installment plans to business-to-business (B2B) prospects, in the present day introduced that it raised a $30 million seed spherical in a mixture of fairness ($6.5 million) and debt ($25 million). CEO and co-founder Matthew Meehan tells Fintech that the brand new money will probably be used to rent workers, develop Kontempo’s service provider community and additional develop the know-how underlying its platform.
Whereas BNPL has gotten numerous play within the client market, with giants like Klarna, Afterpay and Affirm doing their finest to nook it, various, installment-based cost plans have been slower to penetrate the historically conservative enterprise. Whereas most B2B purchases and procurements are unfold out over time (e.g, web 30-day phrases), the offers aren’t structured in the best way consumer-style BNPL plans usually are. Excessive processing charges are regularly concerned, with 35% of companies in an Ardent Companions survey reporting that it prices $8 to course of a single provider cost. And delays are frequent. A separate report discovered that it takes a median of 30 days to finish a cost and that 47% of suppliers are paid late for his or her services or products.
Meehan says he and Kontempo’s different co-founders, Antonia Marino and Kwesi Steele, noticed a possibility to deal with these challenges in a single platform.
“Three necessary insights garnered from our prior work fashioned the premise of the rationale for beginning Kontempo,” Meehan advised Fintech in an e mail interview. “Most firms promoting to small- and medium-sized companies want to supply level of sale financing, or ‘web phrases,’ to be aggressive. Furthermore, there are at the moment no viable choices to outsource this perform. Lastly, quick and versatile cost phrases on the level of sale result in increased common order values and better general gross sales — very similar to with BNPL within the client section.”
Meehan was beforehand an analyst at Morgan Stanley and an affiliate at Lehman Brothers earlier than changing into the VP of Latin America buying and selling at Merrill Lynch. Marino was a senior regional operations supervisor at Uber in Mexico Metropolis, whereas Steele was a senior gross sales supervisor at Google.
Kontempo permits gross sales groups to approve credit score for offline or on-line purchases with web phrases of 30, 60, or 90 days. Alternatively or as well as, enterprises can use Kontempo’s API to deploy a BNPL possibility at checkout that doesn’t require a bank card or checking account data.
Meehan says that, to mitigate threat, Kontempo captures knowledge from service provider companions to feed an algorithm that determines creditworthiness. The algorithm — which takes into consideration a variety of things that Meehan declined to disclose — permits Kontempo to achieve a broader section of small- and medium-sized enterprises (SMEs) which can be usually rejected for credit score.
“Kontempo sees a possibility with its BNPL product to extend the usage of digital funds within the B2B house, increase gross sales for each on-line and offline distributors and suppliers to SMEs, and be an early mover in constructing essential funds infrastructure for the nonetheless small however quick rising B2B ecommerce market,” Meehan stated. “Kontempo is a pioneer on this house the place suppliers themselves are the first suppliers of point-of-sale finance to SMEs. We’ve got created the know-how that enables for suppliers to outsource this perform.”
The query is whether or not there’s a powerful urge for food in B2B for the merchandise that Kontempo’s promoting. To some extent, bill factoring platforms clear up the issue Kontempo purports to unravel — guaranteeing funds — by offering a considerable money advance to suppliers. With bill factoring, a provider sells its unpaid invoices to a factoring firm (for a price) and receives an advance in return (often round 90%), whereas the remaining worth is paid by the factoring firm to the provider as soon as the customer pays the bill (plus a price) to the factoring firm.
However Meehan makes the case that factoring doesn’t present the “instantaneous, point-of-sale financing” that BNPL can. “They’re a post-transaction liquidity answer,” he stated, referring to factoring platforms. “As for bank cards, they’ll clear up for comparable ache factors, however they’re usually not utilized by SMEs to fund stock purchases as a result of credit score limits are low and rates of interest are so excessive.”
Growth by Kontempo’s opponents would recommend that that is true. Funding Circle, a fintech lender to SMEs, started providing a BNPL program referred to as FlexiPay to enterprise prospects after a profitable pilot. Berlin-based Billie, one other B2B BNPL vendor, is valued at over half a billion {dollars} and not too long ago secured funding from Klarna and Chinese language tech large Tencent. Smaller entrants within the sector with sizable funding rounds underneath their belts embody Playter, Hokodo, Mondu and Tranch.
In truth, whereas consumer-focused BNPL startups have seen their valuations slashed and inventory costs plummet in current months, buyers are largely bullish on B2B BNPL as a product class — threat of payer insolvencies apart. As a current CNBC piece notes, BNPL companies are proving particularly in style with SMEs, that are feeling the pinch from rising inflation.
As for the prevalence of paper checks in B2B, Meehan admits it’s a tricky drawback to beat — together with rising rates of interest, which make the phrases of sure cost plans much less enticing. However on the primary level, Meehan notes that the pandemic spurred a migration to e-commerce fashions for a lot of B2B industries.
“Kontempo has signed contracts with 26 service provider companions in Mexico. These 26 service provider companions characterize entry to over 100,000 SME ‘consumers,’ or end-users, of our product,” Meehan stated when requested about Kontempo’s early market traction and near-term development prospects. “The corporate is on monitor to course of roughly $1 million in cost quantity each month by year-end 2022 … We’ve got runway for effectively over three years.”
Kontempo plans to “no less than” double its 11-person workforce by the top of the 12 months, Meehan says. To this point, the corporate has raised $32.5 million in enterprise capital. Portage led the seed spherical with participation from Scor P&C Ventures, Upper90 (who additionally offered the credit score facility), Ignia, Tectonic Ventures and Uneven Capital Companions.