Fundbox’s Opportunity Goes Way Beyond SaaS
September 26, 2019 | Contributed by: Neal Polachek
Back in June, at our Localogy Engage event in the Washington D.C., area, one session really stood out at the event because of the size and scale of the opportunity it revealed. That session featured Fundbox’s Head of Brand and Product Marketing, Greg Powell.
We knew Fundbox was a company to follow since our good friend at MasterCard — David Galvan suggested we connect with Greg. We included Greg and FundBox on the agenda because they were solving a serious pain point for small businesses — generating and managing cash flow.
Most post-mortems on small business failure will point to a lack of cash flow as the core driver of business failure. Groupon hit on this pain point less than a decade ago and grew rapidly. Why? Small businesses got a cash flow bump from the pre-payment of Groupon deals.
Back to Fundbox. This week the company added $326 million to its own fund box — $176 million in venture capital and a $150 million credit facility. Fundbox has been using access to the small business accounting data to quickly and efficiently offer a revolving line of credit.
When payroll comes, Fundbox will push money to the small business and then as account receivables come into the small business the line of credit is paid back. Fees are only paid when the cash is outstanding. As soon as it is paid back, the fees stop until the next drawdown.
Of course, local, regional, and national banks have offered similar services to small businesses for years. The wrinkle that Fundbox offers is a more streamlined, nearly frictionless application process and presumably lower overall fees.
Like all SaaS or cloud-built solutions for small businesses, Fundbox is now turning its sights on solving another pain point — the B2B payments process. Specifically, helping SMBs get their money faster.
After more than a decade as a sole proprietor, I understand this pain point all too well.
At the end of each month, I fill out a Google sheet — pretending to be an invoice — and issue it to my client. Then I wait and wait. And often wait some more. Some clients are super speedy in turning around my invoices, others lubricate the process with molasses. But my issues are really not the point here.
What Fundbox aims to offer now to the B2B space is an efficient way to exchange money — think credit cards for the B2B world. What’s at stake is a ton of money and the implied transaction fees associated with that money. According to Eyal Shinar, what they’re really trying to fix is the trillions of dollars tied up in invoices.
On a broad basis, some $23 trillion of commerce is facilitated via the invoice process – and some $9 trillion is processed via invoices by small and medium businesses. Like Kabbage, FundBox has raised a ton of money to apply technology to disrupt the traditional way small and medium-sized businesses fund and finance their operations.
What strikes me as a huge potential is the opportunity to extract a transaction fee from the $9 trillion of commerce running through small and medium-sized businesses.
This leads me to offer a glimpse into our upcoming SMB SaaS forecast. In the past, we’ve built the forecast off of monthly SaaS spend. You know, the $75 per business per month etc. We firmly believe that the real size of the SaaS/cloud opportunity is considerably larger.
The reason is the $9 trillion of commerce that originates and terminates at the small business. We believe going forward more and more small and medium-sized businesses will expect to pay a lower monthly amount for the SaaS solution while also expecting to pay a small slice based on usage. This is where Fundbox is heading. They’ll gladly lower any month SaaS fee to extract a tiny little slice of the transaction.
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