Citi is backing Crowdz, a Pipe competitor that just raised $10 million for its blockchain-based account funding market.

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Recurring income as an asset class is a relatively new concept, made more popular by startups like A tubewhich has created a marketplace that connects investors with companies whose businesses have predictable, recurring returns.

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While Pipe raised over $300 million and was valued at $2 billion Last year, another player quietly built a company in the same space, focusing on small and medium-sized enterprises (SMEs) operating in global supply chains. That player Crowdzrecently received $10 million in co-financing from Citi and Dutch investment firm Global Cleantech Capital, with participation from Bold Capital Partners, TFX Ventures and Augment Ventures.

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Simply put, Crowdz started by giving small and medium-sized businesses the ability to sell accounts for sponsorship funding. The company is now looking to help fixed-income companies access the upfront capital they need without having to dilute their capital with venture dollars or loans. Specifically, its latest offering is designed to cater to subscription, membership, and SaaS (software as a service) companies. For its part, Pipe came out with the same focus on SaaS, but has since expanded to work with non-SaaS companies as well.

Payson Johnston and Stephen Lee founded Crowdz in 2014 after serving as senior B2B supply chain managers for global processes at Cisco. This experience led the couple to found Crowdz and they launched the company within the first five years. In 2019 Barclays Bank and Bold Capital Partners jointly led a $5.5M Series A funding round for Crowdz. To date, the startup has raised a total of $25.5 million.

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“A major challenge in running a business is getting enough funds to cover operating costs, especially in the early stages,” said Johnston. “While the income you receive from the sale of products and services may cover some expenses, it may not be enough to cover expenses that require a one-time working capital, such as opening a new store, marketing new products, or buying expensive equipment. . We are focused on how we can help SMEs improve their cash flow so they can thrive. This is really the main driver for us.”

With this latest investment, Crowdz and Citi plan to partner with this goal of providing SMEs with “quick and efficient access to the working capital they need to sustain their business.” Crowdz claims to be the only non-banking fintech company that offers both invoice-based financing and periodic income financing.

Over time, Crowdz funded $55 million in receivables, funding over 20,000 accounts. In other words, he has provided SMEs with over $55 million in working capital. The company has uploaded about $2.2 billion in receivables to its platform and aims to help more than 25,000 SMEs by funding more than $1 billion in receivables by next year. He recently signed important deal with Facebook to fund up to $100 million in bills for minority and multi-owned businesses across the United States. Crowdz makes money by taking a basis point from dollar funding. With a new recurring income offering, the company is starting to consider subscription models.

So while Campbell, Calif.-based Crowdz rules the market – as does Pipe – the startup says it goes beyond making connections between small and medium-sized businesses and investors. It also integrates with SMEs’ accounting, payment processing and banking systems to enable SMEs to “get paid early at competitive rates.” By offering account and recurring income funding, Crowdz says it wants to help SMEs be more successful by opening up access to capital.

“We both serve SMEs by being able to buy receivables, invoices and SaaS contracts through our marketplace that brings together other backers,” said Johnston, who is the company’s CEO. “Or we can do it with organizations like Citi, Meta and the city of Detroit. Our important task now is to sign these channel agreements, which we are going to expand very quickly.”

The company’s strategy is currently focused on this white-labeled offering, which today generates about 80% of its revenue, Johnston told TechCrunch.

“We’re not trying to reach SMEs directly — we’re really going through businesses and financial institutions,” Johnston said.

But perhaps the most unique thing about what Crowdz does is that it has been built on Ethereum since 2017.

“Our game is based on technology,” explains Johnston. The startup has filed 10 patents, and Johnston and Lee say data science is at the heart of everything the company does.

For example, Crowdz has developed what the startup calls “in-house” risk scoring that gives banks, financial institutions and DeFi lenders “access to attractive risk-adjusted diversified returns, helping to close the SME funding gap.”

“Right now, banks and other financial institutions assess companies’ risks the way they look at their financial statements, cash flow, balance sheet, cash flow statements, and profit and loss. They can use nine months of historical data to try and predict future behavior,” Lee told TechCrunch. “Through the use of these microtransactions, called invoices, we can incorporate this data and predict the financial health of a company in near real time.”

The company’s latest funding is part of Citi’s $200 million ongoing investment. in technologies that create social impact and is led by the Spread Products Investment Technologies (SPRINT) team, the strategic investment arm of Global Spread Products. This follows Crowdz’s recent partnership with Meta to support the social media giant’s SMB funding program.

Katya Chuprina, Citi CEO of SPRINT, told TechCrunch via email that her team was originally looking for a company specializing in the SaaS accounts receivable space.

She added that his thesis was that the uniformity and reliability of enterprise SaaS fees would make such cash flows attractive targets for asset-backed financing and eventually securitization, essentially creating a new asset class.

“We quickly discovered that the majority of incumbent SaaS receivables-only finance companies lacked reliable data and market appeal to sufficiently test their business models,” Chuprina said. “However, Crowdz had a well-established product in the receivables market and a stress-tested risk assessment methodology — two key elements that gave us confidence in their ability to expand into regular revenue financing.”

She said Citi saw an opportunity to build a “growth” relationship between the startup and the financial institution’s existing portfolio companies, “many of which could benefit greatly from secure access to non-dilutive working capital.”

Chuprina believes that Crowdz products are versatile, flexible and applicable to a wide range of disparate business areas.

“When we analyze potential investment opportunities, we lean towards companies that can solve multiple problems and create opportunities for multiple Citi businesses, effectively expanding and diversifying our strategic commercialization plan with the company,” she said. “In other words, SPRINT is looking for long-term partners with whom we can commercialize various endeavors.”

For his part, co-founder Lee said he grew up in a “pretty rugged L.A. area” and was “always considered an underdog.” He joined the US Army and is a combat veteran, which has left him disabled.

“Really for me, Crowdz is a loser story because we want to help small and medium businesses and put them on an equal footing with the bigger guys,” he told TechCrunch. “My father owned a laundromat himself, so I know how much he struggled as a small business owner. I continue to live this story of a loser, and the fact that our company is really focused on small and medium businesses is extremely attractive and inspires me.”

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