Contempo, a startup offering buy now, pay later (BNPL) and interest-free installments for B2B customers, announced today that it has raised a $30 million seed round through equity ($6.5 million) and debt. ($25 million). CEO and co-founder Matthew Meehan told TechCrunch that the new cash will be used to hire staff, expand Kontempo’s retail network and further develop the technology behind its platform.
While BNPL is active in the consumer market, and giants such as Klarna, Afterpay and Affirm are doing their best to corner it, alternative installment payment plans have been slower to penetrate the traditionally conservative enterprise. While most B2B purchases and purchases are time-based (e.g. net 30-day timeframes), deals are not structured in the way consumer-style BNPL plans typically do. High processing fees are often charged, 35% of businesses are part of Ardent Partners. interview reports that it costs $8 to process a single payment to a vendor. And there are frequent delays. Separate report found that it takes an average of 30 days to complete a payment and that 47% of vendors receive payment for their products or services late.
Meehan says he and Kontempo’s other co-founders, Antonia Marino and Kwesi Steele, saw an opportunity to address these issues on a single platform.
“Three important insights from our previous work formed the basis for launching Kontempo,” Meehan told TechCrunch in an email interview. “Most companies selling services to SMEs must offer point-of-sale financing or “clean terms” to be competitive. Also, there are currently no real options to outsource this feature. Finally, fast and flexible payment terms at the point of sale result in a higher average order value and an increase in total sales, just like with BNPL in the consumer segment.”
Meehan was previously an analyst at Morgan Stanley and a partner at Lehman Brothers before becoming vice president of Latin America trading at Merrill Lynch. Marino was a senior regional operations manager at Uber in Mexico City and 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, businesses can use the Kontempo API to deploy a BNPL option at the checkout that does not require credit card or bank account information.
Meehan says that to mitigate risk, Kontempo collects data from trading partners to feed it to an algorithm that determines creditworthiness. The algorithm, which takes into account a number of factors that Meehan declined to disclose, allows Kontempo to reach a broader segment of small and medium-sized enterprises (SMEs) that are typically denied credit.
“Kontempo sees an opportunity in its BNPL product to expand the use of digital payments in the B2B space, increase sales for both online and offline distributors and SMB vendors, and pioneer the creation of a critical payment infrastructure for the still small but fast growing B2B e-commerce market,” Meehan said. “Kontempo is a pioneer in this area, where vendors themselves are the main providers of point-of-sale financing for SMEs. We’ve created technology that allows vendors to outsource this function.”
The question is whether there is a B2B demand for the products that Kontempo sells. Invoice factoring platforms, to some extent, solve the problem that Kontempo intends to solve – to guarantee payments – by providing a substantial cash advance to suppliers. In invoice factoring, the supplier sells his unpaid invoices to the factoring company (for a fee) and receives an advance payment (usually around 90%) in return, with the factoring company paying the remaining cost to the supplier after the buyer pays the invoice (plus commission) to the factoring company.
But Meehan argues that factoring does not provide the “instant point-of-sale financing” that BNPL can provide. “This is a post-deal liquidity solution,” he said, referring to factoring platforms. “For credit cards, they can address similar pain points, but they are generally not used by SMEs to finance purchases of goods because credit limits are low and interest rates are very high.”
An expansion by Kontempo’s competitors suggests this is true. Funding Circle, a fintech SME lender, has begun offering a BNPL program called FlexiPay to business clients after a successful pilot. in Berlin Billy, another BNPL B2B provider, is valued at over half a billion dollars and recently received funding from Klarna and Chinese tech giant Tencent. Smaller players in the sector with significant funding rounds under their belts include Playerhokodo, Mondu and Tranch.
In fact, although BNPL’s consumer-facing startups estimates have shrunk as well as share prices are falling in recent months, investors heavily bullish for B2B BNPL as a product category – the risk of insolvency of the payer aside. Like a recent CNBC article notesBNPL’s services are proving to be particularly popular with small and medium-sized businesses that are suffering from rising inflation.
For prevalence paper checks in B2B, Meehan admits that this is a difficult problem to solve — along with rising interest rates that make the terms of some payment plans less attractive. But on the first point, Meehan notes that the pandemic has pushed e-commerce models across many B2B industries.
“Kontempo has signed contracts with 26 trading partners in Mexico. These 26 channel partners represent access to more than 100,000 SME “buyers” or end users of our product,” Meehan said when asked about Kontempo’s initial market position and near-term growth prospects. “The company is on track to process approximately $1 million in payments per month by the end of 2022… We have more than three years of headroom.”
According to Meehan, Kontempo plans to “at a minimum” double its staff of 11 by the end of the year. The company has raised $32.5 million in venture capital to date. Portage led a seed round with Scor P&C Ventures, Upper90 (who also provided the loan), Ignia, Tectonic Ventures and Asymmetric Capital Partners.
Credit: techcrunch.com /