Contempo, a startup that offers buy now, pay later (BNPL) and interest-free repayment plans to business-to-business (B2B) customers, today announced that it has raised a $30 million starting round in a mix of equity ($6. 5 million) and debt ($25 million). CEO and co-founder Matthew Meehan tells toptecheasy.com that the new money will be used to hire staff, expand Kontempo’s trading network and further develop the technology underlying the platform.
While BNPL has garnered a lot of attention in the consumer market, with giants like Klarna, Afterpay and Affirm doing their best to corner it, alternative installment-based payment plans have been slower to penetrate the traditionally conservative business. While most B2B purchases and purchases are spread over time (e.g. net 30-day installments), the deals are not structured like consumer-style BNPL plans typically are. There are often high processing costs involved, with 35% of companies in an Ardent Partners questionnaire report that it costs $8 to process a single vendor payment. And delays are frequent. a separate one report 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 he and the other Kontempo co-founders, Antonia Marino and Kwesi Steele, saw an opportunity to address these challenges in a single platform.
“Three key insights from our previous work formed the basis of the rationale for starting Kontempo,” Meehan told toptecheasy.com in an email interview. “Most companies selling to small and medium-sized businesses must offer point-of-sale financing or ‘net terms’ to be competitive. In addition, there are currently no viable options to outsource this feature. Finally, fast and flexible payment terms at the point of sale lead to higher average order values and higher total sales – just like BNPL in the consumer segment.”
Meehan was previously an analyst at Morgan Stanley and an associate at Lehman Brothers before becoming the VP of Latin America Commerce at Merrill Lynch. Marino was senior regional operations manager at Uber in Mexico City, while Steele was senior sales manager at Google.
With Kontempo, sales teams can approve credit for offline or online purchases with a net term of 30, 60 or 90 days. Alternatively or in addition, companies can use Kontepo’s API to implement a BNPL option at 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 an algorithm that determines creditworthiness. The algorithm — which takes into account a range of factors Meehan declined to disclose — allows Kontempo to reach a wider segment of small and medium-sized enterprises (SMEs) that are typically turned down for credit.
“Kontempo sees an opportunity with its BNPL product to increase the use of digital payments in the B2B space, drive sales for both online and offline distributors and suppliers to SMBs, and be an early mover in building critical payment infrastructure for the still small but rapidly growing B2B e-commerce market,” said Meehan. “Kontempo is a pioneer in this area where suppliers themselves are the main providers of point-of-sale financing to SMEs. We have created the technology that allows suppliers to outsource this function.”
The question is whether there is much enthusiasm in B2B for the products that Kontepo sells. To some extent, invoice factoring platforms solve the problem that Kontempo claims to solve – guaranteeing payments – by providing suppliers with a significant cash advance. In invoice factoring, a supplier sells its unpaid invoices to a factoring company (for a fee) and receives an advance in return (usually around 90%), while the remaining value is paid by the factoring company to the supplier once the buyer pays the invoice (plus a fee). to the factoring company.
But Meehan argues that factoring doesn’t provide the “instant, point-of-sale financing” that BNPL can. “They are a post-trade liquidity solution,” he said, referring to factoring platforms. “As for credit cards, they can solve similar pain points, but they’re not typically used by SMEs to fund inventory purchases because credit limits are low and interest rates are so high.”
Expansion by Kontepo’s competitors would suggest that this is true. Funding Circle, a fintech lender to SMEs, started offering a BNPL program called FlexiPay to corporate clients after a successful pilot. Berlin-based Billie, another B2B BNPL provider, is valued at over half a billion dollars and recently secured funding from Klarna and Chinese tech giant Tencent. Smaller entrants in the sector with major funding rounds include Playter, Hokodo, Mondu and Tranch.
While consumer-focused BNPL startups have seen their valuations plummet in recent months and share prices plummet, investors are largely bullish on B2B BNPL as a product category — aside from the payer’s risk of insolvency. As a recent CNBC piece notesBNPL services are proving particularly popular with SMEs, which are the victims of rising inflation.
Concerning the prevalence of paper checks in B2B, Meehan admits it’s a difficult problem to overcome — along with rising interest rates, which make the terms of certain payment plans less attractive. But on the first point, Meehan notes that the pandemic has caused a migration to e-commerce models for many B2B industries.
“Kontempo has signed contracts with 26 trading partners in Mexico. These 26 trading partners represent access to more than 100,000 SME ‘buyers’ or end users of our product,” Meehan said when asked about Kontempo’s early market appeal and near-term growth prospects. “The company is on track to process approximately $1 million in payment volumes each month by the end of 2022… We’ve had a runway for over three years.”
Kontempo plans to “at least” double its 11-person workforce by the end of the year, Meehan said. To date, the company has raised $32.5 million in venture capital. Portage led the round with participation from Scor P&C Ventures, Upper90 (which also provided the credit facility), Ignia, Tectonic Ventures and Asymmetric Capital Partners.