- US enterprise payments platform Melio has raised an $80 million Series C round led by investment fund Coatue Management.
- The new round brings its total raised to $144 million after the firm raised a $48 million Series B led by Accel in April 2020.
- Melio targets the B2B market by offering small businesses an easy-to-use tool for paying suppliers and controlling cash flow.
- Since the start of the pandemic, Melio says it has seen its payments volume increase by 700% as many small businesses start to digitize payments that were previously done via check.
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Business-to-business payments platform Melio has raised $80 million to make it easier for businesses to pay their suppliers.
The new Series C funding, led by investment fund Coatue Management, brings Melio’s total funding to $144 million, the company said.
The company also raised an unannounced $48 million Series B round led by Accel in April 2020.
Other backers include Bessemer Venture Partners, LocalGlobe, and General Catalyst.
The two-year-old payments provider aims to digitize the still largely-analog B2B payments market in the US by offering small businesses an easy-to-use tool for paying suppliers and controlling cash flow. Around 42% of B2B payments in the US are still carried out using paper checks, according to the Association for Financial Professionals.
While other payment providers such as $36 billion US platform Stripe focus on the business-to-consumer (B2C) market, Melio is a B2B solution targeting small businesses. With relatively low transaction volumes, it’s cash flow not automation that is the main challenge for small businesses, according to CEO Matan Bar.
“[The existing] tools are overwhelming for a small business owner, as they are designed for finance professionals and larger businesses,” Bar told Business Insider. “I can assure you, a wine shop owner doesn’t want to re-invent their back office; they don’t care. The thing that they do care about is cash flow, especially now more than ever.”
Adam Fisher, partner at US venture capital investor Bessemer Venture Partners, said that Melio targets a huge, largely underserved market.
“The bottom line is that B2B payments is massive, but uncharted territory, and Melio is the first startup to focus on it,” said Fisher.
“The difference between B2B and B2C in [small business] payments is more profound than the single letter difference may imply,” he added. “Unlike consumer transactions, where you order and pay at the exact same moment, businesses order from their vendors at one point in time and then pay at a later point … This introduces a level of workflow that is essential for any B2B payments solution.”
Accelerating out of a crisis
When the coronavirus crisis first hit, Bar thought that Melio would lose a chunk of its client base as many small businesses struggled to stay open. But, since the start of the pandemic, Bar said Melio has seen payment volumes increase by 700%, as the fallout was more than offset by the widespread digitization of the sector.
“The thing that we hadn’t predicted is that there would be this huge wave of small businesses that have started transacting online for the first time because they didn’t have any other choice,” said Bar.
The raise will allow Melio to double down on its growth and accelerate R&D investment in its cash flow services and to build a platform that will allow integration with other suppliers’ interfaces, as it already does with Intuit’s accounting software QuickBooks.
America’s fragmented banking system means that there is huge market potential, adds Bar.
“There are so many inefficiencies that technology and fintechs can help with in order to better support consumers and small businesses in terms of how they move money,” he said. “That’s why we have such a unique opportunity at Melio.”
Confidence in the crowded global payments space has been knocked by the $2 billion accounting scandal that hit German fintech Wirecard earlier this year.
“It’s a big responsibility for fintechs in general to have compliance and risk as their number one priority,” said Bar, adding that Melio provides a different kind of payments service than Wirecard.
He added: “We’re not working with intermediate companies like Wirecard. We are working directly with US banks and so we took a path which is different than what other startups like Wirecard have taken, which [is to] shorten their go-to market, but add risk.”