Reducing Risk for Main Street

Basis Set Ventures
Aug 15, 2019 · 3 min read

It’s easy to take for granted the benefits of being a large enterprise; the sheer size and weight of corporate balance sheets offer a reprieve from many of the day to day fears of cashflow and fulfillment uncertainty that plague small and medium businesses of main street.

But to help these businesses, it’s going to take more than SaaS. Where large businesses benefit from dashboards and workflows, small businesses need solutions that mitigate risk entirely — either by offloading risk to third parties or finding creative ways to retain and contain risk.

We’re seeing emerging startups sit horizontally across industries to offer automated payment terms to businesses that can be passed on to customers without taking on new balance sheet risk. This allows businesses to become more competitive and grow top line without changing operating behaviors. Payment terms are trivial for the biggest players and the biggest transactions, but for smaller businesses, cashflow remains a challenge. The emergence of OCR, RPA and alternative data sources are making it possible to underwrite smaller and historically more risky transactions

Beyond cash, large reinsurers are starting to dip their toes into servicing startups that aim to offload risk for traditional businesses. Most Fortune 500 companies carry some amount of supply chain risk, but small and medium businesses are often one transaction away from ruin. Imagine if a startup was able to provide drayage services and, instead of just providing a dashboard for transparency, could guarantee a fulfillment timeline against a proprietary, real-time, supply chain data flow. Further imagine what it would mean if this guarantee could easily be transferred to business owners and passed on to their own customers at a small premium. Not all risk can be managed this way, but it’s easy to dream about the benefits for inventory management or autonomous materials procurement.

The B2B commerce startups bringing these robust value propositions are bringing them as managed marketplaces and managed platforms: traditional two-sided marketplaces and platforms with services entities weaved into their architecture. Envision a seafood or produce marketplace with built in customs management, computer vision product inspection and a spoilage guarantee for perishables. What previously would take an irrecoverable bite out of margin can now be largely automated and deployed at-scale with only small human checks and balances. The line between human and machine continues to blurry and with it, entirely novel products and services will result. These emerging tools will connect small businesses and allow them to manage risk in ways that make them more competitive with their large enterprise brethren.

BSV frequently hosts small-group dinner discussions with leaders and innovators in a given industry; our next event will focus on opportunities for B2B commerce. If you share our optimism for Main Street tech, managed platforms and marketplaces, and the future of B2B commerce, please reach out!

Authored by John Mannes, investor at Basis Set Ventures

Basis Set Ventures

Investing in AI and the Future of Work

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