Luge invests in Plooto’s $8M Series A to eradicate paper-based payments for SMBs

We announced today the completion of a new investment in Toronto-based Plooto, a fast-growing B2B payments company focused on cash flow automation for small and medium sized businesses. Luge Capital participated in the CAD $8 million round, which was led by FINTOP Capital (Nashville, TN), a fintech-focused venture fund operated by industry veterans John Philpott and Jim McKelvey, co-founder and board member of Square. Our attraction to Plooto is rooted in the massive market opportunity, the relentless perseverance of the team, and the technical capabilities of the product suite.

The Problem

The act of one person (or entity) paying another person (or entity) is as old as money itself. For as long as stored value has existed, transferring that value has been the essence of commerce. Even in the digital nirvana that currently surrounds us, moving money is still surprisingly slow and complicated, especially for small businesses.

According to a recent Goldman Sachs report, 70% of SMB payment volume is still paid through paper checks, and companies currently spend $2.7 trillion globally on manual, paper-based processing. In the US, one of the most advanced economies in the world, paper checks are still 42% of all B2B payments volume.

And the costs (both direct and indirect) to manually process B2B payments are shocking. Based on data from the Federal Reserve, as described by LEAP Partners, here is a breakdown:

• Direct Cost: $17 average cost to process and pay a single invoice. According to the Federal Reserve Bank, small businesses spend $9 billion per year on paper invoices alone.
• Time: Comdata estimates that it takes businesses at least 10 days to process a single invoice. This can push out the time to receive cash to as much as 30 days for a simple invoice.
• Risks: Manual processes always carry inherent risks. Companies report as much as 18% error rate in paper invoices and 75% of businesses experienced fraud.

The Plooto Solution

Plooto is on a mission to eradicate manual processes for payments, so that paying another business is not only trivial, but fully automated. The platform empowers the finance teams for small businesses to seamlessly pay suppliers, receive payments, settle invoices and automate the accounts payable (AP) and accounts receivable (AR) functions, domestically and internationally. It is sophisticated enough to enable robust financial controls, yet simple enough to quickly initiate a payment in seconds, all digitally. The platform also integrates with popular accounting systems for easy reconciliation of bills and invoices, so the financial information of the company is always current.

Plooto is trusted by more than 5,000 SMBs in Canada and the US, and they have a growing network of more than 120,000 businesses so customers can discover and transact with billers, suppliers and vendors across North America.

When Covid first crippled the world in March 2020, the hardest hit industries were the ones that relied on manual pen and paper processes. Companies were not able to easily issue paper checks anymore, and if they did, there wasn’t anyone on the other end to receive them. There was a major shift towards digital payments and infrastructure that was necessary to keep these small businesses running. In that context, Plooto stepped up and provided their customers with a hassle-free tool to keep funds flowing efficiently.

“Poor cash flow management is responsible for approximately 82% of SMBs failing. At Plooto, our mission is to empower finance teams so they can ensure their businesses thrive.”

-Hamed Abbasi, CEO of Plooto

The Market is Massive and the Benefits are Real

Each year, businesses pay other businesses more than $120 trillion globally. In the US alone, the market is more than $25 trillion. For context, the total market size for all goods and services retail payments is about $11 trillion, according to Nilson. And, as described earlier, the bulk of these B2B payments run on archaic, manual processes.

The business model for traditional retail payments are well defined and generally one-dimensional: a payment processing fee and/or interchange. For person-to-person payments (Interac, PayPal, Venmo), the revenue opportunity is either non-existent or is a small fee. However, in a B2B context, revenue streams can take many forms, including transaction fees, cross-border FX spreads, tiered SaaS licenses and float on stored value.

Since a platform like Plooto’s removes so much pain, increases efficiency and reduces manual process, customers value the service tremendously because they can focus on running their business.

Very soon, the complexity of traditional paper-based checks will disappear, and business payments will be instant, fully automated and will fade into the background. The pen won’t be as mighty anymore!

-Karim Gillani, General Partner, Luge Capital

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Plooto is currently hiring for the following roles:

• Director, People Ops
• Senior Full-Stack Developers
• Senior Front-End Developers
• Director of Channel Sales

Please apply here: Plooto Job Board

About Luge Capital

Luge Capital is a FinTech-focused venture capital fund, investing in early-stage teams shaping the way the world experiences financial services. We invest in fintech and AI solutions applied to financial services and love when entrepreneurs challenge the status quo. We work with dedicated founders who are driven to solve real problems that affect people on a global scale. We are an experienced team of operators with a deep industry network to help leaders build successful companies.