Building the modern credit network for B2B payments: why we invested in OatFi
By Eddie Lee, General Partner, Spencer Henry, Vice President, and Ted Vinnitchouk, Analyst
TLDR: White Star Capital is proud to have lead OatFi’s $24m Series A round alongside existing investors QED and Portage to build the modern credit network for B2B payments.
In the US alone, over $35 trillion of B2B transactions are completed each year, but less than 20% of that is done digitally. This pales in comparison to B2C’s digital penetration, of which 70% of transactions are completed digitally.
Platforms such as Bill.com, Corpay, and PayCargo have helped drive the digitisation of B2B transactions, offering higher fidelity and near real-time monitoring of payment data between suppliers, buyers, and financial institutions. However, the segment’s Achilles heel remains a lack of access to flexible lending products, which is key to every business in some way or another.
This is especially relevant to the SMB segment, which makes up 99.9% of U.S. businesses and contributes around 50% of the country’s GDP, yet 67% of SMBs have been rejected by traditional lenders at least once.
The B2C segment has already seen embedded take off in the B2C segment with the explosive growth of BNPL providers such as Affirm, AfterPay, and Klarna. However, the opportunity in the B2B segment remains significantly untapped, despite being much larger. B2B payment volume is 3x larger than B2C volume, but even better, SMBs tend to have 2.5x higher creditworthiness than the average consumer in the US.
It’s a massive opportunity that has flown under the radar for far too long
Enter, OatFi.
OatFi is solving this fundamental pain point by enabling B2B payment platforms to facilitate transactions with built-in financing at the point where it’s needed most for buyers and suppliers–payment terms.
OatFi embeds directly into B2B payment platforms’ Accounts Payable (AP), Accounts Receivable (AR), and commercial charge card workflows via APIs, granting them access to the financial data needed to seamlessly underwrite, originate, and fund businesses already using these payment platforms.
With OatFi, SMBs can access instant credit for working capital, no longer subjecting them to cash flow challenges from payment term mismatches with their suppliers. It’s a game changer.
Let’s take a look at how OatFi changed the game for Order.co, an advanced spend management platform which helps businesses with physical presences streamline every aspect of procurement and manage all vendor spending in one centralised platform.
Order.co identified an opportunity to extend payment deadlines for its customers by 30, 45, or 60 days. However, this required significant capital and resources to execute well, which quickly became challenging for Order to manage in-house at scale.
Instead of developing their own credit stack, Order partnered with OatFi. Through OatFi’s APIs, Order was able to seamlessly submit customers’ KYB and financial data for underwriting and receive an approval decision from OatFi instantaneously to fund their customers’ daily spend (as shown in the graphic below), saving Order both time and engineering resources and allowing them to focus on customer acquisition and growth.
So, why did we invest?
From the get-go, we knew the market opportunity was massive and growing.
As we learned more, we quickly realised OatFi’s product isn’t just a nice-to-have. By inserting itself via API to be called upon at the point of payment, OatFi is a must-have solution, providing the needed capital to facilitate trusted B2B transactions.
What truly stood out to us, however, was OatFi’s highly efficient go-to-market strategy. OatFi’s ability to access a huge customer base of SMBs via direct integrations with other payment platforms has allowed the business to process $500m in originations through 25+ partner platforms in just three years without spending a single marketing dollar.
Even better, as each partner grows its own business, OatFi benefits by adding incremental borrowers at no additional cost.
This go-to-market strategy wouldn’t be possible without OatFi’s API-first approach. Most other solutions offer widget integrations at the point of checkout, often requiring costly and time-consuming modifications to payment platforms’ existing payment flows and UI/UX, and in some cases, forcing payment platforms to build their own in-house lending functions.
OatFi takes a more logical and scalable approach by integrating directly with each partner platform’s existing flow of funds and UI/UX, equipping partner platforms with the ability to simply “turn on” these highly desired working capital products, powered by OatFi behind the scenes, within their existing platform.
An exceptional team, equipped to lead a massive paradigm shift
OatFi is led by a top-notch team. Mike Barbosa, CEO, is a repeat founder and previously worked in Fixed Income at Morgan Stanley. John Jordan, CTO, previously founded and ran his own software development agency and worked as a Lead Engineer at Disney. Together, they bring the right set of financial and technological expertise required to scale an innovative lending infrastructure business such as OatFi.
The duo are joined by CRO, Yousef Master, who brings decades of credit risk experience from his 20 year tenure as Head of Commercial Real Estate at Capital One, and Jim Glinski, CFO, who spent 20 years as the Executive Director of the Securitized Products Group at J.P. Morgan and CFO at various FinTech startups.
We’re thrilled to partner with such an impressive team alongside QED and Portage. We look forward to supporting OatFi as the latest addition to White Star Capital’s portfolio as they advance on their mission to build the modern credit network powering the $35 trillion in annual US B2B payments.
