Toronto FinTech startup FundThrough has acquired the invoice factoring business of one of its biggest competitors, in a move that significantly expands its United States (US) footprint.
FundThrough provides invoice factoring for small and medium-sized businesses (SMBs) that, similar to Clearco’s revenue financing model, allows companies to sell their unpaid invoices to FundThrough and get cash upfront for their business needs.
“Something clicked in the last 12 months where we went from knocking on doors to getting a lot of unsolicited interest.”
Founded in 2014, the Canadian company recently bought the invoice factoring business of Silicon Valley FinTech company BlueVine.
Created just a year before FundThrough, BlueVine started out in the invoice factoring business. In an interview with BetaKit, FundThrough co-founder and CEO Steven Uster explained how BlueVine had moved away from that part of its business in recent years.
BlueVine currently operates as a digital banking alternative for businesses, providing everything from lending to checking accounts.
BlueVine’s invoice business, while no longer core to the company, was a longtime competitor to FundThrough; competition that Uster says FundThrough has “now eliminated.”
“[BlueVine’s CEO and I] were talking about ways that they could maximize value for an asset that was no longer core for them,” said Uster. “So they decided that … one plus one equals four in this case where there’s more than just natural cost synergies, there are a lot of revenue synergy opportunities as well, which is unique. It’s not easy to find a fellow tech-enabled factoring business, it really isn’t out there.”
RELATED: FundThrough commits $10 million to help small businesses after federal government rejects FinTech COVID-19 relief proposals
FundThrough claims the deal establishes it as the largest artificial intelligence-powered invoice funding platform in North America, processing over $120 million dollars a month.
The deal doubles FundThrough’s US customer base, with the company jumping from 55 percent of its business south of the border to 80 percent.
While the acquisition is a major accelerant for FundThrough, the company has been on an upward trend over the past few years, as familiarity with the type of financing options that FundThrough offers – think Clearco or Boast.ai but for invoices – has grown.
FundThrough works with both individual businesses and companies like QuickBooks, offering its technology as an embedded finance option. Uster noted the recent trend of companies of all sorts adding FinTech to their products led to companies seeing the benefit of FundThrough.
“Years ago, we would knock on doors of these marketplaces, these B2B marketplaces, and say, ‘hey, look, we’ve got this great funding solution and why don’t we work together?’” explained Uster. “And we’d always get answers like, ‘oh, not the right time or we’re not sure we have other priorities, it’s not on our roadmap.’”
“Something clicked in the last 12 months where we went from knocking on doors to getting a lot of unsolicited interest in working with us,” he continued. “Because we are so well-positioned, having now been eight years, almost eight years in the making, and we’re really ‘the’ player in the tech-enabled invoice factoring space.”
FundThrough has been backed by notable Canadian arts impresario David Mirvish (of the Mirvish family).
Without providing definitive numbers, FundThrough claims its revenue has increased by more than 1,071 percent over the past three years. Since last year alone, that revenue has increased by 300 percent.
FundThrough’s target customers are SMBs that sell product to larger businesses. Uster argues that the benefit of invoice factoring is about SMBs having control over their cash flow.
According to recent QuickBooks data, past due invoices present a significant problem for mid-sized businesses, impacting cash flow, and, ultimately, long-term business growth. The survey found that a majority of mid-sized businesses were struggling to collect customer payments in 2021.
FundThrough’s AI makes assessments about SMBs invoices (tracking history of payment etc.) and the company is then able to provide upfront cash while the business waits for payment. Uster says SMBs selling to larger businesses is FundThrough’s sweet spot as the payment, while often delayed, is more than likely to be guaranteed from a large customer – making it a safer bet for FundThrough.
As FundThrough looks to capitalize on its recent success, the company is eyeing more channel partnerships and deals with B2B marketplaces that can embed the company’s tool into existing invoicing services.
The startup is currently fueled by $25 million in equity financing and credit facilities from Northleaf Capital Partners, which fuels its loans. Given its recent acquisition, Uster says Northleaf recently upped FundThrough’s $50 million credit facility, allowing the company to support its expanded customer base.
On the equity side, FundThrough has been backed by ScaleUP Ventures, Real Ventures, and notable Canadian arts impresario David Mirvish (of the Mirvish family). The latter discovered FundThrough through ScaleUP, which Mirvish is also invested in.
The head of Toronto’s Mirvish theatre companies invested in FundThrough because his parents relied on that type of funding model to open a shop in 1941 on Toronto’s Bloor Street West that later turned into the famous Honest Ed’s.
FundThrough has not raised any new equity financing since 2020, as Uster says the business is capital efficient. But the startup will be looking to investors again this year as it looks to capitalize and further accelerate its growth.
Feature image courtesy FundThrough
UPDATE 13/01/01/2022: This story previously incorrectly stated that Relay Ventures was an investor in FundThrough. This has since been updated.