ScaleFactor raised $100M in a Year as VCs Chase Small business focused Fintechs

ScaleFactor, the accounting fintech serving the small and medium-sized business market, raised $60 million in venture funding, in its third fundraising round in about a  year.

To date Austin, Texas-based ScaleFactor has raised $100 million, completing a $10 million Series A round in July of 2018 and a $30 million Series B round in January.

Coatue Management, an early investor in Square and Shopify, led the Series C round, which also included existing investors Bessemer Venture Partners, Canaan, and Broadhaven Ventures. New investors Vulcan, Stripes Group and NextPlay Capital also participated.

ScaleFactor makes online financial software that enables small and medium-sized businesses to automate back-office tasks including bookkeeping and payroll. Business customers pay a flat fee to access the digital tools and services with packages starting at around $6,000 and reaching as high as about $30,000 a year.

Aiming to level the playing field, ScaleFactor and it’s backers say it's giving small and medium-sized businesses digital tools and insight typically reserved for large enterprises.

“Why is it SMBs can’t have on-demand bookkeeping services just like larger corporations without having a team of 50 finance people and access to the best accounting services,” said  Thomas Laffont, senior managing director at Coatue Management. “If you think of platforms like Shopify and Square, their taking individuals or small merchants and giving them the capabilities to do what was previously only for large companies. That’s a huge trend we believe ScaleFactor plays in.”

As part of the investment, Coatue gets a seat on the board, giving ScaleFactor access to a hedge fund that invested in Uber, Lending Club, Reddit, and Lyft in addition to Square and Shopify. “The proliferation of data is making platforms like ScaleFactor increasingly useful,” for small and medium-sized businesses that are looking for actionable insight in real-time, said Laffont.

ScaleFactor founder and chief executive Kurt Rathmann started the company from his living room after working as the CFO for a small business. Trained at KPMG, Rathmann was frustrated by the small business constraints he faced when it came to managing accounting and financing. Obsessing about how to meld the two became his pastime, leading him to form the company in 2014.

Six years later ScaleFactor has more than 1,000 customers and big names in tech investing as backers.

The company offers an easy to use digital platform that houses all of the business’ financial data. That gives business owners a complete view of their finances in real-time. With a News Feed like scrolling feature on the app, customers can decide in real-time to make business actions whether that's to pay an invoice or initiate payroll.  Its digital chatbot Marge is also on hand to answer questions on the go. “You can be on the run and really need the EIN number. Marge can text it back in three or four seconds,” said Rathmann, noting ScaleFactor products are all focused on saving small businesses time and helping them grow.

“In working with thousands of companies over the years, we’ve learned small business owners care about two factors above everything else: saving time and scaling their businesses.”

While ScaleFactor has its roots in accounting and financial management software, its expanding its services, which is where most of the proceeds from the fundraising will go. Rathmann said the business is evolving into a relationship one in which customers are coming to ScaleFactor for advice on other aspects of the business such as insurance. To capitalize on the deepening relationship between ScaleFactor and its customers, he said the company is developing a lending product that will be available in the fourth quarter.

The accounting platform provider is part of a growing list of fintechs that are going after the small and medium-sized business market. Ignored by the big banks for years, fintechs correctly bet small and medium-sized businesses were in need of digital services.  Venture capitalists are fawning over these fintechs, throwing hundreds of millions of dollars their way. Some already command billion-dollar valuations. Rathmann says ScaleFactor is headed that way as well. “Were are growing quickly. We’re not a unicorn yet but that’s the next step for us,” said the executive.

“We’re really excited about the diverse viewpoints now being brought to the company. We’re just getting to the net wave of what ScaleFactor will be.”

Source. Forbes, Donna Duscalso, August 8, 2019

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Aspire raises $32.5M to help SMEs secure fast finance in Southeast Asia

Aspire, a Singapore-based startup that helps SMEs secure working capital, has raised $32.5 million in a new financing round to expand its presence in several Southeast Asian markets.

The Series A round for the one-and-a-half-year-old startup was funded by MassMutual Ventures Southeast Asia. Arc Labs and existing investors Y Combinator — Aspire graduated from YC last year — Hummingbird and Picus Capital also participated in the round. Aspire has raised about $41.5 million to date.

Aspire operates a neo-banking-like platform to help small and medium-sized enterprises (SMEs) quickly and easily secure working capital of up to about $70,000. AspireAccount, the startup’s flagship product, provides merchants and startups with instant credit limit for daily business expenses, as well as a business-to-business acceptance and other tools to help them manage their cash flow.

Co-founder and CEO Andrea Baronchelli tells TechCrunch that about 1,000 business accounts are opened each month on Aspire and that the company plans to continue focusing on Southeast Asia, where he says there are about 78 million small businesses, leaving plenty of room to scale (applications can be made through Aspire’s mobile app and are reviewed using a proprietary risk assessment engine before getting final approval from a human). Aspire claims it has seen 30% month-over-month growth since it was founded in January 2018 and expects to open more than 100,000 business accounts by next year.

Baronchelli, who served as a CMO for Alibaba’s Lazada platform for four years, says Aspire launched to close the gap left by the traditional banking industry’s focus on consumer services or businesses that make more than $10 million in revenue a year. As a result, smaller businesses in Southeast Asia, including online vendors and startups, often lack access to credit lines, accounts and other financial services tailored to their needs.

Aspire currently operates in Thailand, Indonesia, Singapore and Vietnam. The startup said it will use the fresh capital to scale its footprints in those markets. Additionally, Aspire is building a scalable marketplace banking infrastructure that will use third-party financial service providers to “create a unique digital banking experience for its SME customers.”

Baronchelli adds that “the bank of the future will probably be a marketplace,” so Aspire’s goal is to provide a place where SMEs can not only open accounts and credit cards, but also pick from different services like point of sale systems. It is currently in talks with potential partners. The startup is also working on a business credit card that will be linked to each business account by as early as this year.

Southeast Asia’s digital economy is slated to grow more than six-fold to reach more than $200 billion per year, according to a report co-authored by Google. But for many emerging startups and businesses, getting financial services from a bank and securing working capital have become major pain points.

A growing number of startups are beginning to address these SMEs’ needs. In India, for instance, NiYo Bank and Open have amassed millions of businesses through their neo-banking platforms. Both of these startups have raised tens of millions of dollars in recent months. Drip Capital, which helps businesses in developing markets secure working capital, raised $25 million last week.

Source. TechCrunch, Manish Singh, Catherine Shu, July 31, 2019

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This post was brought to you by Woewoda Communications, your partner in the venture capital, private equity and startup markets; offering strategic communications, public relations & investor relation services to Canadian VCs, PEs, Angels, Endowments/Trusts, Family Offices, and Canadian startups involved in ICT, IoT, blockchain, life sciences, healthcare, agribusiness, clean energy, fintech, AI and robotics.

Are you a Canadian GP/LP/CI or a Canadian startup that needs to grow or scale? Give us a call! One of our representatives would love to explain how we vertically design, and then systematically layer each of our communication platforms to effectively reach niche target audiences for our clients. WC offers a unique synergistic approach to effectively communicate our client's message to their target audience.

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