Recurring revenue as an asset class is a relatively new idea, and firms like Pipe, which have created a marketplace linking investors to businesses with regular, recurring earnings, have helped make it more well-known. A competitor has been discreetly constructing a firm in the same market with a laser focus on small and medium-sized enterprises (SMEs) participating in global supply chains, while Pipe has raised over $300 million to date and was valued at $2 billion last year. With participation from Bold Capital Partners, TFX Ventures, and Augment Ventures, that participant, Crowdz, recently obtained $10 million in funding co-led by Citi and Dutch growth equity company Global Cleantech Capital.
Simply said, Crowdz began by providing small and medium-sized enterprises with a mechanism to sell invoices to investors for finance. The company now wants to assist businesses with recurring income in getting the upfront financing they want without reducing their equity by accepting venture funding or taking out loans. Its most recent product is specifically made to benefit subscription, membership, and SaaS (software-as-a-service) service providers. While Pipe initially had a similar SaaS focus, it has recently broadened its scope to include working with non-SaaS businesses. After serving as B2B supply-chain senior managers for global procedures at Cisco, Payson Johnston and Steven Lee founded Crowdz in 2014.
The two founded Crowdz as a result of their experience, and they bootstrapped the business for its first five years. A $5.5 million Series An investment round for Crowdz was co-led by Barclays Bank and Bold Capital Partners in 2019. The business has raised $25.5 million in total so far. Obtaining sufficient funding to meet operational expenditures, particularly in the beginning, is a significant issue in establishing a firm, according to Johnston. “While the money you make from selling goods and services can cover certain expenditures, it might not be enough to pay for expenses that require a lump sum of working capital, such as starting a new business, marketing new goods, or investing in expensive equipment.
We are concentrated on finding ways to help SMEs increase their cash flow so they may prosper. That serves as our primary motivator. With this most recent investment, Crowdz and Citi hope to work together to help SMEs “get speedy and efficient access to the operating cash required to maintain their enterprises.” According to Crowdz, it is the only fintech company outside of banks that provides both invoice-based and recurring revenue financing. Through the backing of more than 20,000 bills, Crowdz has throughout the years funded $55 million in receivables. To put it another way, it has given SMEs more than $55 million in working cash.
The firm has around $2.2 billion of receivables loaded on its platform, and by funding more than $1 billion in receivables by next year, it hopes to assist more than 25,000 SMEs. It just entered into a significant agreement to finance up to $100 million in invoices for minority- and diverse-owned businesses in the United States with Supplier Success, Facebook/Meta, and Supplier Success. By deducting a basis point from each dollar invested, Crowdz generates revenue. It is beginning to consider subscription models with its new recurring income service.
So, while Pipe and Campbell, California-based Crowdz both run marketplaces, the firm claims it offers more than just link SMEs and investors. In order to enable SMEs “to get paid early at competitive rates,” it also interacts with their accounting, payment processing, and banking systems. Crowdz claims that through providing invoice and recurring income financing, it hopes to increase the chances of success for SMEs by facilitating access to cash. According to Johnston, who also serves as the company’s CEO, “We both support the SMEs by being able to acquire receivables, invoices, and SaaS contracts through our platform, which brings other funders together.”
Or, we might partner with businesses like Citi, Meta, and the city of Detroit to white label it. The signing of these channel partnerships, which we will rapidly increase, is now our main focus. According to Johnston, the company’s strategy is primarily concentrated on that white label service, which currently accounts for around 80% of its income.
In reality, Johnston explained, “we’re working through corporations and financial institutions. We’re not attempting to go straight to SMEs.” But probably the most distinctive aspect of Crowdz’s work is that it was created on Ethereum in 2017. Underneath it all, Johnston says, “We are tech play.” The business has so far requested eleven patents, and Johnston and Lee claim that data science is at the core of everything they do.
To fill the vacuum in SME financing, for instance, Crowdz has created what it refers to as “proprietary” risk scoring that provides banks, financial institutions, and DeFi lenders “access to attractive risk-adjusted, diversified returns.” “At the moment, banks and other financial institutions use a company’s financial statements, cash flow, balance, cash flow statements, and profit and loss to determine how risky the company is. “They could try to forecast future behavior using nine months’ worth of prior data,” Lee told TechCrunch. “We are able to use that data and be able to anticipate the financial health of a firm in virtually real time through the usage of these micro-transactions called invoices.”
