Contempo, a startup that offers buy-now, pay-later (BNPL) and interest-free payments to business-to-business (B2B) customers, today raised a $30 million seed round in equity ($6.5 million) and debt ($25 million). CEO and co-founder Matthew Meehan told TechCrunch that the new funding will be used to hire employees, grow Contempo’s merchant network and further develop the platform’s technology.
As BNPL gains more play in the consumer market, with giants like Klarna, Afterpay and Affirm doing their best to corner it, alternative, fee-based payment plans have been slow to make inroads into the traditionally conservative enterprise. While most B2B purchases and purchases are spread over time (eg net 30-day terms), the deals are not typically structured like consumer-style BNPL plans. High processing fees are often involved, with 35% of businesses reporting in an Ardent Partners survey that it costs $8 to process a single supplier payment. And delays are frequent. A separate report found that it takes an average of 30 days to complete a payment and 47% of suppliers are paid late for their products or services.
Meehan said he and Contempo’s co-founders, Antonia Marino and Kwesi Steele, saw an opportunity to address these challenges in one platform.
“Three important insights from our previous work led to the launch of Contempo,” Meehan told TechCrunch in an email interview. “Most companies selling to small and medium-sized businesses must offer sales financing or ‘net terms’ to be competitive. Moreover, there are currently no viable options to outsource this functionality. Finally, fast and flexible payment terms at the point of sale lead to higher average order prices and higher Total sales lead – same as BNPL in consumer segment.
Meehan was previously an analyst at Morgan Stanley and an associate at Lehman Brothers in the Latin American business at Merrill Lynch. Marino was a senior regional operations manager at Uber in Mexico City, and Steele was a senior sales manager at Google.
Kontempo allows sales teams to approve offline or online purchases with 30, 60 or 90 days of credit. Alternatively or additionally, enterprises can use Kontempo’s API to deploy a BNPL option at checkout that does not require credit card or bank account information.
To minimize risk, Contempo captures data from merchant partners and feeds it into an algorithm that determines loan eligibility. The algorithm — which takes into account a variety of factors that Meehan declined to disclose — allows Kontempo to reach a wider range of small and medium-sized enterprises (SMEs) that are typically turned down for loans.
“Kontempo sees an opportunity with its BNPL product to increase the use of digital payments in the B2B space, increase sales for both online and offline distributors and small and medium suppliers, and be an early mover in building the critical payment infrastructure for small but fast. B2B e-commerce. “The market is growing,” Meehan said. “Kontempo is a pioneer in this space where suppliers are themselves the providers of small and medium-sized point-of-sale financing. We have created the technology to enable suppliers to provide this functionality.”
It is whether there is strong appetite in B2B for the products that Contempo sells. To some extent, invoicing platforms offer what Kontempo intends to solve the problem – by guaranteeing payments – by giving suppliers a large cash advance. With invoice, the supplier sells the unpaid invoice to the factory company (for a fee) and receives an advance payment (usually 90%) in return, and the rest of the price is paid by the factory to the supplier after the buyer has paid. Receipt (in addition to payment) to the manufacturing company.
But Meehan makes the case that factoring does not provide the “quick sales financing” that BNPL is capable of. “They are a liquid solution after the transaction,” he said, referring to inspection platforms. “In the case of credit cards, you can settle for the same pain points, but usually SMEs don’t use cash for purchases because credit limits are low and interest rates are too high.”
The proliferation of Contempo competitors suggests this is true. Funding Circle, a fintech lender for SMEs, has launched FlexiPay, a BNPL program for business customers, after a successful pilot. Berlin-based Billy, another B2B supplier BNPL, is valued at more than half a billion dollars and recently received funding from Klarna and Chinese tech giant Tencent. Smaller entrants in the sector include Playtor, Hokodo, Mondu and Trench, along with the largest funding rounds in the sector.
Indeed, as consumer-focused startups BNPL’s valuations have declined and its share price has tumbled in recent months, investors are mostly putting heavy pressure on B2B BNPL as a product category – risk of a payday loss aside. As a recent CNBC piece notes, BNPL’s services are becoming increasingly popular, especially among small and medium-sized enterprises (SMEs), which are seeing rising inflation.
As for the proliferation of paper checks in B2B, Meehan admits it’s a tough problem to overcome — along with rising interest rates, which make the terms of certain payment plans less attractive. But on the first point, Meehan said the pandemic has prompted a migration to e-commerce models for many B2B industries.
Contempo has signed contracts with 26 business partners in Mexico. These 26 merchant partners represent access to more than 100,000 SME buyers or end users of our products.” Meehan spoke when asked about Contempo’s early market traction and near-term growth prospects. “The company is on track to run nearly $1 million in monthly payments by the end of 2022… We have a three-year runway.
Contempo plans to “at least” double its 11-person workforce by the end of the year, Meehan said. To date, the company has raised $32.5 million in venture capital. Portage led the seed round with participation from Scor P&C Ventures, Upper90 (which provided the credit facility), Ignia, Tectonic Ventures and Asymmetric Capital Partners.
