March 15, 2022

B2B fintech platforms: the operating system of the organization

B2B fintech platforms are at the heart of many growing businesses. By focusing on verticals rather than staying broad, these solutions can dominate and find space to grow, stacking industry-specific products and services for further success.
Capchase x MIT FinTech Conference

We were delighted to be included in the student-run MIT FinTech Conference this year. Our Co-founder & CEO, Miguel Fernández, spoke on a panel about the rise of vertical B2B fintech solutions and the emerging trends and industries ripe for disruption.

Miguel spoke with Songe LaRon, Co-founder & CEO of Squire, and Rodrigo Garcia de la Cruz, Founder & CEO of Finnovating, about their journeys building Fintech platforms, and why focusing on verticals is the way forward.


B2B payments are a huge part of the global economy

While many people think of B2C as where companies can really scale, and where the bulk of  high-volume transactions occur, B2B is what dominates payment flows globally. Every 25 days, the value of the world’s entire GDP makes its way through B2B payments, and $20B a year in revenue is being generated through B2Bs in the US alone. This is a fast-growing field which has many untapped verticals just waiting to be offered the solutions that make their businesses more efficient (and more successful).


B2B requires an end-to-end operating system to fulfill all business needs

As Songe pointed out, when you focus on one particular industry and provide them with a full system that encapsulates the whole business, then you can fundamentally change their user experience. The profile of a small business owner is very different from a large corporation. They rarely have software built specifically for what they do. They may still be using pen and peper, or cobbling together 3 or 4 systems to make their business run in any manner. 

Songe knows this only too well. Squire is an all-in-one platform that focuses exclusively on barbershops, and as they were building the business, they ran a barbershop in New York. That allowed them to understand just how challenging it is as a barbershop owner to pay barbers, for example. There were a number of nuances that are not obvious from the outside looking in, that Squire really went deep to understand as they lived that experience. The result is that Squire dominates that space by providing an essential resource that was previously completely untapped by any of the bigger horizontal software and systems players. 

At Capchase, we’re now fulfilling this need for non-dilutive business funding. 


Why data is key when niching by vertical

Businesses that build within one vertical often are pressured to ‘go traditional’ and build out the same solution horizontally for other businesses. Should Squire support nail salons, for example? 

Miguel understands that pressure to create the same products but for other verticals. But at Capchase, we know that if you try and do something for everyone, it’s not optimal to anyone. We have built a platform to make non-dilutive financing more accessible, specifically for SaaS and subscription-based businesses that are looking to grow and have traditionally struggled to find the financing solution they need from traditional financial institutions.

A horizontal financial solution needs to fit everyone into that model and understand the probability of default generally, whether it be a lumber business, a sports shop, or a SaaS business. Which works when the market is going up, but is a disaster for companies when the market is going down. 

We could see that what SaaS businesses were using for finance was very different to what SMBs of a similar size were using. SMBs generally use every financial product available, from bank accounts to equipment leasing, to credit lines. But for recurring revenue models, which often have incredible growth year-over-year, they only had available a bank account, a credit card and maybe a money market account. And that just didn’t make sense from what we knew about the industry. 

By obtaining very specific vertical data, we can understand the nuances of when a business might succeed or fail. We can then make more informed underwriting decisions, which leads to more relevant business funding for the businesses.

 By building multiple products for one vertical and then bundling, we can also offer discounts in pricing in one area, for example, knowing we can get that back elsewhere. And the stickiness of the brand effect means a company can become distinguished in one space which makes it hard for a horizontal player to come in and offer something similar, knowing far less about our industry.

This is why Capchase can underwrite a business and offer working capital in just days or even  hours, rather than weeks as is the case with most horizontal lenders. We connect a company’s data sources, banking, accounting, revenue, and we use that and our knowledge of this vertical to understand the probability of the company being around in the next 12-24 months. 


How being a vertical player in B2B can pay off

While the amount of data that is available can be overwhelming, one place Rodrigo sees the data lacking is when it comes to identifying the decision-maker. While it’s obvious who your client is in a B2C business, that can’t always be said for B2B. Is it the CFO or someone in HR? Managing the data to reach the real potential decision-maker is key.

While Rodrigo sees the B2B space as a much harder one to scale, due to the sheer number of different business models (his company has identified almost 300 different models in the Fintech B2B space, with 5 new ones appearing every month), Miguel has a different attitude. If you can start working with one B2B customer, they are usually willing to invest more time and stick with you as a counterpart than a consumer, who is more likely to be fickle and want to move from one cool app to the next one quickly.

If you start with a handful of customers and create solutions that work for them, you can assume there will be another 100 like them, and more, and then scale in that way. As B2B gets these first assumptions right, they can then grow at incredible speed, provided they have access to programmatic growth funding that can really support their success.


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To learn more about programmatic growth funding visit Capchase.com/Grow