FastPay Raises $25M To Tackle Digital Media Cash Flow

FastPay, a startup offering credit lines to digital media companies, says it has raised $25 million in new funding.

That may sound like a weirdly specific business model, but founder and CEO Jed Simon tells me via email that FastPay is solving a big problem in the online advertising industry — the fact that it can take forever to get paid. According to a survey conducted by the Internet Advertising Bureau, it takes 60 days or more to get paid on 80 percent of invoices.

So for example, if you’re a video syndication startup and you win a $2 million ad contract, the advertiser won’t pay you for months, and in the meantime you have to front the money for the campaign. In this situation, the best course of action may be to raise a sizable venture round, but that probably means selling a lot of the company.

“In general, banks are not lending and certainly not to small businesses (under $50mil in revenues),” Simon says. “If you then factor in the relative nascency of the digital media sector and you needn’t bother apply to commercial banks — it simply isn’t going to happen. Venture debt is available to a very small subset of the ecosystem, but it’s a high friction, inflexible, slow, and costly solution — we believe we have a better product.”

So instead of raising a venture round, companies can borrow from FastPay. The startup offers credit lines of up to $5 million to publishers, social media marketers, creative studios, and ad tech businesses.

FastPay’s business model reflects a distaste for traditional equity financing, and its new funding does too. The money includes credit from Wells Fargo Capital Finance, plus a combination of debt and equity from SF Capital Group. Simon says that by focusing on credit rather than equity, the company is “eating our own dog food,” adding, “Our business model is predicated on offering credit to growing businesses, so in effect we raised equity to cover our core infrastructure and development and then used debt instruments to bolster our balance sheet to offer credit to our clients.”

The company has now raised a total of $30 million. Neil Wolfson of SF Capital Group and Jason Kaplan of Howard Capital Management are joining the FastPay board.