Cash flow is all important for small businesses — it’s the difference between life or death — so it is frustrating when customers don’t pay invoices up front. Nothing puts a strain on finances quite like waiting 30, 60 or 90 days for your money, and that’s not even mentioning the resources spent following up and chasing down payment.
Scenarios like this are where Kickpay, a startup that is graduating from Y Combinator‘s latest batch, hopes to make a difference.
Kickpay’s service is essentially a secondary market for invoices. Companies, and in particular more-financially conscious SMEs and startups, post details of confirmed invoices which are sold to investors who can get a quick return on their money. The arrangement gives the seller most of their capital upfront — avoiding the painful, often critical, wait for funds — while Kickpay claimed an investor can get a ‘double-digital’ return on an annual basis.
“SMEs are busting their asses to make great products, but they start being a bank when doing deals with Costco or other large organizations.” Kickpay CEO and co-founder Andrew McCalister told TechCrunch in an interview. “It’s like me buying a latte, but paying for it 30 or 60 days later.”
Kickpay plugs into a company’s Quickbooks or banking software to make pushing invoices out to its marketplace quick and easy. The service uses “market dynamics and a sophisticated data model” — via a partnership with Wells Fargo — to generate its rates.
In one example, McCalister said that a $10,000 invoice could pay out $9,800 up front for the company needing cashflow.
“Investors can make 1.5-2 percent per month,” he explained. “It’s not like a normal loan: they’re betting on when Costco will pay out, which has less risk than an SME paying back over a two-year period, for example.”
Kickpay has been in an invite-only beta for the past two months. While McCalister declined to say how many businesses and investors are on the platform at this point, he did reveal that the service has provided more than $1 million for companies.
The startup previously secured angel funding from former PayPal, Mint and Palantir executives — McCalister said the goal was “getting their brains on board” — and, after graduating YC, it will look for engineers to build out its product. A primary objective is to make things super easy for investors, matching them with the right companies quickly and minimizing the steps they take when investing.
Similarly, Kickpay is seeking those with fintech experience to make its platform suitably robust for large volumes of transactions. Its predominant focus is on the desktop web, because it isn’t for spontaneous financial decisions, but an analytics/read-only mobile app could come in the future.
Also on the roadmap is monetization. Right now, Kickpay takes no fee but McCalister said it will, in time, take a cut from both companies and investors. The exact size of that is still to be decided.
The concept of Kickpay is not new and happens offline already. McCalister estimated that the size of that market alone is $3 trillion worldwide, but he believes a simple solution that caters to small companies is sorely missing.
“[Many of] our clients have never used the traditional alternative because of the terrible flow involved [such as faxing documents] or a lack of knowledge,”McCalister explained. “There’s a whole new market that we can reach.”
The startup began when McCalister, originally from Scotland, saw the potential to speed up the payment process while at Heyzap, where he was director of business development. He founded Kickpay alongside Stefano Bernardi, formerly with Betable, and Sean Watters, who spent time with Intuit and Yardsellr.