Cashflow management startup Settle announced its second round of funding in five months, this time $60 million in Series B financing as it aims to carve out a niche in the $25 trillion business-to-business payments market.
Settle was founded by Alek Koenig in 2019, after spending four years as head of credit at Affirm, to provide alternative lending to businesses. It combines payments, financing and accounting integrations into one tool so that brands can scale faster.
This has become more relevant as the global pandemic created supply chain issues that plague many brands that are selling out quickly and then experiencing inventory shortages that extend beyond the typical 30-day and 45-day pay terms. Settle takes over those upfront costs for vendors and provides a financing plan for brands.
“The really unique thing that we do is extend payment terms where we’ll pay the customers’ vendors with Settle money, and the company can pay us back 30 to 120 days later,” Koenig told TechCrunch. “They can use revenue from those purchases like inventory to pay us back.”
Settle is working with customers like Italic, Huron, Brightland, Branch and Better Booch. Rebecca Zhou, founder of Soft Services, said via a written statement that Settle was “a game changer” for her skincare company so that she could finance its inventory purchases to continue growing.
The latest investment was led by Ribbit Capital, with participation from Kleiner Perkins, Caffeinated Capital, Activant Capital and Stripes. It comes five months after Settle announced a $15 million Series A round, led by Kleiner Perkins, to give the company a total of $100 million raised to date.
The company wasn’t planning on raising additional funding, but between customer growth, volume, payments and lending, Koenig said it became clear that the company needed to think about going after additional funding. It also gave Koenig an opportunity to bring on Nick Shalek, general partner of Ribbit Capital, as a member of the company’s board.
The e-commerce space is only growing, even through COVID-19, with every business starting to think about e-commerce as core to its business, or at least a part of it, Shalek said. Rather than spend more time on back-office work, Settle enables them to prioritize what drives their business growth.
“I invested because of the team — Alek and Shane (Moriah, CTO) are terrific, but also have the right background and experience to tackle the problem,” he added. “They have a deep understanding of risk and the capital market. You could see a huge pull from the market, and every time we could check in, the company was growing by multiples, attracting talent and was benefitting from the tailwind in the e-commerce market.”
Meanwhile, so far in 2021 Settle has increased its revenues 20 times and grew to 500 merchants since last summer.
The additional capital will enable the company to introduce more products quickly and hire, primarily engineers. Koenig expects to grow from 40 to 100 employees by next year.
“This equity helps us unlock debt, which is our oxygen,” he added. “Just given the increased customer demand, we are able to raise more debt and build our future roadmap.”