Buy now, pay later services like Affirm, Klarna, Afterpay and many others have seen their businesses grow in huge leaps, as consumers buying goods increasingly turned to alternatives to credit to delay paying for them in full. Now a Berlin-based startup called Billie that has built a similar service -- but specifically targeting B2B transactions -- is seeing a lift of its own boat from that rising tide.
The company has raised $100 million in a Series C round of funding, money that it will be using to continue building out the range of BNPL-type services that it provides to organizations buying goods to run their businesses, both in Europe and further afield after passing 100,000 customers earlier this year.
The round is a mark of just how popular BNPL has become as a concept in the payments stack, but also how much investors are looking to get in on the act: the funding is coming in at a $640 million valuation, the company has confirmed, growing nearly 4x since its last round, a $35 million (€30 million) Series B in 2019. Billie says that this is the largest round yet in the B2B BNPL space -- which itself is also getting pretty crowded: competitors in this category include Resolve, a spinout of Affirm; and Tillit, which is backed by Sequoia (which also backs Klarna).
What is also notable about Billie's round is that it has a very interesting mix of financial and strategic investors. London's Dawn Capital, a specialist in B2B startups, led the round, with internet giant Tencent and Klarna also participating; previous backers Creandum, Speedinvest, Picus and GFC are also in the round.
Klarna's investment comes on the back of a major strategic deal between it and Billie. As Matthias Knecht, co-founder and co-CEO of Billie, told TechCrunch, the two are integrating their services, and it will mean that in cases where Billie has a stronger payments relationship, but a consumer transaction arises, Klarna will handle the sale; and in cases where Klarna is present but Billie is not, and a business is doing the buying, Billie's services will kick in.
Related to that, the company is also announcing hefty debt refinancing of $200 million per month (money to run the BNPL financing), coming from a consortium of German banks led by VVRB (Vereinigte Volksbank Raiffeisenbank eG), with Raisin Bank and Varengold Bank also participating.
Billie has been around since 2016 and has actually been working in the concept of "BNPL" targeting businesses long before that became an established concept and term, as part of a bigger suite of products to service businesses and their incoming and outgoing payments needs. Its ambition was simple: since B2B transactions make up more than twice the volume of B2C transactions, there should be more tools for businesses -- especially SMBs -- to make those transactions as easy to handle as B2C ones.
Its other main product, in addition to the financing point-of-sale tool, is an invoicing service to help businesses collect money from others. (Indeed, it's also the basis of its name, with Billie being a reference to "billing.") Invoicing, Knecht tells me, is still a big part of its business, with paying on invoice still a huge part (95% prefer it, he said) of how businesses want to pay for things. However, the bigger growth opportunity right now is BNPL, so for the moment it is doubling down on that with this investment.
A logical question might be why B2C giants in the BNPL space are not doing more B2B business directly. Knecht tells me that it comes down to very different data points and market dynamics when it comes to businesses.
"The reason the B2C players do not do B2B is because they see themselves as strong consumer brands," Knecht said, pointing out how Klarna and others are increasingly raising their profile through their own apps as a window for shoppers to discover and buy goods. "They are going away from solely being a payment method and towards a shopping experience for consumers."
But, he added, there are other reasons, too: business purchases are more complex than consumer ones, and ticket sizes are often 10 times more than the typical consumer transactions. He said the latter range from €60 to €100. (Note: Billie did not disclose updated figures how much it has financed to date, or customer numbers, but it notes on its site that as of February 2021, it had worked with 100,000 businesses and financed €750 million in purchases by May 2021.)
And on top of this, the concept of "business" is also more complex: it can include a sole trader, a limited company, a school, a fire department, and so much more. This means completely different financing considerations at the BNPL end, and lots of different identity and other checks that need to be run.
While consumer services tend to get a lot more of the spotlight when it comes to e-commerce, B2B is not a small part of the bigger business opportunity. One estimate puts the percentage of B2B as between 14% (2020) and 17% (2023) of all e-commerce in the U.S., but that will work out to $1.7 trillion by the later date. Another estimate -- the figures shift depending on what you are including in the category of B2B e-commerce, among other differences in calculation methodology -- says that as of 2020 B2B was already five times as big as B2C, working out to over $21 trillion in sales globally.
Over time, of course, you could see how consolidation is bound to come to the space. That makes a company like Billie a strong target for those payments giants -- BNPL or otherwise -- that might want to build out bigger platforms that integrate this function more tightly.
“As a specialist B2B investor with a deep fintech focus, we’ve been closely following Billie and the evolution of the B2B BNPL market. Over the last few years, we’ve built a trusted relationship with Matthias, Christian and Aiga, impressed by the clarity of their vision, rapid growth and deep experience not only in B2B payments but in the wider risk and regulatory landscape too. We are confident they are well on the way to revolutionising the B2B payments market and excited to join them on the journey ahead.” says Josh Bell, General Partner at Dawn Capital, in a statement.
Knecht declined to comment on M&A but described Klarna as a "close relationship."