Home > Featured > C2FO’s $40 million raise will go to global expansion [Updated]

C2FO’s $40 million raise will go to global expansion [Updated]

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The 2008 recession disrupted many industries in ways still being felt today. A Fairway, Kansas, company has seized this opportunity to create a marketplace for working capital with $5.4 billion in capital flow during Q2 2015.

Prior to the Great Recession, suppliers found it a lot easier to obtain working capital from financial institutions at a reasonable rate. Since then, banks and other creditors have tightened up considerably in what they will lend and under what terms. On the other side, big companies started hoarding cash as a hedge in case the banking industry gets crunched again.

As a result, there is an imbalance between buyers and suppliers in terms of cash, with buyers in a position to squeeze suppliers by extending the amount of time they take to pay. And the problem is even worse in countries outside the U.S.

C2FO (Collaborative Cash Flow Optimization) recently announced a $40 million capital raise and new business partnership to catalyze the expansion of its working capital network of buyers and suppliers. According to John Kill, C2FO’s Senior Vice President and Chief Financial Officer, the company brings suppliers together with big companies with lots of cash who are willing to pay early in return for a discount.

“From a macro perspective, we have a lot of large corporations like Costco and Amazon that have stockpiled large amounts of cash,” Kill said. “On the other hand, there are small and medium sized businesses that need cash and access to working capital. It’s a paradox of lots of cash on one side and desperate need on the other.”

The situation is compounded by other factors, including buyers who are pushing out payment terms to 60 days or more, and banks who are less willing than before to lend working capital. This is where C2FO’s solution comes in.

“We bring together two sides who are willing to fund invoices early for a discount,” Kill said. “It reduces the cost of goods sold for the buyer, and suppliers get access to cash that is cheaper than what they could get at a bank – if they could get it at all. It’s a win-win situation.”

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C2FO earns on transactions, not monthly fees

Unlike some other services in this space, C2FO does not get involved in buying and selling accounts receivable. Their platform simply connects buyers and sellers to negotiate discounts, with the buyer maintaining responsibility for funding their own accounts receivable.

“When suppliers join, there are no up-front or monthly fees,” Kill said. “They only pay the actual discount they are offering, and C2FO takes a percentage of the discount.”

With this revenue model, C2FO needs to develop a large market to generate revenue growth. “We have multiple buyers on one side across multiple countries, and tens of thousands of suppliers submitting invoices,” Kill said.  

According to a fact sheet provided by C2FO, here’s how the system works:

  • A buyer uploads approved invoices, sets target return and cash available
  • Suppliers log in and submit request for early payment
  • C2FO marketplace algorithms align the objectives of the buyer and seller
  • Buyer pays discounted invoices early
  • The buyer’s ERP is updated with discount amount and pay date
  • Supplier awards clear daily

Raise led by Singapore investor

C2FO’s announcement of a $40 million equity capital raise led by Temasek, based in Singapore, will help fuel growth in the Asia Pacific market. “We know there is solid ground to plow outside the U.S., and you need to have the right partner and the capital to make that investment,” Kill said. “The additional capital raise will help hasten our global expansion.”

C2FO also announced a partnership with Tradeshift, a supplier collaboration platform. “Other working capital procurement platforms have multiple options such as automated invoicing, but C2FO has chosen to take a “tip of the spear” approach to be the world’s best working capital marketplace” Kill said. “Tradeshift has a suite of products but doesn’t have a robust discounting solution. The partnership will benefit both companies.”

Attracting talent from bigger startup hubs

So why does a global company like C2FO have its headquarters in the Silicon Prairie?

“We’re here because our founder and most of our initial launch team are from Kansas City,” Kill said. “Now we’re in a position to hire people from traditional tech hubs like San Francisco, New York and Austin.”

“If we can get them here, they’re shocked by the lower cost of living and quality of life,” Kill said. “They might make more in Silicon Valley, but they’ll have 6 people in a small house.”

[Correction: The original title of this article was “C2FO’s $40 million raise will go to Asia Pacific expansion.” The investment will also be used to expand into Europe and Latin America.]

Rod Armstrong is Vice President of Strategic Partnerships for AIM in Lincoln, Nebraska. He is a regular contributor to Silicon Prairie News.

  • Stoked this company is HQed right here in Fairway, KS. What an awesome win for the City of Trees! 🙂