Venture capital firms are foreseeing growth in the B2B BNPL segment

Print

Email

The buy now pay later (BNPL) industry is undergoing a period of major correction and consolidation amid growing macroeconomic challenges. The surging inflation rate has affected consumer spending globally, whereas a rise in interest rates is expected to impact the bottom line of BNPL firms as it pushes up the borrowing cost. With many consumer-focused BNPL players seeing a drop in valuation in 2022, the future of the B2C BNPL segment remains uncertain. Major players such as Klarna and Zip have already started to focus on profitability rather than expansion to weather the current market conditions. While these B2C-focused BNPL firms are finding it difficult to raise investment from venture capital and private equity firms, investors are foreseeing growth in the B2B BNPL segment.

In Europe, venture capital firms are betting significantly on the B2B BNPL market and expect the segment to be the real winner in the deferred payment sector. Currently, several startups are operating across Europe in the B2B BNPL space, and these startups have been raking in millions of dollars from venture capital and private equity firms in 2022. For instance,

• In June 2022, Hokodo, the United Kingdom-based B2B BNPL firm, announced that the firm had raised US$40 million in its Series B funding round. Notably, the round was led by Notion Capital and included participation from other European investors such as Mundi Ventures, Korelya Capital, and Opera Tech Ventures.

The firm is planning to use the capital for expanding its geographical footprint by launching services in more European countries. Furthermore, Hokodo is also expected to invest part of the funding in product development. To further drive its growth in the B2B category, the firm is also considering to venture into new verticals and develop BNPL solutions for in-store purchases.

• Another United Kingdom-based B2B BNPL firm, Playter, announced a debt and equity round of US$55 million in June 2022. Notably, the firm raised the investment from Fasanara Capital and Adit Venture Capital. Other investors such as Act Venture Capital, 1818 Ventures, and Fin Capital also participated in the funding round.

Through its B2B BNPL business model, the firm is offering SMEs access to £300,000 at zero interest. Furthermore, businesses can choose a repayment period ranging from six to 12 months. Since it charges no interest or revenue from businesses, it utilizes a subscription fee model to generate revenue.

The B2B BNPL business model has attracted strong interest from venture capital firms in other European markets as well. For instance,

• In May 2022, Mondu, a Germany-based B2B BNPL firm, announced that it had raised US$43 million as part of its Series A round. Notably, the funding round was led by United States-based venture capital firm Valar Ventures. Other investors such as Cherry Ventures also participated in the funding round.

Like Hokodo, Mondu is also planning to use the capital for expanding its geographical footprint in the European region in 2022. Since launching services in October 2021, Mondu has onboarded merchants from across industry verticals, including manufacturing, beauty, and cleaning.

Billie and Scalapay are the other two major players in the European B2B BNPL segment that are driving industry growth and attracting investors. While Germany-based Billie last attained a valuation of US$640 million, Italy-based Scalapay had achieved a valuation of US$1 billion.

Some of the other players in the European B2B BNPL sector that have raised funding from venture capital and private equity firms include Treyd and Tranch. Notably, Sweden-based Treyd announced that it raised US$10.5 million, whereas London-based Tranch announced a capital infusion of US$4.4 million. Both of these B2B BNPL firms raised the funding rounds in May 2022.

While Treyd is planning to use the capital for launching operations in the United Kingdom, Tranch is aiming to expand its services in the United States by the end of 2022. Notably, the United States B2B BNPL market is also gaining strong momentum. B2B BNPL firms in the United States have also attracted major investment from venture capital firms. For instance,

• In August 2022, Kontempo, a United States-based B2B BNPL startup, announced that the firm had raised US$31.5 million in a mix of equity and debt round. The firm is planning to use the fresh capital for product development and expanding its merchant network.

Globally, PayNXT360 expects B2B BNPL firms to attract more investment from venture capital firms and private equity players. With SMEs also feeling the pressure of rising inflation, B2B BNPL services are expected to gain increasing prominence globally. Moreover, in light of current macroeconomic challenges and the ongoing supply chain crisis, businesses facing cash flow issues are expected to find B2B BNPL services more appealing. Consequently, PayNXT360 expects the B2B BNPL segment to record strong growth from the short to medium-term perspective.