Taulia Collects $3.2 Million to Ease Payment Delays for Suppliers
Just when you thought there couldn’t possibly be another massive inefficiency in the economy waiting to be fixed by Internet entrepreneurs, along comes Taulia. This San Francisco startup has figured out an easy way for suppliers of goods and services to get paid faster, and for the buyers of their goods and services—at least, those who use one popular brand of financial software—to pay less.
It sounds like such an obvious win-win that it makes you wonder why no one thought of it sooner. But only recently have enough big companies automated their invoice processing and accounts-payable systems to make administering such a process feasible, says Taulia CEO Bertram Meyer. And then it took some clever software engineering by Meyer and his colleagues to connect suppliers to their customers’ enterprise resource planning systems via the Web. (So far Taulia’s software connects only with ERP systems from the German software giant SAP.)
In essence, Taulia’s “invoicement” system allows suppliers to apply time-sensitive discounts to their bills, giving them more control over when they’ll get paid. The sooner a customer cuts a check, they larger the discount they get. “For suppliers, it’s a way to receive their funds earlier,” says Meyer. “And the buyer gets a discount at a rate that is interesting—usually in the low double digit range.”
Taulia thinks suppliers will like the dynamic discounting system because it will help smooth out their finances. If it’s the end of the month and a company needs cash to cover payroll, for example, it might be cheaper to offer a discount on a big payment owed to them—thereby triggering faster payment—than to borrow the money. (Of course, such a system could backfire if buyers used it to demand unreasonable discounts from cash-strapped suppliers. But Taulia argues that suppliers are happy to offer discounts to minimize the fuss and delay around collections.)
Taulia makes money by keeping a small percentage of the discount on each transaction. Given that a single large corporation could save tens of millions of dollars a year by taking advantage of the discounts Taulia enables, it’s no surprise that high-profile investors are interested in the startup. Taulia is announcing today that it has won $3.2 million in Series A funding from Waltham, MA-based Matrix Partners, Menlo Park, CA-based Trinity Ventures, and a band of individual investors in Silicon Valley called The Angels’ Forum.
Three things made Taulia’s business model appealing to Matrix, according to Josh Hannah, a general partner at the firm. The first is the way it rebalances cash flow in an economy that might best be called constipated—Fortune 500 companies are sitting on a collective $800 billion in cash right now.
“Once a payment is approved and flagged in SAP for payment, most companies just sit on it until day 60 for cash management reasons,” says Hannah. “But the 60-day terms on most invoices are an artifact of how long it used to take to process a paper invoices. It no longer takes 60 days—it’s more like 10 days. If the company that makes cardboard boxes for iPods has to wait 60 days to get paid by Apple, they are in effect loaning Apple money, which is ridiculous, because … Next Page »