When fast-growing Irish fintech startup Wayflyer announced in February that it had raised $150 million in equity investment from a consortium of backers including global investment bank JP Morgan, most of the talk turned to valuations.
The Series B funding round to fund the next phase of development after launch in April 2020 made Wayflyer Ireland the sixth ‘Unicorn’ company – a private technology startup valued at over $1 billion.
With a notional value of $1.6 billion (€1.5 billion), Wayflyer easily qualified. It even got into consumer branding, becoming a sponsor of high profile Irish golfer Shane Lowry.
But what the company actually did was less discussed. That might not have mattered so much at the end of a bull market that loved tech companies, but the world has changed a lot since February.
With inflation battering wayflyer markets in the US and Europe and central banks giving way, business models are back in play and money is no longer cheap and easy.
So it’s remarkable that JPM keeps coming back to Wayflyer. The Wall Street company is preparing to approve a new line of credit for the company after only approving a $300 million debt financing earlier in May.
However, Wayflyer’s pace of growth is so fast that the company is already looking for more support to grow its sales this year from $500 million in 2021 to $2.5 billion.
Essentially, that means providing working capital for e-commerce businesses trying to scale quickly and hitting a wall they can’t scale on their own. There is more to the backend, but the basic product is funding.
“We’re solving a financial problem,” says Chief Revenue Officer Dan O’Brien.
“At the simplest level, if I buy a lot of stocks and sell everything, I’ll have to buy more stocks next time, but my sales won’t give me that room to do that.”
Wayflyer “fills that hole,” O’Brien says, by providing cash for inventory and marketing and receiving what he calls a “small upfront fee” and a percentage of future sales.
It’s not a million miles from easy banking or discounted bills, except that banks and wealth financers tend to steer clear of e-commerce startups that need unsecured capital and may have poor credit ratings. This means that digital companies looking to grow typically turn to expensive venture capital or private equity.
“The reason we’re plugging this hole is that if you go out as a company and raise VC money or something like that, you would be giving away a fortune or the company to fund working capital,” says O’Brien.
“Essentially, you’re just creating a rotation where you’re constantly being asked to go out there, raise money, and give away more and more of your business.”
The partnership with JPM makes Wayflyer a sort of lender to Wall Street Bank, which has fintech payments ambitions of its own, and is pursuing them in part by investing in promising companies like Wayflyer.
It’s easy to see why. Global e-commerce is expected to surpass $5 trillion this year, and Wayflyer came at just the right time as the Covid-19 pandemic turned everyone to online shoppers.
To date, Wayflyer has stuck to the smaller end of e-commerce, with companies that sell making anywhere from $1 million to $12 million in revenue per year. But that’s changing with the help of JPM. The company just launched a new revolving credit product called Scaler, aimed at those who make over $20 million in revenue. And since Wayflyer’s own earnings are tied to its customers’ sales, that means faster growth.
This is the fin side of the fintech. What’s happening behind the scenes? Unsurprisingly, it’s all about data, which Wayflyer calls “tech underwriting.”
“We connect to their sales, their analytics, their marketing and their bank account,” says O’Brien.
“So we have an overall view of the company and the cycle, how it’s generating revenue and how efficient it is on the marketing side.
“That allows us to assess them, which means we don’t have to keep collateral or anything strictly confidential.”
Data immersion enables Wayflyer to use AI to make quick lending decisions and get funds to merchants quickly — a matter of days or hours where it could take months for a more traditional lender.
The data is also recycled into value-added services like analytics, marketing support, and shipping support, which Wayflyer can then sell to its borrowers.
“We see many of the same trends within companies and industries, so we know how we can help them increase that lifetime value or recoup their initial cost,” says O’Brien.
“We want to operate as an ecosystem where ecommerce companies can essentially get to a point where they can run their brands on our app, where we have a lot of tools and bring them together.”
O’Brien concedes the post-Covid environment is not an easy place to keep sprinting.
“The macro environment is obviously quite tough, but we are really well positioned to be successful in it.
“From that perspective, right now we just want to focus on getting big results and growing as much as possible, and then next year try to do exactly the same.”
https://www.independent.ie/business/irish/wayflyer-looks-beyond-its-unicorn-status-as-it-carves-out-a-funding-niche-41764888.html Wayflyer is looking beyond its unicorn status and carving out a funding niche for itself