Unlocking Cash Flow for Small to Mid-Sized Businesses
March 31, 2020 | Scott Murphy
Small businesses make significant contributions to the U.S. economy. According to the SBA, they create two-thirds of net new jobs and account for 44 percent of economic activity. At the same time, the Bureau of Labor Statistics has reported on the risks of entrepreneurship, with roughly half of all companies folding within their first five years.
Plastiq, an AVG portfolio company, is providing small and mid-sized businesses (SMBs) with the means to manage all aspects of their working capital cycle with a flexible payment platform. The company recently announced a new $75 million growth financing led by B Capital Group, with participation from Kleiner Perkins, Khosla Ventures, Accomplice, and Top Tier Capital Partners.
Simple, Convenient Payments
After graduating from Harvard in 2011, Co-Founders Eliot Buchanan and Daniel Choi originally launched Plastiq with a consumer focus. The platform enabled individuals to use their credit card to pay a wide variety of vendors that didn’t normally accept cards. They built a sizable, fast-growing company, with tens of thousands of customers using Plastiq to pay for things like college tuition, taxes, healthcare, and rent while benefiting from credit card rewards and early-payment discounts.
The process is simple: users submit the recipient’s billing info and Plastiq processes the payment via their credit card. Plastiq doesn’t require the recipient to have an account with the platform, and users can customize payments with their account and invoice number. Recipients can be paid via check, wire transfer, or ACH transfer, all handled by Plastiq.
An Evolving Business Model
By 2018, Plastiq’s team noticed a growing number of business owners were using their platform to process corporate payments for their company. This included a wide range of business expenses, including invoices from suppliers and contractors, payroll and commissions, and rent.
The platform’s appeal to corporations made sense. Having an extra 45 to 60 days of working capital is meaningful for a business owner. Extending the focus of the business to SMBs opened up a significantly larger market, and we’ve witnessed that impact on Plastiq’s growth.
Growing our AVG Relationship from an Alumni Connection
Alumni Ventures Group first invested in Plastiq as part of an earlier stage round in 2017, led by our fund for the Harvard community, The Yard Ventures. Like many AVG portfolio companies, the firm secured a relationship with Plastiq through an alumni connection. Jeffrey Bussgang, General Partner and Co-Founder of Flybridge and a Harvard alum, made the original introduction. Buchanan and his Co-Founder Daniel Choi are both Harvard alums as well, and they saw huge potential for our communities across AVG to be helpful to the company in future years.
Over the last three years, we’ve had the benefit of an insider view of the company consistently surpassing annual expectations. Plastiq has attracted the interest of many of the top VCs in the country as they have continued to grow and strengthen their market-leading position.
One of the benefits of AVG is an ability to share access to investment opportunities across our entire firm. The Yard Ventures was granted a larger allocation in the company’s latest growth financing round, providing access to the round for every fund within AVG.