Podcast 366: Sandy Kemper of C2FO

At any point in time there is $40 trillion in accounts receivable on the balance sheets of all global businesses. That is a huge amount of capital that, if unlocked, could be a major boost to the world’s economy. But how to unlock this capital efficiently?

Our next guest on the Fintech One-on-One Podcast has an answer. Sandy Kemper is the founder and CEO of C2FO, a platform that enables companies to work with their suppliers and customers to unlock this capital. How they do this is the subject of this episode.

In this podcast you will learn:

  • The founding story of C2FO.
  • How they were able to land a company like Costco in their early days.
  • Why they think of customers like Costco as a central node in their network.
  • The average cost of the working capital on their platform.
  • How many days early C2FO customers get paid on average.
  • How they typically acquire new customers.
  • How their Invoice Central platform provides real clarity for their customers’ forward cash flows.
  • What a future C2FO score could look like.
  • The incredible scale of invoices flowing through the C2FO system.
  • How they help their customers if something goes wrong on the flow of funds.
  • What Sandy said in his Wall Street Journal op-ed in the early days of the pandemic.
  • Why minority-owned businesses are much more likely to use the C2FO platform.
  • What they are seeing on their platform with regards to inflation.
  • The three streams of revenue they have.
  • The annual cost to the world economy of having money locked in AP and AR.

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Download a PDF of the Transcription or Read it Below

FINTECH ONE-ON-ONE PODCAST 366-SANDY KEMPER

Welcome to the Fintech One-on-One Podcast, Episode No. 366. This is your host, Peter Renton, Chairman & Co-Founder of LendIt Fintech.

(music)

Peter Renton: Today on the show, I’m delighted to welcome Sandy Kemper, he is the CEO and Co-Founder of C2FO. Now, C2FO is a truly unique company, they are all about working capital, probably no one has done more for small businesses to access working capital in this country than C2FO, but they’re not a lender. A company has suppliers and they have customers and what they do is they really help maximize cash flow by companies can decide with their suppliers, you know, how much they want to pay them, when they want to pay and with their customers they can allow them to pay them later for a premium and this is all done at massive scale. 

We’re talking 1.5 million customers, we’re talking $200 Billion of total funding and it’s growing all the time. You know, Sandy talks about also the impact of these unusual economic times and he actually has some really interesting insights to share there. He talks about the future of working capital and what’s going to happen there and much more. It was a fascinating interview, hope you enjoy the show.

Welcome to podcast, Sandy!

Sandy Kemper: Wonderful to be here, Peter, thank you.

Peter: Okay. So, let’s just kick it off by giving the listeners a little bit of background about yourself. Looking at your LinkedIn profile you started in banking, it seems, so tell us a little bit of the highlights.

Sandy: The highlights and lowlights. I’m a recovering banker, run a bank here in the Mid-West for Mid-West of the United States for a number of years and it came up on the commercial loan side. Our business bank practice was around small and mid-sized businesses, very focused on working capital and it was my job to find ways to get companies who needed money, the money they needed to be successful and that’s what I did as a commercial banker.

Realizing that the bank itself had some constraints and there was financial underwriting necessary to that delivering of working capital, I began wondering if there was a way for us to do something that was more efficient and early on as a financial technology guy and banker guy began to think about more efficient ways of getting capital to companies outside of the banking system.

Peter: Okay. And so, what was the aha moment or the founding story of C2FO?

Sandy: When I retired from the bank in 2000, I started a company called eScout which later became Perfect Commerce. Perfect Commerce was a good company, not a great company, it was a B2B e-commerce marketplace which was competing at that time with companies like Ariba and Commerce One, we were venture capital-funded and we had wonderful funders, but by 2002, we had built a fairly decent business, decent revenue, but there wasn’t a lot more capital to be had, that was a bit of nuclear winter for venture capital and private equity. We were very close to running out of money and my CFO came to tell me we might miss payroll. 

We always had a fair amount of accounts receivable and so I did what I think anyone of us would do, got on the phone and talked to the people who owed us the money to see if they could pay us early and I realized how clunky that process was, how difficult and somewhat risky it was to get on the phone with your largest customers to ask them to pay early. Now, I also realized they had no idea what the right market price for that early payment was, so the idea to create a more efficient way to be paid sooner, but more price discovery on both sides of the equation was the origin story of C2FO.

Peter: Alright. So then, when I was reading about you guys in the early days, you managed to land a pretty big client pretty early like Costco. I think I hear you say one time you had like 12 or 13 people in your company when you landed Costco, so tell us a little bit about how you were able to position yourselves for a company of that size.

Sandy: We were obviously very lucky. We were introduced to Costco by someone on the board who had heard about what we were doing. Costco has a very unique and I think very differentiated, a few allowed us to think about it, customers and their suppliers, they are very holistic. They were looking for ways to reduce cost inside their supply chain, they were working with, at that time, a credit card company and that credit card company which will remain unnamed was really trying to persuade them to pay more their suppliers via their card and then, of course, taxing the suppliers with interchange which was not something that Costco wanted to do. 

The saw that as cost accretive not cost reducing. They also sort of believed static discounting was inefficient because those terms are either on or off and not at the discretion of the supplier so a static platform basically says if the buyers are going to pay you early, they will pay you a little bit less, if they’re going to pay you on time, they’re going to pay the full dollar amount. The supplier, in this case, doesn’t know what’s going to happen until you come to that crossover day for early payment. 

We built a platform that lets the supplier name their rate to be paid early and Costco thought if that supplier was naming their price, by definition, they’d be satisfied with the price, they’re telling you what they’re willing to pay and if you take that then, by definition, it’s good. So, we started off with a very high net promoter score from day one, very high good growing satisfaction from our suppliers to Costco marketplace. They were our first big client and we were, as I said, very lucky and they’ve been a fantastic client ever since.

Peter: They’ve got a ton of different suppliers there, you get them in and suddenly you get a whole range of others in there, so…

Sandy: It leads to additional large central node so in our world we think of that large business that has a lot of suppliers or a lot of customers as a center node and our network is node-enabled in our discussion. They are our partner, the center node is our partner in the acquisition of their suppliers and their customers. A supplier can be paid early and be paid a little bit less and hopefully, cost is less than what their suppliers are paying to the bank, if they don’t have a bank, giving them new available capital. In the case of a customer, a customer might be enabled to pay more slowly, but pay a little bit more so we created price discovery in our marketplace between those who have money and those who need money, whether that’s the center node with the supplier or a center node with their customer.

Peter: Right, right, got it, okay. So, before we dig into that, I want to take a step back and just talk about the working capital marketplace in general. Small business owners, they always end up……I’ve been a small business owner pretty much my whole career and it’s always important to have access to working capital. Certainly, in the last two or three years it has been critical, but why do you think it is still so underserved today?

Sandy: I don’t know that it’s underserved. The nature of any sort of lending, if you’re going to approach working capital from a risk-on perspective and think about the risk underwriting of providing capital against accounts receivable or against inventory…. the first charter of a bank, at least those who are governed well and/or play by the rules of the government, is not to lose the depositors’ money. Therefore, they have to be thoughtful about how they, and I say I’m still a banker in some ways, they have to be thoughtful about the way they loan that money which creates a filter or an aperture through which only so much capital can pass. 

So, if you think about working capital globally, B2B sales in the course of a year total roughly $240 Trillion, on a 60-day term, that means that there’s $40 Trillion of accounts receivable or accounts payable on the books of businesses on any given day in the whole world, Peter. You and I know this from sort of back of the envelope math thinking about how much capital of said banks are devoted to working capital against that $40 Trillion of accounts receivable is available for potential liquification through lending, only $4 Trillion is available in traditional finances. All the asset-based lenders, that’s all the bankers, that’s all the supply chain finance people, that’s all the traditional finances, $4 Trillion, trying to solve for this $40 Trillion opportunity, 

So, C2FO doesn’t see itself as against the banks, it sees itself as stepping into the vacuum that the banks, because of the need for risk-based underwriting, cannot fill so if you have to risk underwriting, you have to think about potential loss. In our world, we just crossed $200 Billion of funding earlier this month. On $200 Billion of funding, we have had zero losses because we don’t loan money, we simply enable the early payment which is the same as working capital. I mean, you’re a small business, would you rather go to the bank, beg, borrow and plead to get money or would you rather have your customers pay you on time or sooner.

Peter: Right, yeah. When you’ve got a large accounts receivable it’s great to get the money in. So, let’s talk a little bit about how the marketplace works exactly. So, you just sort of described it a little bit, but I want to delve into it where you can use the small business who needs money and how, like how do they decide on the pricing for what they’re willing to accept as a discount for someone who pays early and maybe just talk a little bit about the mechanics of how that all works.

Sandy: Last year. we did just about $50 Billion of funding. Our total cost of that funding, in other words, that which the supplier paid or in some cases a customer paid was 5.2% APR, that was a discount of roughly 47 basis points, less than one half of 1% had to be paid sooner. So, we wish to be, and believe we are, the most convenient lowest cost source of capital for those who use us and it’s not because we’re brilliant, we’re not, we’re just basically blocking and tackling companies because we’ve been able to eliminate credit risk. If you are Costco or you are Intel or you are Amazon or whoever you are, when you have an account payable you’ve accepted the product or the good that your supplier has given, you’re going to pay in 30 days or 40 days or 50 days. 

The acceleration of that payment is not until it’s credit risk-free whereas the taking of that account receivable to the bank does require the bank to risk underwriting so we’ve reversed the flow. The idea of an intermediary coming between the reflexive, the reciprocity, if you will, of the AR and the AP is ludicrous, the introduction of a third-party intermediary and the facilitation of capital flows between AP and AR only creates more noise, more cost, more risk underwriting, it’s a relic of a broken financial system. So, eliminate intermediaries, create a marketplace for those who have money, the Costcos, the Intels, the Amazons of the world, to pay their suppliers early at a rate or price that that supplier names. 

So, if you’re borrowing at 7%, put in 6, if you’re borrowing at 5, put in 4, if you can’t borrow, put in a rate that’s right for you given your cost of operations and your potential return on the money that you’re going to get. We built this platform and patented the ability for those suppliers or customers to name their rate for the working capital they want so that’s why we have such a high NPS and our NPS last quarter was 72, this quarter dropped to 69, I’m not happy about that, but it’s still leaps and bounds above other financial institutions. We’ve built an apparatus now for 1.5 million customers, 180 countries to be able to name their rate for working capital without having to be (inaudible).

Peter: Right, right. And then, how much sooner on average are these people seeing the money, like how many days are you saving them?

Sandy: So, I think last year, 32 days early was the average.

Peter: Okay, okay. So, are you working with like the majority of the Fortune 100, I mean, I know that they all have massive procurement operations, what’s…..

Sandy: We’re, again, very lucky, thanks to our early customers and our great team who did a great job taking care of those early customers, I think we now have something on the order of 75 of the Fortune 100 working with us.

Peter: Wow!

Sandy: Something like 270 or 300 of Fortune 1000.

Peter: Okay. So then, how do people find out about you, like the supplier who’s…they’re a relatively small supplier and they’ve landed Walmart or Costco or someone like that and they’ve never heard of C2FO, but do they hear it then from Costco saying if you want to get paid early you can go sign up with C2FO, how does that work?

Sandy: That was probably one of the historical lucky precedents. Since I had grown up in the business of B2B selling, I understood B2B, I understood how to talk to a CFO of a Costco or a CFO of a Walmart and have a conversation. Again, very fortuitous in the sense that that was my go-to, that was always my sales motion as a young man growing up and as an older man growing up and my sort of my vernacular. 

It turns out that it’s also a ridiculously cost-efficient way to acquire the suppliers or customers of those businesses, they have the brand with their customers, they have the brand with their suppliers, they are our partner in acquiring the suppliers and the customers that they have.  If you’re a customer of Intel and Intel says, here’s a potential way for you to pay a little bit more, but pay slower if you’re a supplier of Intel, it’s a way for you to be paid sooner, but be paid a little bit less, that cost of acquiring is a fraction, a fraction of a fraction of what I spent to acquire that same business when I was a banker.

Peter: Right, right, for sure. And then, I imagine it snowballs from there, like that small business who’s supplying Walmart has suppliers themselves and now, they’re in the C2FO system, they’re going to say, oh I want you guys to join that so I can imagine…is that how you’ve grown to 1.5 million, mainly through the chain reaction of all the different components of the system?

Sandy: Our utilization rates go up as our point of…..you know, Metcalfe was the founder, Robert Metcalfe was the Founder of 3Com and the Founder of TCP/IP Protocol, Metcalfe’s law is that the value of a network is equal to the square of its users, we actually see that in absolute fact inside our system so as we bring in more connections, in other words, as that supplier who is a supplier of Costco is also a supplier of Albertsons, who’s also a supplier of Krogers, who’s also a supplier to XYZ that platform becomes much more robust for that supplier because more and more of their working capital is there. So, as we grow, additional network effects bring in more suppliers because there’s more working capital for them to harvest on our platform than anywhere else.

Peter: Right, right. And so, you’ve got your Early Pay product where people who get their money early and they’ll say you got the product where people can delay payments on the other side if they kind of want to manage their cash flow that way, are you working with customers in other ways to, you know, solve financing needs or is that really the main focus?

Sandy: The first thing we want to do is give everyone on our ecosystem, everyone on our platform a view of what their forward cash flow looks like and we do that through our platform called Invoice Central. There they will see in one place everything that they are owed by all of their customers, they are on our platform. So, you may have billed Walmart this, you may have billed Amazon this, you may have billed HP this, here’s what HP says they’re going to pay, here’s what Intel says they’re going to pay and here’s exactly when you’re going to get paid, now then would you like to be paid sooner then they can come in and accelerate that. 

So, the first thing we offer is a crystal, empirically true not an artificial intelligence not anecdotal, an empirically true view of what your forecast flow is going to look like and then we give you the option to accelerate it at your price, at your discretion, when you want it, how you want it. So, first it’s just better information then flow of funds and then, Peter, if we do our job this time, as we’re not yet together yet, we only have $2 Trillion matched in our marketplace today, it ought to be $20 Trillion so there’s a lot of work for us to do. But if we can get to that then I would think it would be possible potentially for us to be able to publish a C2FO score or a C score for small /mid-sized biz to be able to use to reduce their cost of borrowing from banks to things that we don’t do today, term loans, equipment loans, but we need to figure out a way. 

Small business is 50 to 55% of all major economies’ GDP and yet they are the most underserved by the financial system, you know, I just talked about the reasons for that. If we could create a way to cause their cost to borrow to go down through data, yes, and also through empirical matching and what we do inside C2FO, come on, favor, we’re opening a spigot and allowing as much capital flow as possible, data-enabled by what we see so we’re driving hard towards a C2FO score that would enable lower cost of capital even when that spirals, that customer is not using our platform.

Peter: Right, right. How does it actually work as far as, like the Walmart customer and the small business they said they’ll accept, you know, a discount for early payment, how do you ensure that happens? What’s the flow of funds like, are you pulling from Walmart or what are you doing?

Sandy: So, every night, the good men and women of C2FO and the systems they’ve built take in 50 million approved invoices from the biggest businesses in the world. These invoices are coming from the AP systems of the Fortune 1000, this is the promise to pay, I’m going to pay you, you’re a supplier, in 32 days. So, we take that 32 -day promissory, right, which is basically their account payable, we push that off to Joe’s supplier, Joe says, ah, now I know what I’ll be paid in 32 days, that’s awesome, thank you very much, C2FO, I can now accelerate on our platform. 

So, we see first the AP, second we see the offer potentially from the supplier or the customer and then third, we see whether that was paid or not so we do see the audit trail and we help if there is a problem. We can help that entity that wanted or needed that capital, we can help that entity get it if somehow it is processed or lost in processor otherwise. So, we present another helping hand, not just the technology, we put a voice and a face and a human via the technology. 

If something went wrong, we want to be able to help take care of it, but, actually, it’s very rarely does anything goes wrong because the center node or the big buyer, the Walmarts, the HPs, the Intels of the world, they’re wanting to do this to strengthen their supply chain, they’re wanting to so this to strengthen their customer base and, by the way, they’re also reducing their cost of goods when it’s a supplier because they’re paying a little bit less by paying earlier and they’re increasing their revenue with the customer because they’re going to be charging them with more being paid a little bit later.

Peter: Right, got you, okay. So then, what are the verticals or the industries that are most popular on your platform?

Sandy: Any industry, where it’s a diverse supply base, any industry where you have a fair number of nodes, right, so basically everything. We’re very fortunate we started with retail which has been very good to us, we’ve got a great vertical on technology. logistics, transportation, manufacturing, automotive, aerospace. Capital is fungible across all entities, all entities and all industries and everyone needs it so I wish I had the foresight, this was when we started the company. 

I was just trying to solve a problem for myself, but this is a fundamental problem in all businesses. Working capital is fundamental, it is to me, I’m sure you’ve heard this before, working capital is water for commerce, just that simple and there’s no reason for it to be restricted, the only reason it’s restricted is because we’re involved in this risk-based underwriting shenanigan which should not take place in working capital. You can match up the AP and the AR, you can accelerate payment, you don’t need to risk underwrite.

Peter: Right, okay. I want to switch gears a little bit and talk about the Wall Street Journal, I think it’s an Op-Ed that you wrote, it was a little while ago. During the pandemic, early days of the pandemic, if my memory serve me right, you know, maybe you can describe what you were sort of putting out there into the world as far as an idea for helping kind of stimulate the economy in the early days there.

Sandy: I think the banks did a fantastic job in many ways with PPP and I think Main Street lending fund by the government is a little bit more challenged. I watched, because I am still in the board of the bank that I ran, I watched our bank work 7/24 for months to get all the PPP processed and they were fabulous, fantastic, but they still didn’t get everything done. I was arguing that it might better to fund that center node to allow the center node, in this case, a large corporation who is rightly concerned at that time because they didn’t know what was going to happen to their business during the pandemic so many of them began to be a little bit more careful on how they pay, they weren’t paying early of late, they were paying later. 

We saw this happen in droves so what if we could have gone, brought money to that center node to accelerate payment, in particular the small and mid-sized businesses and as we dug deeper what we saw, Peter, is we saw that even those small businesses that were doubly disadvantaged unfortunately, I hate to say it this way, but in a majority/minority world NB business, brown and black-owned business in the United States, female on biz, women on biz in the United States utilize our platform and I’m very proud of this, utilize our platform five to seven times more than their majority cohort, their male cohort or otherwise. 

Why is that? Because the financial system today is therefore not serving them well and we can get into lots of reasons why that exists, but the fact of the matter is small biz, diverse biz, women on biz have a harder time securing capital and our position was let’s get them paid sooner on our platform at rates that are ridiculously low, even below the 5.2% APR that we did, let’s get them paid at 1.5% APR, let’s get them paid at 0.5% APR. These are the companies that are struggling the most right now in this pandemic. 

Yeah, thank you for saying that what we wrote, it turned, as you can imagine, sort of hard to move the government, we’re trying to inform public policy and I think that’s measured in, not in our time, but in geological times (Peter laughs). We didn’t have enough time, but a lot of our private companies, private sector companies saw that and said, wait a minute, you don’t need the government to do this, let’s do it ourselves. So Walmart, Albertsons, Intel, others have put together markets that are there for those first businesses at rates that are really outstanding and I think it’s solving a major problem for businesses that were not able to get capital as efficiently as before.

Peter: Right, yeah. I just want to get back to what you said there, you said it was like, what was it, five to seven times more likely to use your platform than a white male-owner in business, I mean, that is staggering to me. I mean, are they getting similar kinds of advance rates or how do they operate on your platform?

Sandy: So, the analysis that I gave you, the 5 to 7X utilization was even before we started new markets. As we said, we build markets for large companies and their supply chain and their customer base, we do price discovery that allow for early payment of capital suppliers, perhaps late payment of dollars from customers to the center node. In this world, we were seeing 5 to 7X utilization, once we built markets that were even lower priced, in other words, we were able to convince, we didn’t have to convince, as I said a lot of our large customers said we want to provide capital at lower cost to those who are underserved by the financial system so utilization has gone up even more. 

So, last year, we did $2 Billion of funding to the diverse businesses, brown and black on business in the  US, women on business in the US. In the first quarter of this year, just this last first quarter, we did almost a billion so we’re on pace to double that again this year. The reason I think there’s need, right, they’re just not being served by the financial system today and it’s not indictment of the financial system, it is a fact so I’m really happy to see that sort of growth inside our marketplace.

Peter: That’s amazing, that’s truly astounding scale. Some government programs are smaller than that so that really is pretty impressive. So then, it sounds like you’re operating beyond the United States because obviously we live in a global world, I mean, what is…….

Sandy: That was the other thing that I wasn’t smart enough to realize, it’s one of those deals, like oh boy, we landed Costco, oh crap, we landed Costco (Peter laughs) we went immediately global with 13 people, right, because they had suppliers all throughout the world. We have customers, 100 customers and about 180 countries around the world, we operate in 46 different currencies and something on the order of 16 or 17 different languages. Happily, we’re not 13 people anymore, we up to about 900 folks and, again, great team that’s done a great job building a platform. 

We spent the money early on to build a global platform that’s capable of doing this type of working capital flow, regardless of where our customers, we decided not just to be retail, not just to be in the US. Our position is very simple, we want to see that every business in the world has the capital they need to thrive, first thing is by de-risking the provision of capital which allows us to lower the price for that working capital and create a marketplace so it is just ridiculously easy for those who need it to get paid sooner to alleviate their working capital needs. So, global platform, low cost, convenient, ridiculously easy to use with that patented ability for our customer to name their rate for the working capital they need which give us that 69, 70 or 72 NPS.

Peter: Right, right, okay. I want to talk, if you could, a little bit about just what’s been going on this year. We live in unusual economic times, obviously there’s inflation, there’s trade disruptions from the war in Ukraine, I mean, what are you seeing inside your platform that’s sort of hitting home with what the economic circumstances are today?

Sandy: We began to see inflation a little bit before the governments of the world began to see it because we saw the rates of increase with the unit invoices on our platform. As I said, we bring in….we’re sent 50 million approved invoices every night and if we must price it down on like to like over the course of time, we began to see a rapid increase on average invoice size well over 12 months ago and we continue to see it. We continue to see it in advance so what the CPI’s publishing and what PPI’s publishing so we’re a bit of a kind of clearly an early bell for monitoring and watching inflation. 

So, the other thing that we’re seeing, of course, is a lot of folks are looking to increase prices because inflation is driving the need for this now. The problem with this is as prices increase, it’s going to be more strain on the supply chain so we’re beginning to see more churn of suppliers inside the baseline marketplace, I suppose this is the way of the world. One thing that we’re positioning to do instead of seeing rapid price increases, we’re working with a large percentage of our supplier base to accelerate the cash conversion cycle. So, they can accelerate cash conversion from, you know, from inventory to AR to cash. 

If their inflationary prices and goals on what they’re buying tomorrow to be more expensive than what they sell today the need to move rapidly to acquire new inventory. If we can accelerate payment effectively for a large cohort of our suppliers perhaps they can also keep their customers without having to increase their prices. So, there are inefficiencies in the system today that can be addressed to help offset the pressures of inflation so it’s not a fait accompli that we have to be in this inflationary spiral. I think there’s a lot of process improvement and systemic improvement that can counterbalance the need to increase price if we can get rid of the sloppiness in the financial system today.

Peter: Right, right, interesting. So then, I’ve got to ask because you said you were sort of a, you have an early kind of insight into inflation. Are you seeing it top out, are you seeing…economists have said that we’ve topped out now, we’re going to be down towards the end of the year, what do you think?

Sandy: No. Well, your viewers can’t see me and look when I get a response from my team because I was asking about that. I was on my bicycle this morning doing my little stationary routine, watching CNBC predict an 8.1% CPI and I said to my guys and gals what they were thinking. They think this is going to come up higher so looking at our data as of today, those data seem to indicate a little bit higher CPI than what the government’s projecting. We’ll see, I don’t know if the final numbers have been announced, they are targeting 8.1, you know that our team thinks it’s becoming a little bit higher.

Peter: Right, right, okay. So, before we close there is one thing that I want to be clear on, well a couple of more things. Firstly, how do you make money, what is the actual business model here?

Sandy: There are three principal streams of revenue, but the most important is transaction-based revenue. As early payment is made to suppliers or slower payment is made from customers there is money that is being made by the center node. Either they’re paying a little bit less to their supplier or they’re getting paid a little bit more by their customer. We don’t show our jars to suppliers, anything to be on the platform and we don’t show it to the customers of our center node, anything to be on the platform. 

We simply say that that center node, again, we’ve named a lot of our customers already, but XYZ customer if you’re making $10 Million or $50 Million of reduced cost or more revenue because we are a platform, would you share 20 to 25% of that with us. And so, we don’t have a SaaS model, we have a highly predictive transaction revenue model and our net revenue retention is 133% per year so I’d rather be transaction revenue-based than flat SaaS-based.

Peter: Right, got it, okay. So then, last question. I’ve heard you mention before, like you said there’s $40 Trillion of outstanding receivables every year, I mean what is…..

Sandy: No, no, not every year, every day, every day there’s $40 Trillion, right, you have to think about account receivables/account payables of balance sheet metric, cost of goods, revenue is going to be an income statement metric. So, $240 Trillion of trade between businesses in the course of the year on 60-day payment terms and you’ve got about $40 Trillion of AR or AP on the books of businesses on any given time.

Peter: Got you.

Sandy: So, it’s a huge market. I had no idea when I started the company……again, I think sometimes it’s just better to be lucky. I was awfully lucky that I had a problem, it was personal, but it was also a really big market so our team has done a great job building into that market.

Peter: So, my last question is this, what’s your vision for that $40 Trillion because right now, obviously, it’s not being met in its entirety or even close to, how do we get there, how do we make this $40 Trillion available to everyone who wants it?

Sandy: There’s probably a million ways to solve for it. We think we’ve got a fairly efficient, effective way in the creation of marketplaces that allow for de-risking of this working capital. Let me put a finer point on it, we’d love to see more people in the space, we’d love to see more people focused on this because that $40 Trillion or in this case $36 Trillion is unfinanced, costs the world’s economy plus or minus $3 to 4 Trillion per year. 

There are a grand total of four, maybe now five countries in the world that have a GDP greater than $4 Trillion so imagine bringing in a country like that online or imagine adding $4 Trillion back to the world’s economy by solving this vacuum gap of opportunity, by solving this need for more capital against that which is out there and the only way you’re going to do it, I think, is through more transparency, more marketplaces like ours, less risk underwriting and more open flow of capital at prices that work for customers.

Peter: Right, right. Well, luckily they didn’t see any void, that’s tantalizing thought and I think you’ve got a great thing going there and really appreciate your coming on the show today.

Sandy: Thank you, Peter, really a joy to be with you.

Peter: You know, to me, it’s such a simple idea that C2FO have done, but they’ve executed obviously extraordinarily well and they’ve got now network effects where there’s huge numbers of companies dealing with both their own customers and their suppliers on the C2FO platform optimizing the terms that’s most suitable for them. Obviously, in difficult times really trying to delay payment a such as possible and getting payment as early as possible, when things are going well they could do the opposite. So, it really is such a unique and I think worthwhile endeavor for the companies because as Sandy said many times, like the working capital piece is so critical for companies and he’s found a way to kind of juice the system and that is certainly a good thing.

Anyway on that note, I will sign off. I very much appreciate you listening and I’ll catch you next time. Bye.

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  • Peter Renton is the chairman and co-founder of LendIt Fintech, the world’s first and largest digital media and events company focused on fintech. Peter has been writing about fintech since 2010 and he is the author and creator of the Fintech One-on-One Podcast, the first and longest-running fintech interview series. Peter has been interviewed by the Wall Street Journal, Bloomberg, The New York Times, CNBC, CNN, Fortune, NPR, Fox Business News, the Financial Times, and dozens of other publications.

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