Outward VC co-led the $5m funding round of Finverity – the ecosystem for trade and working capital – alongside Acrobator VC, with participation from S16VC and existing investor BY Venture Partners. We are excited to be supporting Finverity on its mission to bridge the $2.0tn global trade finance gap.
Supply Chain Finance (‘SCF’) as a financial product is far from a novel concept. First introduced in the 1980s and utilised initially by large automotive manufacturers, SCF is a financing product offered to corporate buyers engaged in domestic or global trade who wish to offer their network of suppliers early repayment and/or extend their own payment terms to release working capital and improve cash flows, which in turn enables participants to increase trade with one another.
Whilst the financial product has been around since the 80s, it is only over the last decade where technology platforms have transformed the SCF and broader trade finance industry, particularly in developed economies.
They do so by matching SCF lenders with corporates seeking solutions, whilst providing software for all participants to properly administer and manage loans through a digital interface that is connected to core systems such as banking, AP/AR and ERP. This technology wave has driven the exponential growth of SCF, enabling the world’s major trade finance institutions to lend trillions of dollars to multi-national enterprise corporates in a fast, efficient, and cost-effective manner. To put this in numbers, global volume of SCF was estimated to have reached $2.2tn in 2022, growing at a 5 year CAGR of over 31% (Source: BCR World Supply Chain Finance Report 2023).
Despite this exceptional growth, the suitability of these platforms for enterprise corporates in more developed markets have made them poorly set-up, if even willing, to service lenders and corporates in emerging markets, particularly for non-enterprise corporates (mid-market). Challenges we have seen repeatedly faced by lenders and corporates that have prohibited them from partnering with globally recognised SCF platforms include prohibitively high set-up costs, extensive and complex day-1 integration requirements and insufficient onboarding and AML/KYC capabilities.
...It is therefore of little surprise to see the global trade finance gap most recently estimated to have topped $2.0tn (Source: Asian Development Bank) and forecast to reach $2.5tn by 2025...
In the absence of suitable technology that services the specific needs of emerging market SCF participants – which include lenders with billions of loans under management; as well as a clear mandate to offer trade finance products in their markets – manual and paper-based processes often remain the modus operandi. As such, established mid-market corporates across MENA, Sub-Saharan Africa, Eastern Europe and Latin America continue to lack access to the same standard of SCF solutions that have become a mainstay for finance and treasury teams in developed markets. In many cases, particularly in regions such as Africa, it is still even common for these businesses to acquire physical land or property purely to meet the collateral requirements of local trade finance lenders. It is therefore of little surprise to see the global trade finance gap most recently estimated to have topped $2.0tn (Source: Asian Development Bank) and forecast to reach $2.5tn by 2025 (Source: Bain & Co with World Economic Forum), which is disproportionately impacting emerging markets and SMES / mid-market.
This growing gap acts as a bottleneck on global economic growth, which to close, will require trillions of institutional dollars to flow into developing economies with confidence of delivering sufficient and consistent risk-adjusted returns in a regulatory compliant manner. This is only possible if lenders are provided with the same level of data, transparency, and connectivity as they are provided when lending either directly or via platforms within developed markets or to larger multi-national corporates.
This is precisely why we are excited to announce our investment in Finverity - an emerging market-focused, end-to-end SCF platform on a mission to bridge this multi-trillion dollar funding gap.
Finverity’ SaaS and origination platform is used by mid-market banks and non-banking financial institutions (NBFIs) to fully administer, fund and grow SCF lending programs within emerging markets. In turn, mid-market corporates in emerging markets have the ability to access SCF facilities at competitive rates, providing their supplier network with the ability to receive early repayment through the financing of invoices in three clicks. All workflows that typically act as a bottleneck to SCF, such as onboarding and KYC/AML as well as the approval, payment, management, administration, and reporting of all loans at an invoice and payer level are managed by lenders, buyers and suppliers entirely through the platform.
...the company is winning business against global SCF tech peers and enabling lenders to launch, fund and scale SCF programs in a way that was not previously possible...
Built on a modern, modular technology stack and with emerging markets specifically in mind, Finverity has stood out to lenders and businesses due its speed of deployment, light-touch phased deployment approach, easily configurable and customisable workflows, clean and intuitive UI, and its emerging market-focused origination capabilities. As a result, the company is winning business against global SCF tech peers and enabling lenders to launch, fund and scale SCF programs in a way that was not previously possible, delivering significant increases in new business and funding utilisation growth and a dramatic reduction in time required to onboard time and disburse funds.
As is always the case, this level of impact is only ever made possible with an exceptional and mission-driven team at the helm. We first met founders Alex Fenechiu and Slava Oganezov after receiving multiple recommendations from trusted individuals within our network that we had to meet them, which typically is not a bad starting point! Very quickly, we were struck by their deep understanding of the market and customer pain points, combined with both the ambition and clarity of vision as to how Finverity would eventually become one of the global technology leaders in the multi-trillion-dollar trade finance industry. The compelling story was also supported by exceptional traction, achieving >15x revenue growth over the last year and attracting a best-in-class leadership and supporting team across tech, product, risk, credit, legal and ops. Without ignoring the many challenges that lay ahead, it was clear that the team have built the best possible foundations for its next phase of growth.
As Outward exists to empower start-ups to become the most important fintech companies in the world, it’s hard to imagine a better fit.
Fundamentally, we believe that the current state of trade finance in emerging markets, combined with the growth outlook and increasing digitalisation of emerging economies, and the parallel trend of SCF lenders increasing their reliance on third-party technology platforms for both origination and administration, all point toward a significant opportunity for emerging market-focused solutions to become global leaders. We are also convinced that Alex and Slava have their eyes and minds firmly set on this enormous opportunity. As Outward exists to empower start-ups to become the most important fintech companies in the world, it’s hard to imagine a better fit.
