Wayflyer raises $150M on a $1.6B valuation for a new spin on providing loans to e-commerce merchants

E-commerce has continued to boom in the wake of the Covid-19 pandemic, but running an e-commerce business has also become significantly more chaotic, with unpredictable supply chains, logistics hiccups, and overall higher costs upending even the best-laid plans. To underscore the demand for solutions to address this, today a startup called Wayflyer — which has built a new kind of financing platform, using big data analytics and repayments based on a merchant’s revenue activity — is announcing a big round of funding, $150 million. It plans to use the funds to double down on its business after a strong year of growth, with average monthly capital deployments (that is, loans) on the platform reaching $100 million, up nearly 1,000% on the year before.

The Series B funding values the Dublin-based startup at $1.6 billion.

DST Global and QED Investors co-led the all-equity round, with Prosus, Madrone Capital Partners and J.P. Morgan — all new backers — also participating, alongside previous investors Left Lane Capital and Guillaume Pousaz (the founder of Checkout.com). J.P. Morgan is something of a strategic investor here: it’s not a direct partner (yet?) of Wayflyer, but in addition to being a major financier of tech startups, it’s also the world’s biggest bank and has been buying up fintechs to grow that part of its business.

Some 65% of Wayflyer’s customers today are in the U.S. and North America, with the remainder in Western Europe (mainly UK) and Australia. The plan is to continue investing both in the technology that Wayflyer uses to evaluate and make loans; and to continue growing its business overall, in particular with more partnerships to serve merchants. (Those partners today include Adobe, Sezzle and eBay UK.)

Wayflyer is not yet profitable, said CEO Aidan Corbett in an interview. But he noted that the startup has hardly touched the $76 million in funding that it raised in May 2021, and could potentially be profitable this year if it chooses. Along with the $76 million equity round in May, the startup also secured $100 million in debt to provide financing; we’ve asked whether there is another debt component in this latest round and will update the story as and when we learn more.

The valuation is a big one for an Irish startup, but it is all the more notable because Wayflyer, founded in September 2019, has only been around for just over two years. Yet in that time it has grown substantially. Corbett (who co-founded the company with president Jack Pierse) said that currently the company has “thousands” of customers — exact number undisclosed — who typically take out loans of between $300,000-$400,000 to cover things like inventory purchases, shipping costs and other big-ticket items necessary for running an e-commerce business.

The crux of the problem that Wayflyer is addressing is a persistent one in the world of e-commerce, but it has definitely become more exacerbated in the last couple of years. E-commerce businesses regularly face shortages with working capital, with funds coming into their accounts often not matching up with expenditures because outgoings need to be made on a regular basis, but incoming funds face reconciliation and other delays.

Corbett said that the Covid-19 pandemic made this an even more acute situation, with e-commerce merchants facing “three hits” that got especially rough in 2021. (Ironically, he noted that 2020 was a lot less difficult because it was just pure boost in demand with the knock on effect in supply chains taking longer to play out. 2022 is looking “better,” he added.)

“Raw material prices went up, there were supply chain delays so getting things took longer, and the cost of freight has gone up,” he said of last year. “It was a triple blow and they needed our funding more because the time in which they were paid or recognized revenue was elongated.” Specific costs simply went haywire: for example, the price of a container — an important item especially for smaller merchants that don’t charter their own shipping frigates — jumped to $14,000 from $4,000 last year. And supply chain delays jumped to 12 weeks from four.

“We have thousands of customer stories” detailing the problems, he said.

The company’s technology is a classic big-data play: it uses a number of sources of data, from Shopify and Woo Commerce through to TrustPilot reviews and Google Analytics and even wider information about how shipping services are performing, to determine how a merchant is doing as a business. It considers data not as a static but dynamic resource, which in turn becomes the basis on which repayments are made.

Revenue finance, as this is called, is not completely a new concept, but with the rise if big data analytics, it has become increasingly more ubiquitous and stands in contrast to how a traditional bank might have made a loan in the past.

“This gives founders downsize protection,” Corbett notes. “So say a shipment is late, you pay less money back that month. I am taking a performance risk on you.”

But this is also variable and can work in Wayflyer’s favor, too. “If they do well and outperform, we get paid back faster. It’s a lovely alignment on both sides,” he said. It’s not unlike the financing model adopted by other kinds of startups like Lambda School.

Its big data approach has some other benefits, too. Wayflyer can forecast when a merchant might be seeing more issues down the line, and so it nudges customers to put in orders earlier in those cases. It also has an interesting view on what is driving sales for businesses. Right now, for example, among social channels, TikTok is outpacing Snapchat and Pinterest for referrals and giving Facebook and Instagram a big run for their money.

In terms of competitors, the size of the loans it typically makes, and the frequency — depending on the nature and size of the customer, loans could be made as frequently as monthly — has partly meant that Wayflyer doesn’t compete, but complements, some of the other companies that have emerged as financiers to e-commerce businesses. Those include the likes of Stripe and Square, or those issuing credit cards to merchants, all of whom also base their loans on data from their platforms detailing what kind of incomings and outgoings a company is seeing. These tend to be much smaller amounts of money, however, and not aimed at helping a merchant run their supply chains. The bigger players in those categories might potentially become partners, or even try to acquire companies like Wayflyer as they grow and seek to diversify their own revenue streams.

More directly, Wayflyer competitors include the likes of Clearco and Uncapped.

“Aidan, Jack and the Wayflyer team remain focused on helping eCommerce companies grow and maximise their potential,” said Tom Stafford, co-founder and managing partner at DST Global, in a statement. “We are impressed by their commitment to building the best products for their customers and proactively helping their customers grow via analytics, practical insights and attractively priced funding. We are pleased to continue supporting the team, as Wayflyer expands globally to provide innovative financing and growth solutions for eCommerce businesses around the world.”

“The pandemic has accelerated eCommerce adoption globally and Wayflyer is transforming financial services for eCommerce businesses wanting to scale quickly, helping them to gain access to capital, inventory and insights at attractive terms,” said Sandeep Bakshi, head of investments for Europe at Prosus Ventures, in a statement. “Aidan, Jack and their team have a deep understanding of what will drive value for their customers, and the financial and business innovation that Wayflyer provides will help to fuel eCommerce ecosystems globally.”