When Eliot Buchanan tried to pay his Harvard tuition with his credit card, the payment was declined because the university said it didn't accept credit. He recognized the same problem for thousands of different transactions like board, rental and supplier payments and started Plastiq. Plastiq helps people to pay or get paid for everything with credit cards.
Plastiq announced today that it has raised $ 75 million in venture capital in a Series D round led by B Capital Group. Kleiner Perkins, Khosla Ventures, Accomplice and Top Tier Capital Partners also took part in the round. The round brings the company's total known venture capital to over $ 140 million.
To use Plastiq, users enter their credit card information on the Plastiq platform. In return, Plastiq charges you a 2.5% fee and pays your bills. While Plastiq was launched with consumers in mind, according to Buchanan, KMB has now accounted for 90% of sales. The new round of financing will invest in expanding functions to provide SMEs with faster payments and processing services.
Plastiq offers SMEs and consumers the opportunity to pay their bills and ensure a reliable cash flow. For example, restaurants sometimes have a drop in sales due to seasonality or, as we are now experiencing with COVID-19, pandemic closures. Or tourism companies for cities that have difficulty attracting visitors. These companies still need cash flow. With the Plastiq service, you can also use credit cards in low season to pay suppliers.
There is no shortage of competition from other companies that are also trying to address weaknesses in small business cash flow. According to Buchanan, Plastiq's biggest competitors are traditional lenders as well as companies like Kabbage and Fundbox. Similar claims could be made about Brex, which provides startups with a credit card that allows them to access capital more quickly.
Kabbage finances SMEs through automated business loans. The SoftBank-backed company received $ 200 million on a revolving credit line back in July after building strong partnerships with banks and giants like Alibaba to gain access to more customers. Kabbage awards around $ 2-3 billion to SMEs each year.
Plastiq is also on track to make more than $ 2 billion in transactions, according to its release. In contrast to Kabagge, Plastiq does not grant any loans or credits, but only opens up a payment option.
"SMEs do not have to be burdened with additional debt or credit," said Buchanan. "Instead of trying to reinvent the wheel, we're using behavior that they already deserve."
Buchanan would not disclose Plastiq's current valuation or sales, but said that this is not too far from the $ 100 million sales rate. The company's revenue increased by 150% from 2018 to 2019.
The company also found that it exceeded "well over 1 million users", an increase of 150% in individual new users from 2018 to 2019.
Regarding profitability, Buchanan said, "We could be profitable if we wanted to," and noted that Plastiq's sales and margins could make it profitable if they didn't want to focus on growth. But he added that they are not planning to "slow down" the growth engine soon – especially after the COVID-19 pandemic.
As the Series D round was closed in late 2019, Buchanan said the pandemic had no impact on the deal. However, the company had planned to schedule the announcement with the tax season. Now that small businesses across the country are struggling to secure capital and stay afloat due to lockouts, the new Plastiq increase feels more appropriate.
"Our customers are more grateful for solutions like ours because traditional sources of credit dry up and are not easily accessible," said Buchanan. "Hopefully we can measure how many companies make it because of us."
The 140-strong company is currently hiring in various product and engineering functions.