Tranch - B2B Payments, Reimagined

Company & Team Introduction

Tranch is the Fintech company bringing the flexibility of Buy Now, Pay Later to businesses across the globe. The company was founded by experienced Fintech executives Philip Kelvin (CEO) and Beau Allison (CTO) after the duo worked together at consumer-facing Digital Mortgage startup Better.co.uk. During their time at Better, where Philip served as CFO and Beau as Head of Engineering, it became painfully apparent that the world of B2B payments was out of date, lacking the flexibility and quickness already offered in many consumer-facing Fintechs. With their prior experience, they were well-positioned to bring such a solution to market, and in 2021 Tranch was born. The company is based in London, England and NYC, New York and has scaled its team to ~14 employees.

Product Overview

Tranch does wonders for businesses looking to get paid faster and allows their customers to effectively manage their working capital by removing the burden of having to pay for large services all at once. Tranch pays the merchant the contract's total value upfront, eliminating the customer risk of non-repayment, as Tranch handles the collecting payment installments. The company offers several payment products, including Pay Later, Pay Now, Pay By Card, and Embedded Checkout.

Pay Later: Allows companies to pay invoices of up to 500k in installments over a 2-12 month period to help companies manage their working capital and easily pay invoices in multiple currencies.

Pay Now: Secure checkout utilizing Fed-Now and a real-time payment network, helping businesses get paid up to 40% faster. Payments are processed in 1-3 days, and there are no fees associated with Pay Now payments.

Pay By Card: Accept credit card payments through Tranch’s secure payment portal, which is fully customizable, has complete data security, and is PCI compliant.

Embedded Checkout: Customizable checkout based on your brand. Hosted by Tranch, enabling companies to offer their entire suite of payment products in a week or less without any integrations.

Total Addressable Market

Consumer-focused By Now, Pay Later solutions have seen massive adoption over the past decade and have created some of the largest Fintech companies in the world today, including Affirm, Klarna, and Afterpay (Acq. by Square for $29B). The estimated global total addressable market for consumer BNPL was $37.19B in 2023 and is expected to undergo an impressive 20.7% CAGR through 2032, expanding the TAM to $167.58B. Tranch’s team had its sights set on what it believes to be a much bigger opportunity, applying similar technology to the much larger, less competitive and innovative segment of B2B payments. Businesses spend a staggering $29T in invoice payments in the US alone every year, meaning the TAM for B2B payments is already ~10x larger than its consumer counterpart.

Business Model & The Numbers

Tranch uses a straightforward transaction-based business model, only monetizing via their “Pay Later” product. The company takes a percentage fee based on the total price of the invoice, starting at 1%, but can vary based on assessed business risk. Tranch’s fee is also payable across the term. Any “Pay Now” or “Pay By Card” payments are free. The average revenue of a Tranch customer is ~$1.5B. The company also released earlier this month that it had just landed a massive deal with a top American law firm with ~$750M in annual revenue. Tranch customers collectively invoice over $10B annually.

Traction

Tranch has already helped several companies spread out millions of dollars worth of invoice payments. The company was also accepted as a participant in Y Combinator’s S22 batch, giving it some much-needed market validation to tackle its ambitious goals. Tranch has seen a strong market pull from massive enterprises, already serving customers such as Gunderson Dettmer, Paul Hastings, Perkins Coie, and Airmeet as they look to offer more flexible payment solutions. Gunderson Dettmer received incredible customer feedback after implementing Tranch, raving about its flexibility and convenience. They’ve received millions of dollars in invoices using Tranch, saw a 25% reduction in discounting invoices, and were onboarded in under 48 hours.

Competitors

The market landscape for Tranch is promising. There are only a few competitors in the space, and they all came to market around the same time. The main competitors to Tranch are Mondu.ai, which was founded in 2021 and resolvepay.com, which was spun out of Affirm in 2019. While each company provides a similar offering, Tranch’s combination of industry expertise, technology, design, and transparency set it apart from the competition. Plus, with the size of the opportunity, there is more than enough room for more than one winner.

Funding

Tranch has raised 2 rounds of funding, with both raises being a combination of equity and debt. The company initially raised a pre-seed round in May 2022, totalling $4.25M, with an undisclosed mix of debt and equity. Flash Ventures led the round, and other participants included Y Combinator, Global Founders Capital, and the credit facility was provided by Columbia Lake Partners. Tranch’s next fundraising was a massive $100M seed round at the start of 2023. The majority of the round consisted of debt, with $95M in credit provided by Clear Haven Capital Management and the other 5M in equity spearheaded by Soma Capital and FoundersX Ventures, in addition to several strategic Fintech angel investors participating in the round.