Thought Leaders in Artificial Intelligence: Prashant Fuloria, Chief Product Officer at Fundbox (Part 2)

Prashant Fuloria: Let me explain the SMB to B concept a little bit more because it’s a fascinating and sometimes overlooked area. You and I interact a lot on an ongoing basis with small businesses that are fundamentally B2C. You talked about e-commerce. You might go down to a coffee shop and get your morning cappuccino. You might go to a small store.

These are all B2C merchants where the nature of their transactions typically follow a predictable path. It’s an end consumer transaction and consummated with a credit card. The data is fairly well-organized. You’re absolutely correct that there are a number of players that have tried to asses the health of a B2C business. You also have larger platforms like Amazon or PayPal working on trying to solve the opportunity around B2C merchants.

As for trends, look at the number of B2C transactions happening in the country. There’re between $3 and $4 trillion of credit card transactions happening every year in the US. That’s a big number. You cannot just shake a stick at $3 trillion of transactions. However, that number is completely dwarfed by the dollar value of the B2B transactions. By a very conservative estimate, the amount of B2B transactions is 13 times that of B2C.

When it comes to the number of businesses, while there are roughly four million B2C businesses, there are almost as many B2B-oriented SMBs. For every restaurant you go to, there are laundry services, food delivery services, plumbing services. There are a number of B2B businesses that exist. These have historically been underserved from many perspectives including access to working capital. This is what we focus on. This is the big market need that we are on a mission to help address.

Sramana Mitra: What are the criteria against which you offer credit to these businesses?

Prashant Fuloria: The criteria that we use and the way we assess the health of these businesses is another thing that differentiates Fundbox from everybody else out there. Typically, the traditional approach of underwriting a business often starts by assessing the personal credit history of the proprietor.

If you go into any online application for either a term loan or working capital, very soon you’re in some sort of a FICO pull and your personal credit history is one of the first things that’s leveraged to give you a business loan. It is crazy to expect that a business creditworthiness is only a function of the proprietor’s creditworthiness. The reason people use it is because it’s easy. FICO has been around since the ‘50s.

While FICO is a decent guide for consumer credit, FICO is even less of a reliable predictor for small businesses. Many business owners that we work with have already leveraged their personal credit history to build their business to where it is today. They may have a successful business, but they spent five years in putting loans on their credit cards. They don’t often have the best personal credit scores. For many of them, they don’t want to mix up their personal credit with their business credit anymore.

What does Fundbox do that’s very different? Fundbox is able to underwrite and assess the health of a business without resorting to personal credit through something very unique that we’ve built out over the last few years that we call the small business graph. A few years before joining Fundbox, I used to work at Facebook where I ran a few products. I was the first Product Director for Advertising. One thing I learned there is the power of the graph.

Just like the Facebook social graph, it captures not only you as a person, but your interactions with your friends. That graph gives Facebook the data that it needs to do things like sort the items in your newsfeed. In the same way, the Fundbox small business graph captures not only businesses but also shows how they interact with the businesses around them. This is particularly important for that SMB to B category.

If you are an SMB to B business, your health is a function of the health of your vendors and your customers. Rather than only focusing on the information about a customer that comes to us, we look at the set of other businesses that they work with. Through that process, we build out a graph that captures those interactions. Over the last four years, we’ve built out the graph to the point that we have more than 10 million entities in that graph and their interactions. That’s our proprietary asset that we use.

The other part of it is the Artificial Intelligence that we’ve built that uses that data to assess the health of the business. The key thing here is the combination of the data asset and the Artificial Intelligence lets us underwrite business health using business data without having to resort to personal credit history.

This segment is part 2 in the series : Thought Leaders in Artificial Intelligence: Prashant Fuloria, Chief Product Officer at Fundbox
1 2 3 4 5