Sramana Mitra: This is an area of differentiated well-merchandised consumer products in existing categories and sometimes even new categories. This is a very interesting area because Facebook has created an unbelievable platform for entrepreneurs to hyper-target. That hyper-targeting capability never existed until now. It’s amazing.
For $20, the kind of hyper-targeting you can do is incredibly efficient. There’s some good news for the consumer entrepreneurs who are trying to build something. There is some good news and bad news in the story that you told. Amazon has locked up distribution and logistics in such a tight way that all the big categories are locked up. However, the niche and new products is where the e-commerce opportunity is.
David Blumberg: We did invest in the infrastructure for food manufacturers. It’s called CaseStack. They started in LA. Very interestingly, they moved to Bentonville, Arkansas and got acquired. Now they build consolidation programs for logistics. I think they’re trying to work with Amazon. They help small entrepreneurs under $2 billion in revenue.
They help them be much more efficient in their logistics. There’s what we call LTL (less-than-truckload) and making it full truckload. What they’re moving to is a software solution that puts the entire supply chain to logistics management in the cloud. It makes it end to end. I can sit in my office where I make hot chili pepper sauce and sell it all over the world. I don’t have to know anything about shipping and logistics. All of it happens seamlessly. I meet the extremely difficult demand of huge customers like Walmart or Amazon. That’s helping the entrepreneur.
What I love is seeing companies that start to level the playing field. Let me give you an example in FinTech where people think it’s all for Goldman Sachs’ wealthy clients. We just invested in a company called EarnUp. These are two entrepreneurs who bootstrapped themselves into an MRR of tens of thousands of dollars before they came to us. They are helping average people who are in debt with mortgage or student debt to pay these things off in an automated fashion so it optimizes the minimum interest payment and maximum financial health for the consumer.
We never miss a payment. We pay down extra principal whenever we have extra money. This is a SaaS model. It’s extremely easy to use. It helps the average Joe do better in the credit market, build their credit score, never waste money with a missed payment, and always make sure that the bank credits the principal early payment. We’re seeing many companies like this who start to help average people level the playing field. Technology can benefit the elite and the big companies but it can also help benefit the average person in ways that their great grandparents would never have imagined possible.
Sramana Mitra: I think the opportunity for selling B2B SaaS to small to medium enterprises is a massive one. Customer acquisition is a bit more complicated, but it has become a lot easier because of the targeting capabilities. It has become a lot easier. That continues to be a very sizable opportunity still.
David Blumberg: I totally agree with you. Another example from FinTech of a problem and how we solve it. We often say that it’s often harder to find a good problem than a good solution. You got to look for the problem. We have an entrepreneur who came to us with a company called Lendio. After he finished his presentation, I said to him, “We’ve been waiting for you. We knew that a company like this needed to be built.”
They’re a one-stop shop for borrowing entrepreneurs. Say you want to get an equipment loan or you want to get a general line of credit or you want to factor some of your clothing sale. All those are different kinds of loans. They require you to go to different institutions, different account managers, and different data. Forget that. Lendio takes one application. They put a bid out to relevant lenders, so they compete for your business. It’s a great model and is growing really fast.
On the other side of the marketplace, people like OnDeck are bidding for your business. Here’s a real problem. This is not talked about by politicians, but it’s a real crisis for small businesses. Since the 2008 crash, lending to small business has decreased. The average daily sales outstanding ratio, which is essentially your receivable, has gone from 45 days of cash flow to 90 days in the last decade. Terrible.
They rely on credit cards, which are extremely expensive. We try to help them with companies like Lendio. Fundbox does it in an automated way. Those are the kinds of things that are moving towards helping the SMB market. I agree with you. It’s easier to target them. You can reach them through email or Facebook.