The New Playbook for B2B E-Commerce; Our Investment in Balance
At Forerunner, we obsess about the purchase journey for the consumer–but sometimes, the consumer isn’t a person. It’s a business. And while B2C e-commerce has meaningfully evolved over the last decade, B2B e-commerce has yet to be modernized to the same degree.
Across lumber, steel, chemicals, diamonds, food, and beyond, the next decade holds game-changing potential to enable and unlock more B2B transactions online. But B2B commerce is uniquely different from B2C. It is driven by personal relationships, underpinned by rational business-related buying behaviors, characterized by larger transaction sizes with negotiated volume discounts, and executed with slow ACH payments, risky net terms, and costly invoice factoring. The pandemic challenged businesses to adapt and accelerate digital transformation – they are now more eager than ever for modern tools to digitize systems, mitigate risk and cost, and unlock upside.
More digital marketplaces, distributors/wholesalers, and manufacturers are emerging across industries with vertical and horizontal B2B e-commerce offerings. In addition to the potential for those B2B e-commerce platforms to bring their respective industries online, the commerce enablement needs of those platforms are typically different from B2C and will require a new tech stack and playbook powered by new companies. While B2B commerce companies can partner with a leading B2C solution for B2B e-commerce, those companies most often have limitations on their ability to offer the range of payment methods, terms, and financing that the B2B ecosystem expects.
The B2B opportunity is at the largest of scales. The global B2B e-commerce market is estimated to reach $25T by 2028, which would put B2B e-commerce at three times the size of B2C e-commerce with an expectation to grow twice as fast. Today, we are in the earlier innings of B2B e-commerce and we believe the tech stack will evolve and mature over the coming decade to be as robust as the B2C playbook for how to start and grow a business online – think Stripe, Shopify, and Klaviyo. From our early investment in Faire five years ago to more recent investments in Canal, CoProcure, and Buffalo Market, Forerunner has long believed in the potential here and from partnering with these founders we identified a critical opportunity that can shape the B2B e-commerce landscape in the years to come.
Enter our latest Series B investment in Balance, an all-in-one B2B payments platform for digital marketplaces, wholesalers, and manufacturers.
The breadth and depth of Balance’s products and services stands out in the market. Balance offers a modern checkout experience with preferred B2B payment methods; 30/60/90-day net terms with digitized and seamless underwriting; instant payouts, where companies can receive full payment upfront less a financing fee; a reconciliation program to manage and settle AR digitally, as well as KYC and anti-money laundering services. Today, Balance is live with dozens of clients, including Bryzos, Fabric, and Choco. With the offering, these B2B companies can focus on their core competency of bringing buyers and sellers online, while Balance provides a top-notch digital payment experience, unlocks top of the funnel through sophisticated financial underwriting, and takes on the responsibility and risk of payments.
The company was co-founded by Bar Geron and Yoni Shuster, a team based in Israel who met while working on risk at PayPal risk team. With rich experience working together–both at PayPal, and on another startup–we were impressed to see the energy forming around this global team (attracting talent from Bread, Paypal, Flexport, and American Express) with offices in Israel and New York.
The problem that Balance is solving could not be more timely. 93% of CFOs said they are currently digitizing their accounting operations, with priorities that include invoicing customers and vendors (61%), payment processing (51%) and tracking payments that are both received and due (48%). In 2021, there were 5.3B B2B ACH payments, valued at $50T and up 20% from 2020–all accelerated by Covid-19. On top of this, supply chains continue to be strained and costs are going up. The more efficient B2B commerce can become by moving online, the lower the cost of living for people everywhere.
B2B e-commerce companies deserve better tools to transact. We believe Balance will help power a radical (and necessary) shift toward digitization for the next generation of B2B e-commerce. We’re thrilled to partner with Bar, Yoni and the Balance team as they build this brilliant, long-overdue solution.