THE WORLD’S MARKET FOR WORKING CAPITAL ®

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Allison MacKinnon | Sean Van Gundy | 09.17.14

TECHNOLOGY

‘05

130Exabytes

‘10

1227Exabytes

‘15

7910Exabytes

TECHNOLOGY MARCHES ON RELENTLESSLY

Moore’s Law Yearly Information Created

Source: Wikimedia Commons, EMC Digital Universe Note: 1 Exabyte = 10^18 bytes (1 million million million bytes)

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DIGITAL IS DISRUPTING EVERY INDUSTRY

Communication Transport & Leisure

Games Agriculture

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YET MANY INCUMBENTS FAIL TO INNOVATE

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STEVE JOBS, APPLE

“If you don’t cannibalize yourself, someone else will”

Laser focus on Search for first 5 years

Homepage now even more simple

FOCUS, FOCUS, FOCUS

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DISRUPTION - RULE OF 10

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“For a startup to replace an incumbent and convince people to do something different or new,

it has to be 10 times better than the alternative”

JOSEPH ANSANELLI, GREYLOCK PARTNERS

•  10x the selection

•  10x better distribution

•  10x the customer service

•  10x faster

•  10x smaller

•  1/10th power consumption

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“Failure is simply the opportunity to begin again, this time more intelligently”

HENRY FORD

MOVE FAST & BREAK THINGS

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“I view my role more as trying to set up an environment where the personalities, creativity and individuality

of all the different employees come out and can shine”

TONY HSIEH, ZAPPOS

ONLY POSSIBLE IF THE RIGHT CULTURE EXISTS

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DISRUPTION OF WORKING CAPITAL

Financed by: $3T Bank Debt $3T Factoring $0.3T Supply Chain Financing

$35T OPPORTUNITY TO ENABLE EARLY PAYMENT

Source: C2FO analysis, St Louis Fed, FCI, GBI, UK Government Taskforce

Outstanding right now

AP/AR annually

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Immediate funding gap

   

   

               

GAP WIDENING FOR SMBS

•  $100B less lending to SMBs in US since crisis

•  $400B more lending to large businesses

•  Basel III risk-weighting making this SMB trend worse

Source: Federal Deposit Insurance Corporation

’09 $620B ‘10 $610B ‘11 $550B ‘12 $510B

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YET SMBS ARE MEANT TO DRIVE THE RECOVERY

Source: US Small Business Administration

•  SMBs comprise 99.7% of US Employer Firms

•  SMBs account for 49% of employment

•  SMBs provide 64% of new jobs

“Too many small businesses struggle to access the capital they need…small businesses are spending unnecessary funds to cover cash flow issues cause by late payment.”

White House Press Release,

July 2014  

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LONG PAYMENT TERMS CONTINUE TO STRESS BALANCE SHEETS

Brazil, 75   UK, 50  Germany, 58  

Japan, 75  

USA, 42

Italy, 103   France, 80   China, 78  

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Source: PWC

Days sales outstanding (DSO)

APR

THEREFORE SMBS FORCED TO USE EXPENSIVE ALTERNATIVES

Source: OnDeck, Business Observer, Business Week, Metro Bank, Various SCF Schemes, Corp Bond Issuance

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50%+ 0% 25%

NO PRODUCTS

Online business loans

Factoring / invoice discounting / p-cards

Business credit card

Business loans

Business loans

Bonds

Supply chain financing Larger corporates

SMBs

Top 1000 non-financial institutions have $23T of cash

Outstanding right now

AP/AR annually

Financed by: $3T Bank Debt $3T Factoring $0.3T Supply Chain Financing

   

   

   

LIBERATING $23T+ OF CASH IS THE REAL DISRUPTION

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If part of this $23T flows down the

supply chain, there would be no funding gap,

and no need for so many bank products

Source: C2FO analysis, St Louis Fed, FCI, GBI, UK Government Taskforce

           

Funding gap eliminated

ENTER THE DISRUPTORS

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•  Leverages Buyer’s credit rating

•  Banks advance cash on receivables

•  Low APRs

•  Becoming faster to implement

•  Good for CSR

Supply Chain Financing Early Payment Marketplace

•  Leverages Buyer’s cash

•  Early payment in return for discount

•  Increases profit margins

•  6-10 weeks to implement

•  Great for CSR

COMPLEMENTARY STRATEGIES

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Accounts Payable

Value

Larger

Supplier Size

Smaller

C2FO SCF

Buyer Push Bank generates profit

       

Supplier Pull Buyer generates profit

       

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THE EMERGENCE OF DISRUPTIVE MARKETPLACES

Source: Federal deposit insurance corporation

Physical Goods   Travel  

Stocks & Shares   Working Capital  

A Marketplace captures a supplier’s changing dynamic cost of working capital over peaks and valleys throughout their fiscal year. Each color represents a unique supplier’s APR offers for early payment over time.

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THE SUPPLIER’S NEED FOR CASH IS DYNAMIC

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SUPPLIERS BID FOR EARLY PAYMENT

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21 average day yields annualized

HIGHER YIELDS THAN OTHER OPTIONS

The marketplace produces high returns while maintaining a low risk profile.

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Extend working capital down the supply chain tiers. — C2FO market member

THE VALUE OF THE NETWORK IS FULLY CAPTURED

Tier 1

Tier 2

Tier 3

BENEFICIAL FOR CORPORATE SOCIAL RESPONSIBILITY

•  Suppliers down entire chain get early access to cash, at a rate they decide

•  Low APR – market averages 7%

•  Complements existing SC programmes

•  Extremely simple – 2 clicks to cash

•  91% supplier recommendation rate

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THANK YOU