As most readers of this blog know all too well that starting a company from scratch is stressful and difficult—but for those who do it successfully, Founders stand to gain substantially. At any stage of business development though, cashflow issues can quickly become a point of series friction, and a lack of prompt invoice payment or incoming revenues can drastically impact company operations.
Viacheslav (Slava) Oganezov and Alex Fenechiu are the Co-Founders of Finverity, a London Founder Institute portfolio company that helps bridge the gap for small and mid-sized companies that can’t wait 30 to 90 days for a payment to come through after invoicing. Finverity is a cross-border invoice trading platform that connects investors from developed markets with high-yielding opportunities in developing markets.
Trading Cashflows for Cash Now
The trade finance industry faces a global gap of $1.5 trillion whereby, according to Co-Founder Slava Oganezov,
75% of that comes from small to midsize companies in emerging markets, trading with corporates in developed markets. These are almost never funded by traditional financial institutions.
Through Finverity, investors are able to make low-risk allocations of capital into invoices, buying them at a discount today and receiving the full invoice amount at the agreed payment date. When asked how the process works, Slava linked the concept to how small or mid-sized companies might work with a corporate giant such as Walmart.
We pull validated invoices from the buyer companies. This means that the buyer has received the goods or services, has checked them, and confirmed they are happy to pay for them at the maturity date of the invoice. These invoices are then allocated to each supplier who is a small to mid-size company that often struggles to get funding in their local market. Through the platform, they can login and immediately see all invoices they are due from the corporate buyer, when payment is expected (e.g. in 60 days), and how much they can receive today for that invoice. With a few clicks, they can sell that invoice to the investors, receive the money within hours, and carry on with their daily operations—without 15 trips to the bank or weeks of negotiation with the buyer for early payment.
Because of how the Finverity platform has been carefully setup though a blockchain enabled verification system, the funding can be allocated to underserved markets while reducing risk to their investors. The complexity of the system is a testament to the challenges the Founders had to overcome, to view fully integrated FX capabilities and transparent financial health indicators for all buyers within one screen. These are features are a prerequisite to a successful global Invoice Trading platform, but are incredibly difficult and expensive to setup initally in a scalable way. But the Finverity team has done it.
Though the company is just gearing up to launch the pilot solution, they have already been met with a great deal of success. To date, Finverity has raised over £600,000 (~$760,000 USD) through both angel investors and institutional venture capitalists, including Loyal VC. This initial funding has allowed the company to build a complex system that is now fully operational, as well as meet the necessary regulatory requirements that are particularly stringent for financial institutions. In fact, according to Slava, his big success metric is “building an entire system, which offers comfort to institutional investors from an operational perspective, and is fully compliant with the landmine-filled legal landscape in Europe. It was honestly a nightmare. Now that we overcame it, however, it means we can go live.”
A Team of Experts to Navigate Financial Complexities
Slava attributes the successful development of their solution to the strength of the Finverity team. He met his Co-Founder, Alex Feneciu, during his time at Cass Business School, where the two became close friends. While participating in the London Founder Institute, Slava made connections with people who would be key to his fundraising success later on, including Kamal Haasan of Loyal VC. Finverity’s team today is 8 people strong, with the latest addition being a Chief Risk Officer (CRO) arriving via a supply chain finance fund and bringing a great track record within the industry.
It’s hard to imagine building a financial platform such as Finverity as a childhood dream, which begged the question: What motivated Slava and Alex to plant the initial seed? From a young age, around 12 to 14, Slava said that he always knew that he was going to build a business, just not quite like this one... The idea for building a financial services company was sparked when Slava was working a strategic consultant at PwC.
We were building financial strategies for banks. Banks are not nimble and are hard to move… Long complicated processes and inefficient practices meant that most of the time our suggestions were not implemented. So at some point, instead of advising, I decided to build a company of my own.
Slava went on to discuss how this particular challenge inspired him to launch Finverity,
There is a massive lack of credit and liquidity in emerging markets, hindering growth especially at an SME level. [However, in developed markets,] there is a lot of money just sitting around in accounts.
In particular, London came to mind. He asked himself, what is the most efficient and scalable way to redeploy this capital for better returns where it’s most needed? Through this thought exercise, the foundation for the supply chain finance platform that is Finverity was born.
There are a lot of social ideas behind our enterprise. My Co-Founder is Romanian, and I am from Russia. Good businesses struggle to get money in those countries and that’s the case in all emerging markets. Cashflow is killing them, and we are able to help! Why do it? Because we’ve seen good businesses fail due to the system, and that’s not the world we want to live in. If we help grow the backbone of the economy—SMEs—that’s the foundation for further development that the political systems in the East often ignore, and you can’t build a house without a foundation.
Graduates of the Founder Institute are creating some of the world's fastest growing startups, having raised over $800M in funding, and building products people love across over 180 cities worldwide.
See the most recent news from our Grads at FI.co/news, or learn more about their stories at FI.co/journey.