Here’s a New Corporate Card Startup, Backed by $157M in Equity, Debt, Going After Brex, Ramp
Image credit: Parker
Parker, a startup that offers a business credit card for e-commerce businesses, emerged from stealth Thursday with $157 million in equity and debt financing, much of which closes in 2022.
The company bills itself as “the first e-commerce payment card” with increased limits that average 10 to 20 times higher than traditional business credit cards, such as CapitalOne, American Express and Brex.
Co-founders Yacine Sibous and Milan Ray were more concerned with computing before they kind of fell into the world of e-commerce. They built internet based businesses to help people build passive income when they came across the problem of economics in e-commerce.
“We envisioned building better financial products for e-commerce entrepreneurs with the mission of increasing the number of financially independent people,” CEO Sibous told TechCrunch.
Sibous and Ray founded Parker in 2019 and were part of the Y Combinator winter 2019 cohort. The company focuses on the middle market – companies that make $3 million to $100 million in annual revenue.
Parker’s “secret sauce” is the underwriting process, which assesses cash flow so e-commerce brands can have credit limits that make sense for their business; for example, up to $10 million in credit, Sibous said.
In addition, the company offers payment terms that Sibous said are reasonable in the context of e-commerce – think net terms on each transaction. For example, if you buy something on March 1st and then March 3rd, you can have a net 30 or 60 days on each of those and not pay on that transaction until May 1st and May 3rd, respectively.
“We’ve essentially changed the way statements work for credit cards, so instead of using a monthly statement, we have the ability to work with daily or weekly statements,” Sibous added. “It helps these brands a ton with cash flow.”
Sibous believes Parker has a good opportunity to compete in the crowded credit card space that includes other venture-backed companies such as Moss and Emburse. Sibous also pointed out that corporate card companies like Brex, American Express and Ramp have a broad reach to startups and don’t niche down to a specific industry to focus on custom needs like Parker does.
“We tried to use these cards for our own business and the cards kept breaking,” Sibous added. “We realized that nobody has really solved the problem in a way that makes sense. Because we had been working with fintech and e-commerce startups for so long, we knew all the vendors in the landscape pretty well and were very well positioned to actually tackle this problem. »
Parker’s revenue comes from exchange and transaction fees, and since launch has surpassed $300 million in transaction volume. It also has a run rate of close to half a billion dollars, Sibous said. Clients include Amour Vert, Italic, SpikeBall, Canopy and Caraway.
The company began raising venture capital after graduating from Y Combinator and is now announcing all of its previously unannounced funding, most recently $31.1 million in Series A venture funding led by Valar Ventures that followed $5.9 million in seed funding. In addition, there is $70 million in debt, consisting of venture debt from Triple Point Capital and warehouse debt from Jefferies. The senior debt facility also includes an unobligated option to increase by $50 million.
“Parker has identified an opportunity as a massive segment of e-commerce has been underserved by traditional banks, startup card and cash advance companies,” Andrew McCormack of Valar Ventures said in a written statement. “The company has seen a good product market fit among companies that require flexible financing terms and innovative guarantees to succeed and unlock growth.”
Sibous said Parker has maintained a solid runway through the global pandemic, meaning it hasn’t needed as much additional funding over the years. The funding will be distributed to research and development across product, engineering and go-to-market when it is ready to expand across the country this year.
Parker is also working toward profitability, and the company is working to scale to access cheaper capital costs and upsell other products, although there is a path to profitability in just the card business, Sibous said.
“We want to become the de facto card for profitable e-commerce brands looking to scale,” Sibous added. “We want to build the best card experience in class and solve the problem area of cash flow, management and profitability. Once we reach that goal, we will look to expand our product lines, including other financial products these brands may need.”