THE WORLD’S MARKET FOR WORKING CAPITAL...‘05 130 Exabytes ‘10 1227 Exabytes ‘15 7910...
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THE WORLD’S MARKET FOR WORKING CAPITAL ®
optimize connect collaborate
Allison MacKinnon | Sean Van Gundy | 09.17.14
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TECHNOLOGY
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‘05
130Exabytes
‘10
1227Exabytes
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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”
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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
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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
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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)
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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
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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
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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
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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
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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
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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