We continue to be surprised at some of the funding rounds and public company valuations in the sectors of procurement and trade financing (receivables and payables financing). Given even highly optimistic discounted cash flow valuation approaches on what is “here and now” – i.e., cash generation in the next two to three years – it is all but impossible to arrive at anything close to the valuations we’re seeing. But in a frothy market, we toss out all norms anyway.
However, Taulia is one of the few vendors that I’d bet my own money on to grow into what is a curiously high valuation based on historical – even historical tech – norms. It’s my estimate that the recent Taulia valuation round was done on a valuation multiple roughly around 15 times trailing top line numbers. I base this multiple on a napkin sketch of Taulia’s current accounts and business activities (including program adoption) and a WSJ blog pegging the overall valuation at $200 million.
Download our free research paper, Mixing Apples and Oranges: 8 Differences Between Dynamic Discounting and Supply Chain Finance Programs.
On the surface, Taulia does not do anything terribly complex from a dynamic discounting perspective (discounting is not rocket science). But dig below the high level positioning, and Taulia features, in addition to a supplier portal and related discounting capabilities tied into tight ERP integration, a basic if not high capability e-invoicing platform. They also bring to the table broader trade financing enablement (and third-party capital), and most important of all, the largest, most diverse, and fastest-growing list of corporations to sign up for such programs that we know of on the tech platform side.
Still, Taulia (and others) have got some big shoes to fill – built on a past they’ve created for themselves based on the valuation numbers.I think David Gustin, my Trade Financing Matters colleague, nails it in another post today:
“What we have going on now is sort of a gold rush to find the next big company for early payments. While there is a perfect storm of opportunity (zero short term rates, structural changes in banking, technology, etc.) we are still in the early days. What compounds the challenge is that it’s still guess work in terms of how big financing techniques like reverse factoring and dynamic discounting are and will be. Basically, private equity is funding the likes of Taulia and others on the hope that this is a gigantic market.”
But for investors and customers implementing such receivables and payables financing programs including dynamic discounting, the most important question is just how large a slice of transactions can be financed. Most programs today (on the customer side) are still in their infancy. Crossing the trade financing chasm will take more than optimistic valuations – it will take reasonable APRs for financing, significant investment in the marketing of programs, and, perhaps most important of all, highly effective supplier enablement programs to bring new suppliers on board.
Stay tuned for more as we cover Taulia’s funding round and its implications for others in the market.