C2FO Update – A Working Capital Market in the Making

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C2FO has been operating what they call their working capital market for close to five years now and clients include Costco, Walgreen, Sysco, ToyRUs and Toshiba.

For those who are not familiar with what a Working Capital Market is, in C2FO’s case, suppliers provide a rate at which they will discount their invoice for early payment.  This is a significant point of distinction.    Suppliers have the ability to set their own price for early payment.  C2FO’s marketplace technology will route these offers to the buyers in the marketplace to determine whether the rate is accepted based on a number of variables, with the main driver being what the company, in this case, Costco, Walgreen, etc. set as the return they require for the cash they commit to the C2FO Market.

C2FO has registered some interesting numbers (note: these numbers come from CMO Sanjay Gupta):

  • C2FO has delivered more than $15 billion in working capital and 80 million days of accelerated payment to businesses world-wide.   Walgreen's Assistant Treasurer indicated "There are over 1,000 suppliers enrolled in the program and we have delivered more than $1.1 billion in early payment to them.”
  • C2FO indicates that anywhere from 20% to 50% of large organizations spend can be part of an auction, certainly much more than the long tail of procurement spend.
  • On average C2FO achieves a return for buyers of 5.82% APR.  This rate represents a blended rate.  Some suppliers will only offer 5% while others may offer9% or more.
  • The average acceleration of payment days in a C2FO program is ~26
  • 90% of C2FO suppliers put in their parameters and let it ride on all invoices
  • C2FO indicates that 95% of suppliers on C2FO plan to continue to use them on an ongoing basis and has a Net Promoter Score of 60
  • C2FO operates in 13 currencies
  • C2FO is quick to implement, with one company telling me that contract signing to implementation took six weeks.

C2FO charges buyers a subscription fee and up to 35% gain share on the income earned.

C2FO partners with major financial institutions such as KPMG, SolomonEdwards, Citigroup, and Fifth Third Bank.  For example, Fifth Third white labels their solution as part of their dynamic discounting platform.

Right now, C2FO is still working on third party sources of capital within their marketplace.  With effective APR rates lower than dynamic discounting rates for invoices, the investors may be different types (ie, more conservative) than those that invest in dynamic discounting platforms.

Our analysis is that C2FO provides a strong cash management tool for both suppliers and buyers.  Buyers, on any given week, can adjust the cash pool based on their excess cash position.  While suppliers are told they are not always guaranteed to be able to discount the invoices given the pool of money available, suppliers can get a rate they want versus a rate set by the Corporate.  This is leading to the adoption numbers we’ve seen.

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