Supplier Payments Fintech Melio Raises $110 Million at $1.3 Billion Valuation

Melio, founded by CEO Matan Bar, CTO Ilan Atias, and COO Ziv Paz, has raised $110 million at a valuation of $1.3 billion. Melio allows businesses to digitally pay their invoices for free using a bank transfer or debit cards.  The funding round was led by Coatue bringing Melio’s total funding in 2020 to $240 million and $256 million since launch in 2018. Investors from earlier rounds include Accel, Aleph, Bessemer Venture Partners, Corner Ventures, General Catalyst, and Latitude. Salesforce and American Express Ventures also invested in 2020.

Melio is taking advantage of B2B wholesale payments that are said to be largely manual and a paper-based process. Melio reports that over 40% of B2B transactions in the US, or $25 trillion, are still made with paper checks. The ongoing COVID-19 health crisis has exacerbated the need for digital payments. Melio points to Federal Reserve data showing that paper check use by US businesses declined at about the 4%-8% range per year between 2003 and 2018. Melio reports that its users experienced a 50% reduction in payments delivered by check during 2020 – expediting the payment process and releasing needed capital.

Melio says it has grown rapidly, processing multi-billion dollar payment volumes since offering its services in 2019. The company’s monthly active users (MAU) grew by over 2,000% in 2020, including businesses like restaurants, wine shops, office supply stores, and small construction firms – a sign that small businesses are increasingly adopting digital solutions to pay their suppliers.

Bar, a former PayPal executive, said that getting better control over cash flow and the ability to manage payments remotely and small business digitization is here to stay:

“[These] are key elements of a business’ health, and that process shouldn’t be complicated. We see this fundraising as a great privilege and responsibility to support small businesses during these challenging times.”

Michael Gilroy, General Partner at Coatue, stated:

“Melio has identified both the opportunity and duty to help small businesses manage their finance remotely and improve cash flow, in normal times as well as during this crisis, as physical payments supply chains are interrupted and overwhelmed. Going digital is the only way small businesses can compete against larger rivals and stay ahead of the curve.”

Melio points to the fact that about 31 million small firms provided employment for 47.1% of working Americans over 2020, and have historically accounted for around 44% of all economic activity as well as 64% of net new private-sector employment.

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