Rethink / Fintech / 40Seas on the crest of a wave: Bold innovators in SME, cross-border trade financing

40Seas on the crest of a wave: Bold innovators in SME, cross-border trade financing

Rakefet Russak Aminoach January 10, 2023
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After a rigorous process of establishing product-market fit, one of our home-grown foundry companies, 40Seas has emerged from stealth mode with a spectacular $111m funding raise. This includes a $100m credit facility with ZIM – a leading global shipping company – to revolutionize SME cross-border trade financing and make life easier for exporters and importers, and not a moment too soon!

It is really a beautiful thing when preparation meets opportunity. Sometimes the window of opportunity is narrow, requiring swift, decisive action to maximize outcomes. Then again, sometimes there are market opportunities so lofty, that they remain broadly untapped – resulting in decades of inefficiencies and prolonged industry stagnation. Nowhere is this more pronounced than in the supply chain space.

Addressing legacy pain points for the logistics industry

Amidst ongoing geopolitical and macroeconomic challenges, the global supply chain is undoubtedly in a heightened state of fragmentation. This has exacerbated existing pressures on industry participants and illuminated some glaring issues that have plagued the sector for decades. Legacy technology in particular has been a major impediment to progress, with semi-manual or manual processes and lengthy paper trails adding unnecessary complexity.

The ramifications of this fractured industry landscape can also be seen in the difficulties ecosystem players encounter when it comes to accessing finance – a harsh reality for importers and exporters who often lack the trust required to agree on flexible payment terms. Traders in separate legal jurisdictions are largely dependent on local banks who have struggled to keep up with the pace of modern commerce. The compound effect has resulted in a major credit crisis in the supply chain space, particularly for SMEs, who typically carry out a high volume of small transactions between geographies. This is especially complicated and cumbersome for companies who rely on Letters of Credit (L/Cs) to solve cash flow issues. It’s easy for banks to assess risk when it’s one large transaction within a single jurisdiction, but it’s considerably more difficult when lots of smaller amounts of credit need to be processed across borders. Deploying technology to address these issues has always felt like a no-brainer, and it has been clear to me for some time that data-led fintech innovations could reimagine how financing is handled in the supply chain industry.

My own career experience in the field of Credit underscores my belief that the supply chain space needs fundamentally better financing solutions. Before my time as President and CEO of Leumi, Israel’s largest banking group, I served as the bank’s Chief Credit Officer during the 2008 Financial Crisis. So trust me, I understand the difficulties SMEs encounter when it comes to accessing capital to manage cash flow, but I also understand the risks involved in providing credit on the banking side.

A perfect storm opportunity at the intersection of fintech & logistics

As part of Team8’s company-building process, we try to view industry-wide problems through a fintech lens, and assess how technology can drive sectoral efficiencies. We had actually already started to ideate around this area during 2021 when supply chains were at a tipping point. The economic downturn has since underscored the market need for digitized cross-border payments and financing within the supply chain industry. Over the course of our ideation process, we identified a perfect storm opportunity at the intersection of three ascending fintech trends – B2B Buy Now Pay Later (BNPL) offerings, verticalized fintech solutions and Embedded Finance. In partnership with the 40Seas founders, we set about developing a bespoke solution for an industry in dire need of digital transformation. Opportunities of this scale are for the fearless founders who dare to tackle highly complex issues and challenge industry convention with innovative technology.

The 40Seas founding team had the technical know-how and strategic acumen to adapt consumer-facing BNPL solutions for B2B applications – a trend that we believe will accelerate in the coming years. They’ve reengineered the BNPL concept to deliver a new paradigm for digitized, B2B cross-border trade-finance, highly tailored to the needs of SMEs. Their ‘Import Now, Pay Later’ (IMPL) model enables importers to secure extended payment terms from global suppliers, while ensuring that exporters get paid in full as soon as goods leave their factories. In parallel to the B2B BNPL play, 40Seas is part of a growing breed of verticalized solutions that better utilize companies’ current data, deliver a more efficient user experience, and are highly optimized for nuanced industries. The intricate nature of cross-border payments is perfectly suited for a solution like IMPL to take hold.

Additionally, the 40Seas platform is very much in tune with the ‘go where the customers already are’ idea, which is at the heart of the Embedded Finance trend. The embedding of financial services within existing service offerings is opening the door for non-financial and financial companies to greatly expand their portfolios to improve stickiness, acquire new customers, and capture greater market share. In the Embedded Finance era, even a logistics company can become a fintech. Once we understood the scale of the opportunity on the table, we leveraged existing fintech capabilities and the domain expertise of the 40Seas founders, to develop a digital trade finance platform like no other. Having led the $11 million seed funding round, with participation from ZIM, we are firm in our conviction that the 40Seas solution can set a new standard in this space.

Introducing 40Seas

40Seas is an innovative fintech platform for cross-border trade financing, delivering a much more efficient, simplified, and cost-effective financing framework for SMEs involved in global commerce. Their solution enables digital B2B payment functionality and helps ecosystem players bridge the financial gap between selling goods to customers and paying suppliers. By harnessing AI and data-driven technology, 40Seas is able to offer flexible payment options that effectively increase the availability of working capital for SME importers, exporters, freight forwarders and sourcing agencies.

40Seas is available as an API or stand-alone platform, both of which can be seamlessly embedded into checkout portals to improve business flow and provide a more convenient and efficient service to customers. By incorporating flexible payment options into checkout pages, both suppliers and buyers are spared the time and hassle of dealing with separate financial institutions for financing. One of the signature aspects of the 40Seas platform is credit, and its ability to assess risk and process financing much more efficiently and at a much greater scale than a traditional bank. In addition to leveraging data-driven technology to automate decision-making processes and scalably verify creditworthiness, the platform also helps businesses streamline communication around order tracking.

The founders of 40Seas have more than 60 years of combined experience in cross-border payments, logistics, risk management, and trade financing. Headquartered in Tel Aviv, 40Seas has already expanded its global footprint with offices in New York City, Toronto and Shenzhen – laying the foundations for sustained international growth. The company is led by Eyal Moldovan (Co-founder and CEO), who formerly served as General Manager at Payoneer; Gil Shiff (Co-founder and COO) who co-founded ConvertMedia (acquired by Taboola); Suki Gao, (Co-founder and GM of 40Seas China), who spent a number of years at Paypal, Payoneer and Ant Group; and Igor Zaks (Co-founder and Chief Risk Officer), who was an Executive at Dell, Citibank, Daiwa, and Commerzbank.

Strong market validation

The involvement of ZIM as a design partner, investor and lender is hugely significant, providing a major stamp of approval for the 40Seas solution from a dynamic, multi-billion dollar market leader. Embedding 40Seas into ZIM’s portal will provide customers who are already using ZIM’s shipping services with a fully-integrated and flexible digital financing solution to cover both freight and inventory expenses.

I would like to extend my sincere congratulations to the 40Seas team on this incredible milestone, surely the first of many as they assertively establish a market-leading position. Since their soft launch in October 2022, they have already onboarded dozens of SMEs, and built a rich pipeline of activity which will see them finance tens of millions of dollars over the coming months. We are both proud and excited to support the 40Seas mission to help SMEs overcome payment-related barriers to cross-border trade, and usher in a new wave of unprecedented trade financing efficiencies.

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