Fintech startup 40seas secures $11M seed

Cross-border trade finance, 40seas, has raised $11 million in seed funding and secured a $100 million credit facility to facilitate B2B trade transactions for small and medium-sized businesses.

Why it’s important: SMEs account for a large share of cross-border trade volume, but are approximately seven times more likely to be denied funding compared to larger counterparts, according to the World Trade Organisation.

What’s up: The Israeli-based venture group Team8 led the seed round. ZIM Integrated Shipping Services participated, and also extended the senior secured revolving credit facility. The company will have the option to expand the facility to $200 million.

• ZIM, an Israeli shipping company, will also incorporate 40seas into its subsidiary Ship4wd for freight forwarding services.

What’s next: Tel Aviv-based 40seas plans to use the funds to develop the product and expand its workflow management tools, APIs and technology for suppliers and buyers.

• Already with offices in Israel, New York, Toronto and Shenzhen, China, the company plans to expand its geographic footprint as well.
• It plans to add more hubs for exports in Europe and Asia, such as India, Vietnam, Bangladesh and Pakistan, and engage with more buyers in EU countries, CEO Eyal Moldovan told Axios.
• “We want to be a reflection of the global economic trade,” Moldovan says, starting with the biggest corridors in China and North America and getting to the point where 40seas can add corridors based on market demand.

Status: Tighter funding and rising cost of capital have made it harder for businesses to access the money they need to operate.

• Additionally, with cross-border transactions, businesses must contend with banking jurisdictions, legacy processes, and other financial constraints.
• Traditional banking institutions have trouble facilitating cross-border transactions for SMEs because they don’t have the resources to analyze companies at that level, Rakefet Russak-Aminoach, a managing partner at Team8, told Axios.

• “With machine learning tools, you can be in a position where you can analyze an SME like a bank [would] analyze a large transaction, she says.

How it works: 40seas offers flexible payment options and financing to small to medium-sized importers, exporters, freight forwarders and purchasing agencies.

• Exporters can get paid immediately upon shipment, giving them a jump on the next production cycle while importers are able to free up working capital and grow their business without being constrained by the credit limits available to them.
• Brick-and-mortar stores can pay for goods within 60 or 90 days of receiving the goods from China, for example.
• This helps them get “those extra days to help sell the goods, either to consumers or to businesses before they have to pay for the goods,” Moldovan says. “We call it an import now, pay later solution.”