Freight payment platform PayCargo said Wednesday it has secured up to $130 million from the Blackstone Group, one of the world’s largest private equity firms, to support rapid international expansion, new product development and potential acquisitions.
The series C investment from funds managed by Blackstone Growth represents the largest funding round for 13-year-old PayCargo, which landed $125 million from private equity firm Insight Partners exactly one year ago. Blackstone considers the startup a vehicle for high-growth returns because it combines two areas in which technology is in demand to improve efficiency: financial services and supply chain.
The multimodal cloud-based payments network allows air and ocean carriers, railroads, truckers, ports, ground handlers, freight forwarders and customs brokers to automatically notify customers that an invoice is available in the online portal for review and approval. Payments are completed within hours, enabling businesses to obtain faster releases of their cargo.
Blackstone (NYSE: BX) manages $915 billion in alternative assets such as private investments, real estate, public debt, infrastructure and non-investment-grade credit. Holdings include 1.1 billion square feet of warehousing space and a large stake in Carrix, the Seattle-based parent company of SSA Marine. SSA is the largest ocean container terminal operation in the Americas. Blackstone Growth, which is in the process of raising billions of dollars, is the division focused on high-growth companies, a strategy that has become increasingly popular in connection with technology investing.
Series C funding sessions are typically reserved for profitable companies that have a proven business model and are looking for scale. An investment from a blue-chip financial services firm like Blackstone is further validation of the company’s growth prospects. At the series C stage, investors anticipate more than doubling their money.
The investment in Coral Gables, Florida-based PayCargo is further evidence that deep-pocketed Blackstone is bullish on the logistics and supply chain sectors, especially companies that can increase efficiency and minimize disruption for the multiple stakeholders involved in international transportation.
“PayCargo is a category leader, operating at the intersection of several of our highest-conviction investment themes — including the continued proliferation of electronic payments, the digitization of the supply chain and the modernization of business-to-business payments,” said Vini Letteri, senior managing director and head of financial services for Blackstone Growth, in the announcement. “We believe that these attractive tailwinds, combined with the strength of PayCargo’s offering, positions the company well for its next phase of growth.”
CEO Eduardo Del Riego indicated that one of the prime growth areas for the freight payment and data infrastructure platform will be e-commerce. The company, which has extensive market penetration in North America, is also rapidly expanding in Europe and other regions.
PayCargo’s value proposition
PayCargo’s technology is designed to reduce costs, delays and security risk associated with outdated, manual payment methods such as checks, wire transfers and cash. Managing checks and cash, and applying for credit, are time consuming. The system provides real-time customer reporting and invoicing, as well as new workflow tools to streamline partial payments and reconciliation, advanced payments and automated refunds in any currency.
The tools are enabled by middleware, known as Application Programming Interfaces, that allows PayCargo’s financial management system to communicate directly with vendors’ back-office systems.
The company processed more than $10 billion last year from thousands of users and is on track to process more than $20 billion this year, said Chief Growth Officer Thomas Vieweg in an email.
The PayCargo network has more than 40,000 active users and 5,000 freight transportation and logistics vendors, including major ocean carriers such as Maersk, Mediterranean Shipping Co. and Zim. Other large customers include 3PLs such as Kuehne + Nagel, DHL, DB Schenker, BDP International, Seko Logistics, UPS and Yusen Logistics; airport ground handlers Alliance Ground International and Swissport; and airlines AirFrance and LAN Cargo.
More than 1,000 of these vendors release cargo within an hour of receiving a payment approval alert from PayCargo. All other vendors release cargo no later than the following morning, according to the company’s website.
PayCargo also offers users up to $2.5 million in credit for 45 days. Under the terms, PayCargo Capital pays all freight charges to the carriers up-front for the shipper or forwarder and then reclaims those funds electronically from the customer with the agreed upon time frame.
Officials say that unlike traditional lenders, PayCargo Capital has the ability to approve credit applications in seconds rather than days or weeks, since the company’s customers have been previously vetted to use the freight payment system and PayCargo Capital has a robust decision-making platform that can crunch a large amount of invoices, trade and financial data.
PayCargo offers investors an enticing double play for potential returns. Huge amounts of capital are flowing into the financial technology sector because of the potential of high returns from combining software economics — low marginal costs once a tech platform is established — with the lucrative financial services sector. PayCargo also inhabits the booming freight technology sector.
In a series A funding round, Insight Partners invested $35 million in PayCargo.