The Evolution of Payments: From Consumer Ease to B2B Complexity

While consumer payment systems have seen significant advancements – with options like Stripe, PayPal, Apple Pay, and Google Pay offering streamlined checkouts – the realm of B2B payments remains surprisingly antiquated. Modern tools have greatly simplified transactions for individuals.

A stark contrast emerges when transitioning to business-to-business transactions. Instead of a seamless digital experience, companies often encounter a fragmented landscape of payment methods, ranging from traditional paper checks to wire transfers. These methods frequently lack automatic synchronization with financial systems.

Introducing Balance: A Modern Solution for B2B Payments

Balance aims to revolutionize B2B payments by accelerating the transition to a fully digital system. The platform provides businesses with a versatile range of payment options, including ACH transfers and bank wires.

Furthermore, Balance facilitates flexible payment terms, such as payment upon delivery, net payment terms, and milestone-based payments. The company assesses the risk associated with each transaction, considering the customer, the merchant, and the chosen payment terms to underwrite financing options.

Built upon the foundation of Stripe, Balance incorporates all of Stripe’s credit card payment capabilities while extending far beyond them.

Consider a typical Software-as-a-Service (SaaS) model. Initially, employees often purchase individual software licenses using corporate cards, potentially managed through platforms like Brex, and processed via Stripe or PayPal. However, as a company’s software usage grows, negotiations for a comprehensive enterprise rate with a single payment become necessary.

This is where Balance proves invaluable. The consolidated payment can be processed through Balance, utilizing net 30 payment terms and a bank wire transfer, all automatically synchronized with the service provider’s invoice to the customer.

A Massive Market and Strong Investor Support

The B2B payments market represents a substantial global opportunity, valued in the tens of trillions of dollars. This potential has attracted a prominent group of investors to Balance’s seed round.

The company secured $5.5 million in funding from Tal Morgenstern of Lightspeed, Stripe, and Nellie Levchin through SciFi VC. Lightspeed previously invested in Affirm, a company founded by Max Levchin, Nellie Levchin’s husband. Balance participated in the summer 2020 Y Combinator cohort, but opted to remain in stealth mode as its seed funding was already secured. UpWest, a firm focused on Israeli companies expanding into the U.S. market, also contributed to the round.

The Founding Story and Vision

Balance was established in late 2019 and early 2020 by Bar Geron and Yoni Shuster, drawing upon their shared experience at PayPal. Geron explained that their time at PayPal provided valuable insights into the consumer payments landscape.

While Shuster continued at PayPal, Geron joined Behalf, a company specializing in B2B financing and cash flow management. Geron observed that Behalf offered a “pain point solution” for net payment terms but lacked a comprehensive approach to digitizing the traditionally analog payments process.

Recognizing this opportunity, Geron reconnected with Shuster to develop a more expansive solution.

The founders envision a future where “B2B payments are as easy as card payments.” Their goal is to replicate the simplicity of Stripe – enabling businesses to integrate the service with a few lines of code.

Once integrated, Balance’s features, including invoice synchronization and financing options, become readily available.

Target Customers and Revenue Model

Through Y Combinator, the team identified a consistent need for these solutions among various tech companies, who served as early adopters. However, Geron emphasizes that B2B marketplaces, where synchronizing complex transactions is challenging, represent a particularly critical customer segment.

Service providers utilizing milestone-based payments, such as a 20% upfront payment and 80% upon delivery, also constitute a key target audience. “We automated [all that] and put it online,” Geron stated.

Balance generates revenue through a “factoring fee,” essentially paying merchants in advance of customer payment. Geron indicated a standard rate of 2%, although the actual fee varies based on the assessed risk.

The founding team is based in Israel, but maintains a distributed workforce, a common practice for modern startups.

Note: This article was updated on February 4, 2020, to accurately reflect information from Balance’s press release, confirming Nellie Levchin as the lead investor from SciFi VC.