Exclusive: Payments platform Melio raises $150m

Exclusive: Israeli payments platform better Globes has learned that the company has raised $150 million in a financing round led by US strategic investor Fiserv. The funding round marks a rebound for Melio, which last raised money in 2021 at a company valuation of $4 billion, but has since seen efforts to sell it fail and a round of layoffs. Despite increasing the company’s revenues tenfold, the latest funding round was completed at a valuation of $2 billion, half its value three years ago.

Fiserv, which led Melio’s funding round, is an American fintech company, which is the largest software distributor to banks in the US and distributes Melio’s payments services to US banks.

Melio’s most recent funding round was in September 2021, at the height of the tech bubble, when it raised $250 million co-led by General Catalyst, Thrive Capital and Corner Ventures, at a valuation of $4 billion. A valuation drop is currently not a rare event after privately owned technology companies saw their valuations decline during the tech crisis of 2022 and 2023, with fintech companies being hit hard. For example, Swedish payment processing company Klarna saw its value drop from $46 billion to just $6.5 billion in 2022, while financial services company Stripe saw its valuation drop from $95 billion in 2021 to $50 billion today.

The decline in valuations also affected publicly traded companies. PayPal’s market capitalization has fallen by 70% since September 2021, while Melio’s competitor Bill.com, which trades on the New York Stock Exchange, has lost 80% of its value. Given the declines in the industry, reducing the value of a company like Melio by 50% is a good accomplishment.

Unicorns that have shown growth and financial strength are still forced to lower their valuations in order to continue raising capital, but this comes at a price: in addition to the damage to their reputation, new investors – such as Thrive Capital, most recently a funding round – are seeing their value decline. Their investment, and we must hope that in the future the company will recover or even exceed its previous valuation. Early investors, like Bessemer and Aleph, who invested in 2019, continue to see a significant increase in the value of their investments. Following this funding round, Milio will become one of the largest unicorns in Israel in terms of capital raising, having raised $650 million since its founding in 2018.

Melio has developed a payments platform that allows small businesses to pay suppliers. It operates in a relatively crowded niche market of fintech companies that provide payment platforms to their clients, but unlike Israeli firm Tipalti, which focuses on small businesses, Melio provides a similar product to small businesses with few employees such as accounting and law firms, stores and restaurants. . In addition to transferring payments, Melio syncs payments into company systems and allows owners to defer or distribute payments, while the supplier receives payment on the due date.

The main player in Melio’s market is Bill.com, a publicly traded, loss-making company with annual revenues of $1.3 billion and a market capitalization of $6 billion. Melio, worth a third of Bill.com, has annual revenues estimated at $150 million, and is growing rapidly. According to a source familiar with Melio’s operations, it is enjoying high growth and rapid adoption by banks due to signing partnerships with distributors like Fiserv. Melio has also signed agreements with Capital One, Shopify, Amazon, and Intuity to embed their payment systems into their systems.

In fact, the direction that Melio has chosen – implementing its payment conversion interface inside other systems and inside other banks – is such that users do not know that they are turning to an external service, because they are making transfers and payments from within the system they are using. Familiarity – enabled rapid adoption of their products. This is in contrast to Bill.com, which maintains an independent and separate brand.

A year ago, Bloomberg reported that Bill.com was in negotiations to acquire Melio for $1.95 billion, but the deal did not happen. In 2022, at the beginning of the tech crisis, Milio fired 60 employees, about 10% of its workforce at the time. The company, which shifted to distribution through partnerships, laid off marketing and sales staff and trimmed its middle management ranks. Today, Melio has 620 employees, according to LinkedIn — a similar number for 2022.

There has been no response to this article from Milio.

Published by Globes, Israel Business News – en.globes.co.il – on October 29, 2024.

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