Melio’s have-it-your-way payment system nets $4B valuation

U.S.-Isreali payment platform Melio announced Tuesday it had closed on an anticipated Series D round, raising $250 million co-led by Thrive Capital of New York and existing investor General Catalyst. Tiger Global Management, Accel, Bessemer, Coatue, Corner Ventures and Latitude participated in the round as well.

The company also confirmed its rumored $4 billion valuation, elevated since its $1.3 billion valuation in January.

Melio provides an online platform that enables businesses and their suppliers to send and receive payments in ways that are best for each party, eliminating fees that often pressure payment type decision-making.

Throughout the pandemic, as postal services and accounting departments found themselves operating with low levels of employees, companies found themselves finding different ways to send and receive payments.

With its new funds, the company plans to use its new funds to add new financial institutions, software provider and marketplace partnerships to improve its current technology offerings.

In the company’s fundraising announcement, Melio’s monthly processing volumes increased 5,000% over the past 18 months as its customers turned toward its digital suite to maintain positive cash flow.

The company also announced General Catalyst chairman and managing director Ken Chenault, former chairman and CEO of American Express (NYSE:AXP), will become an observer on Melio’s board of directors.

Funding details: Melio

Funding amount	$250 million
Funding round	Series D
Lead investors	Thrive Capital of New York and General Catalyst
Secondary investors	Tiger Global Management, Accel, Bessemer, Coatue, Corner Ventures and Latitude
Last valuation	$1.3 billion (January 2020)
Pre-money valuation	$3.75 billion
Post money valuation	$4 billion
Business goals for the round	Expand partnerships with financial institutions, software providers and marketplaces.
Total funding	$511 million

Logistics companies’ payment systems need agility

When scaling a logistics operation, acquiring new customers often comes with amending multiple accounting and payment operations to support those opportunities.

Obtaining carrier capacity can often mean paying in shorter than normal terms, merging with customers’ systems can mean investing in new integrations and onboarding those new customers might mean changing invoicing processes.

In an interview with FreightWaves earlier this summer, Victor Ofstein, a strategic markets and logistics specialist at Melio, described how logistics companies were leveraging its platform to scale.

“Many small logistics businesses have essentially made Melio their payment platform,” he said. “Brokers are looking to pay carriers as quickly as possible because their relationships with carriers are key. But brokers are often not being paid for 60 to 90 days.

“In some scenarios, we have seen small brokers using our platform to pay carriers with their business credit even when the carriers are not set up to accept credit card payments themselves. With Melio, the broker can pay with a credit card and the carrier can get it transferred via ACH directly into their account.”

While Melio is servicing business in all industries, the payment platform allows for logistics providers to take advantage of business credit cards without having to draw directly from their lines of credit to maintain elevated carrier relationships.

Carriers also could be paid quicker and directly by their brokers or shippers without having to give up a 3% to 5% fee normally charged by their factoring companies.

“Melio provides a more nimble approach and a richer set of options for [logistics providers] to pay carriers, keep them happy and maintain a relationship without involving a third party. It’s a cost-effective way for logistics providers to free up cash flow until they get paid by their shippers,” said Ofstein.

For logistics providers, this can be extremely helpful for the customers they serve as well. Back-office teams can approach new shippers without angst, knowing they will be able to accommodate any type of payment transaction supported through Melio.

As logistics providers reach customers’ set credit limits, sales representatives and accounting teams can offer quicker options of payment, like credit card payments, to open up credit to move more loads without having to tack on an additional, unforeseen processing fee.

“Our system provides full visibility, so there is no need for accounting teams to ask customers, ‘Where is my money?’” said Ofstein. “If they have initiated payment, we can provide visibility to the recipients of funds that they normally don’t get from their bank.”

Melio’s platform also can minimize the amount of time many logistics accounting teams spend on reconciliation as invoices often represent the individual loads of each shipper.

“A shipper may send funds to a broker and say, ‘Hey, here is $50,000 and it relates to the following [load numbers].’ We give the Melio interface to both parties and as the payment requests are sent from the broker, the shipper has the ability to cherry-pick which ones they are paying for. Our system will aggregate all of those when payment is sent and the reconciliation can be done automatically. It’s a very elegant way of solving a painful problem in a shipper-broker relationship,” said Ofstein.

With live integrations into Quickbooks and partnerships with American Express, Mastercard, Visa and Discover, logistics providers can focus on sales development without payments slowing down cash flow.

“Most small businesses are not set up to facilitate multiple payment options,” said Ofstein. “If you are a small business, you should be able to pay and get paid in whichever way you choose and your carriers should be able to receive funds in the way they want to receive funds.”

Articles by Grace Sharkey

Melio’s have-it-your-way payment system nets $4B valuation

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