Norwegian B2B buy now, pay later (BNPL) startup Two is today announcing an €18m Series A led by US-based VC Shine Capital and company builder Antler, with participation from the likes of US heavyweight VC Sequoia Capital, Day One Ventures and LocalGlobe, among others.
Having already launched in the UK and in the Nordics, the capital will help the company expand to new markets across Europe and elsewhere.
What Two does
Two, previously Tillit ("trust" in Norwegian), is often lumped together with other companies doing B2B buy now, pay later, like Billie, Mondu, Treyd, Hokodo and Playter.
B2B BNPL is designed as a short-term financing tool to help companies manage their cash flow — it’s essentially fintech’s answer to the age-old concept of invoice financing, which is still how the majority of B2B payments are done. Of the $120tn B2B commerce market, only 6% is ecommerce. But things are slowly changing.
Two offers a ready-made payments solution to businesses — both merchants and buyers — with the option to spread costs over 14 days to 12 months across all a company’s main B2B sales channels.
According to the startup, it has quarterly growth of 243% across the Nordics and the UK, and captures 58% of the B2B payments through the online channels of its close to 200 active merchants. Two charges sellers a transaction fee that is, according to the company, “typically lower than what it costs to process cards from a business customer” — which most commonly sits between 1.5–3.5% per transaction.
To provide quick access to capital for sellers, Two scores and underwrites transactions — basically assessing them for risk — in less than a second with an approval rate of more than 90%, according to the company. The high approval rate is achieved by using multiple credit underwriters to assess the same order, of which Two’s own credit engine is one of them. The largest payment it has processed — of €450k — was end-to-end and completed at checkout in less than 45 seconds.
These types of payment solutions, where the payment provider takes care of credit and fraud underwriting and pays sellers upfront, shifts the risk from the seller to the payment provider — in this case Two. And with an economic downturn the risk increases, especially if loans default.
To manage some of that risk, Two has partnered with Allianz and Santander for its larger deals between multinational companies, as well as other third-party companies.
“We truly work hard on getting the best partners who can take on and manage as much of that risk as possible for us. But then we also work very hard at building out the best possible team and decision engines internally that can help and complement these third-party options,” says Andreas Mjelde, Two’s CEO and cofounder.
But according to Mjelde, although the recent economic downturn increases the risk of handling payments, the “new” economic climate is not just the new normal but the way it should be.
“I'm not that old, but I'd say this is normal,” he says. Interest rates should sit at “a couple of % [...] it should be possible that a business goes bankrupt — that is part of the concept of being in business. That basically just means that solutions like ours become more valuable and more important to use,” Mjelde says. “We don't think any differently on it (the risk) now versus a year, two or three years ago.”
Two currently has a team of 67 people, and attracted top-tier investors for its unannounced €10m seed round last year, which was led by Sequoia. Mjelde says they picked them with location in mind.
“We started out with three larger investors, which were Sequoia, which has an incredibly strong presence in the US; LocalGlobe, with strong networks in the UK, which was going to be one of our main markets; and Visionaries Club, which is a seed-stage fund (fully focused on B2B) out of Germany,” he says.
Its latest round of €18m was led by US early-stage VC fund Shine Capital and the accelerator and VC Antler, which coincidentally has Norwegian founders. Antler, which is most commonly known as a company builder across the globe, usually focuses on very early-stage deals, and co-leading a Series A funding round is perhaps a sign it’s becoming more open to multi-stage investments.
“Antler has been an investor with us from the beginning, but with the original model where they do smaller investments. This is a more substantial investment,” Mjelde says.
Other investors in the round include:
- Alumni Ventures
- The Visionaries Club
- Alliance VC
Two is currently only active in the UK and the Nordics, but is looking to the US as well as across the globe with its new investors. As previously mentioned, Two is not the only company trying to find a solution to B2B invoicing and there is a lot of competition.
As with Klarna when it started off in the BNPL B2C space, it’s hardly alone. But perhaps it is not so much about being the only player but the one offering the cheapest and best customer experience.
If Two can do that and at the same time handle the risk of missed payments, perhaps the Nordics could be home to another BNPL fintech success.