Lendflow, an Austin, Texas-based fintech startup that supplies embedded lending technology to small and midsize businesses, is celebrating its second birthday with a $10.8 million Series A round of funding.
Boston-based Underscore VC led the round, which was announced October 13. Uncorrelated Ventures, Y Combinator, 2048 Ventures, Knoll Ventures, I2BF and Navitas Capital contributed to the round. Since its founding in October 2019, Lendflow has collected more than $13 million in funding.
Lendflow boasts that its embedded technology can “make any company a finance company.” The startup’s white-label software enables small and midsize businesses to build and embed credit services within their platforms.
“We’ve built a platform on which software companies can quickly launch lending services tailored to their audience. This promotes higher user engagement, increases revenue per user and decreases churn,” Jon Fry, co-founder and CEO of Lendflow, said in a news release.
Lendflow gears its offerings toward SaaS companies in the construction, transportation and home services sectors. Among its customers is New Orleans-based Levelset, a paytech platform for the construction industry. Lendflow counts more than 65 financial services providers among its lending partners.
Lendflow is a fast-growing newcomer in the rapidly growing fintech niche of embedded finance, which includes embedded lending, insurance and banking. A study released in July 2021 by Juniper Research estimated the value of the market for embedded finance will surpass $138 billion in 2026, up more than 220% from $43 billion this year. Business transformation expert Simon Torrance predicts the total addressable market for embedded finance will reach $7 trillion in 2030.
“Embedded finance has the potential to make every business a fintech — or at least blur the lines so that it’s no longer easy to tell who is a fintech, and who is not,” according to a report from paytech provider Tribe Payments.
Fry told FinLedger that Lendflow’s technology paves the way for software companies to provide embedded finance capabilities outside the traditional realm of standalone financial products. Thanks to companies like Lendflow, software providers can fashion embedded finance capabilities to meet the needs of their customers, he said, “and not be forced into creating kind of a cookie-cutter, one-size-fits-all financial product or service.”
Lendflow customers can, for instance, embed technology for BNPL (buy now, pay later), credit cards, equipment loans, lines of credit or invoice factoring. In addition, they can adopt third-party embedded finance software from Lendflow’s marketplace.
The startup makes money by charging:
- Subscription fees for access to Lendflow’s white-label software.
- Percentage fees for lending transactions completed using software from the third-party marketplace.
- Fees for API services.
Fry said the fresh round of funding will allow Lendflow to add about 25 full-time employees to its 45-member, full-time workforce within the next three months. The startup is hiring for positions in areas like engineering, product development and customer success.
The funding round that’s financing Lendflow’s workforce expansion attracted robust interest from potential investors, Fry said.
“Embedded finance is a pretty … hot space at the moment,” he said. “There’s a lot of interest in embedded finance. I think everyone’s just trying to figure out the space.”