The past two weeks have been unlike any other for the Supply Chain Finance industry and Taulia. With the collapse of Greensill Capital, we’ve seen the space and our company receive more media attention than ever before. A concept that was quite foreign to many has suddenly found itself on the evening news and in nearly every major business publication.
Yet despite all the coverage on the topic there is still so much confusion. Supply Chain Finance is straightforward, but has been associated with a large series of events. Likewise, Taulia’s business model is one that is both simple and a force for good for millions of businesses.
Most of my time over the past two weeks has been spent speaking with our customers. I’ve seen this confusion firsthand. One story, one headline, or in some cases even one word has caused significant misunderstanding. My hope in writing this blog is to provide more clarity around the events and how they impact our customers, our industry and Taulia by having the freedom to be a bit more detailed.
Taulia has been and is Strong Financially
The question I have found the most surprising is whether Taulia remains financially stable. I see where the confusion comes from. Some of the headlines have said things like Taulia has raised money to “stay afloat.” This isn’t correct.
Unlike Greensill Capital, Taulia doesn’t use its own balance sheet for funding Supply Chain Finance transactions. In addition, we aren’t exposed to losses from recent events. In 2019 we achieved profitability and have since been further investing to accelerate our growth. Our most recent strategic financing round in 2020 brought in $60 million and we remain very well capitalized. Taulia is a company of ~300 employees and we’re rapidly hiring. The $6 billion in capital is not for Taulia to keep going. It is not a “credit line” for Taulia for its own use.
Taulia’s Funding is for Supply Chain Finance Program Liquidity
So, if we didn’t raise $6 billion for Taulia, what did we do? To answer this, it’s important to understand who Taulia is and what our company does. Taulia is a fintech company. We connect businesses together and help them manage their working capital by allowing them to determine when to pay and be paid.
In the business-to-business world, goods and services are usually paid on terms. In other words, an invoice will be provided after the service is completed or goods have been shipped. This invoice requires payment after a certain number of days. A common example is Net 30 which means payment is due 30 days after the invoice date.
Using our platform, a business can decide it wants to be paid early on an approved invoice. Instead of waiting until 30 days later, they can decide to get paid on day 5, day 10, day 15, … anytime within that 30-day period. It’s completely optional, flexible and very easy to use. If their customer pays them early with their own money, that is called Dynamic Discounting. If a 3rd party financial institution pays them early and the customer pays the financial institution back when the invoice comes due, that is called Supply Chain Finance.
Taulia provides a “multi-funder model” for Supply Chain Finance which means we work with multiple financial institutions to provide the liquidity to make these early payments. This model is advantageous for our customers because it provides flexibility of funding options, allows them to work with their desired banks, and minimizes counterparty risk. Prior to going into insolvency, Greensill Capital’s relationship with Taulia was limited to being just one of our many funding providers. Others we have worked with include J.P. Morgan and UniCredit.
With Greensill Capital no longer able to provide financing of Supply Chain Finance transactions, it left a gap to be filled. We worked closely with our other funding partners to ensure formerly Greensill-funded programs have continued access to liquidity. We established a consortium of financial institutions to provide the necessary funding to fill this gap. Currently $6 billion in funding is available to suppliers through this consortium.
Customer Success is Our Success
Our first core value is “Customer Success is Our Success.” At Taulia we live and breathe this every day. The actions we have taken over the past two weeks are all about doing what’s best for our customers and their suppliers.
For those Taulia clients who have self-funded programs (i.e. Dynamic Discounting) or Supply Chain Finance programs previously funded outside of Greensill Capital, there has been no change or impact from these recent events. We continue to operate these programs everyday. For those that were funded through Greensill Capital, on March 2nd, early payments became unavailable. Suddenly thousands of businesses were unable to have access to cash at a click of a button. We needed to resolve this situation and do so as soon as possible.
Hope is not a plan. We took action swiftly to secure the liquidity our customers needed rather than hoping someone else would solve our problems by hypothetically acquiring Greensill Capital.
Through the consortium we’ve established, we now have the liquidity that is needed to ensure continuity and are working day and night to transition the impacted customers to these new funding sources. Varying amounts of configuration and testing are required for each customer to go live again, some are resuming this week.
Supply Chain Finance is Robust and Resilient
As the news cycle slows in the coming days and weeks, focus will turn to what this means for Supply Chain Finance as a practice. For those in the industry, it’s clear that the collapse of Greensill Capital has nothing to do with Supply Chain Finance. Instead, it was a lesser-known side of their business which focused on risky, high-yield assets. Greensill Capital labeled itself as a Supply Chain Finance fintech, but decided to engage in lending practices whose characteristics do not intersect at all with Supply Chain Finance. These non-related lending practices ended up becoming non-performing and led to the downfall of Greensill.
The Taulia story within the broader context is a compelling proof point for the resilience and maturity of Supply Chain Finance. The underlying asset class is highly sought after and made up of many of the high quality, investment-grade names mentioned in the press. In just 7 days we were able to fill the gap created by Greensill Capital and secure billions in liquidity. There is no magic here. It was a combination of hard work, fantastic collaboration with our clients and strong commitment from financial institutions.
Taulia’s vision is to create a world where every business thrives by liberating cash. There are trillions of dollars locked up in payables, receivables and inventory. When the news cycle has come and gone, you will find us hard at work, continuing to turn our vision into reality.