As fintech Sonovate reaches a staggering £3bn funding milestone, we caught up with Co-Founder and CEO Richard Prime, to talk about the drivers of this exponential growth and what we can hope to see from them in the future.
How has the company evolved over the last couple of years?
Sonovate’s mission has never faltered – and that is to ensure that contractors and freelancers get paid on time, every time. Not only workers, but also suppliers of contingent labour. We funded our first invoice in 2014 and since then, we’ve grown exponentially, reaching our first £1bn in 2019. We’re proud to have hit the £3bn milestone just three years later, endorsing our position as a leading fintech provider of invoice finance as the world continues to transition to more flexible ways of working.
Since we began funding organisations, Sonovate has funded thousands of businesses across the UK and delivered payments to 41 countries to ensure tens of thousands of contingent workers are paid in full and on time for the services they provide. Much of this growth in funding has been driven by demand from the enterprise sector – both large recruitment firms, but also larger-sized consultancies and labour marketplaces. By the end of the current year, we expect to have funded over £1.3 billion in invoices, enabled in part by a securitisation deal with BNP Paribas and M&G Investments, adding £165 million to our funding structure.
What are the main drivers of this growth?
As with every successful disruptor, Sonovate has proved its potential over a period of time. In our early years, we gained a foothold with new, smaller recruitment firms. Over time, we have grown our base to where we now offer funding, back office and recruitment technology services to firms, consultancies and labour marketplaces of all sizes.
Over the last five years we’ve become more and more focused on solving challenges for enterprise businesses – those with more than £10m annual turnover. The key for these businesses is international growth. Another growing area for us is digital labour marketplaces which have surged over the last few years alongside the rise of a contingent workforce as both employers and workers seek a more flexible way of working. Indeed in our Future World of Work report, we found that 55% of UK small-medium sized businesses that have used freelance labour are seeing a greater proportion of their workforce becoming freelance and contract-based.
Since the start of 2021, we have closed a new deal with a business customer almost every single working day – helping hundreds more companies across Europe, Asia and the US to pay their people on time, every time. We’ve also grown internally – from just 12 staff to over 140 across both our London and Cardiff offices. We are developing a brand-new, enhanced platform to support our rising number of growth and enterprise clients. Our cloud-native, API-first, SaaS platform provides flexible facility-based funding for growth and enterprise clients, with the ability to fund group companies with full visibility of their debt position. We enable them to optimise working capital, maximise their liquidity and deploy their cash to achieve their strategic goals.
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What continues to set you apart from other lenders?
We provide access to funding much faster than traditional banks – crucial for most businesses, but even more critical for a start-up. They can come to a business like Sonovate, access funding and get their company up and running within a week. Access to finance also means access to cashflow – in our SME survey earlier this year, we found that cashflow issues were a key reason why over a quarter of businesses who use freelance workers were failing to pay their contractors on time.
With the global contingent workforce sector estimated to be worth $5.4 trillion (according to research published by the Staffing Industry Analysts in September 2022), there is a clear need to improve access to finance, and consequently cashflow, to help businesses pay and retain staff. Our platform utilises the latest developments in finance, such as Open Banking, to allow recruitment companies, consultancies and labour market places to embed funding solutions which ensure contingent workers get paid on time, while employers benefit from longer payment terms. This means businesses of any size can benefit from access to skilled workers, regardless of their cashflow situation or payroll constraints.
Via API connectivity, we can integrate seamlessly with their key tech tools such as accounting software. We can also understand their business very, very quickly which places us in the right position to affect positive change.
Unlike competitors, we provide 100% invoice funding. We have also changed the game by not requiring personal guarantees (unlike banks and traditional funders) and by doing away with concentration limits. The latter is very specific to the recruitment industry where agencies often get the chance to grow by expanding through one main client for a while (for example working with that client in new countries), and then widening their base from there. This sector-specific offering has helped Sonovate to lead in our category and compete with more generic value propositions from other providers such as traditional banks. As our technology and our capabilities have evolved, our mission is to integrate our solutions into the entire workforce supply chain.
What can we hope to see from Sonovate in the future?
Embedded finance is a key thesis that we believe in and we’re just at the start. In fact, Bain & Company and Bain Capital recently released new data that suggests embedded finance-driven business lending is projected to grow five-fold over the next five years, from $200 million in 2021 to $1.3 billion by 2026 – largely driven by specialist providers, such as us.
The ability for companies to integrate their technology via APIs gives them a much wider suite of data that enables them to get better management insights to grow their business. Fintechs are at the forefront of doing that; helping businesses adapt to new challenges and enabling new business models.
Technology is making recruitment more efficient, but the emergence of open banking and open data also enables lenders like us to access and connect to the right data to give us a full understanding of our customers’ business. Recruiters know they have to evolve and adapt to a changing future world of work and we are here to enable that. At the heart, recruitment will always be about relationships and people, but tech will bring them together faster.