Welcome to the SMB Tech Innovators podcast, powered by Gusto. We explore the intersection of financial services and vertical SaaS strategy and discuss how software combats the rising complexity of running a business. We aim to share stories, advice, and best practices from the leaders and investors behind today’s cutting-edge platforms. In this episode, Prashant Fuloria, Chief Executive Officer at Fundbox, discusses how important embedded financial services are and why they benefit both vertical and horizontal solutions in specific ways.
Highlights include:
- Fundbox explained in two minutes.
- How does Fundbox compare to traditional lending companies?
- What are banks doing to compete with fintech?
- What’s driving the overall growth of embedded finance services?
- How to identify the right software partners.
- What is Fundbox focused on creating next?
- Horizontal versus embedded solutions in the world of fintech.
- Advice to SaaS partners thinking about partnering with an embedded product.
How embedded financial services support both SMBs and the tech platforms they use
In small business finance, finding the right balance between capital accessibility and customer selection can be an intricate dance. In this SMB Tech Innovator podcast, Prashant Fuloria, CEO of Fundbox, discusses the core philosophy behind Fundbox, the challenges of small business finance, and the evolving landscape of embedded financial services.
Prashant’s Journey to Fintech Leadership
Prashant’s journey from a product manager at tech giants like Google and Facebook to the helm of Fundbox wasn’t straightforward. His tenure at various tech companies, including a stint at Yahoo following an acquisition, paved the way for his current role at Fundbox. As he humorously reflects on “doing Yahoo, Google, and Facebook, but not in the right order,” his journey underscores the diverse experiences that shaped his leadership style in fintech and financial services.
Democratizing Small Business Working Capital: Fundbox’s Mission
Fundbox isn’t just a working capital platform; it’s a catalyst for empowering the small business economy. Their mission revolves around providing accessible capital solutions directly to small businesses and strategically partnering with accounting software systems, invoicing apps, and vertical SaaS players. By embedding themselves in these workflows, Fundbox aims to offer capital solutions at the precise point of need, effectively serving the SMB customer base.
The Crucial Need for Working Capital Solutions
The discussion shifts to the critical need for working capital among small businesses. Prashant emphasizes that poor cash flow management often leads to the downfall of SMBs. Many traditional financial institutions, especially banks, are ill-equipped to cater to the nuanced capital needs of small businesses. The high cost and outdated user experience within these institutions create a void in serving the financial needs of smaller entities.
The Challenges for SMBs in Traditional Banking
The speed, ease, and embedded nature of Fundbox’s offerings starkly contrast to the cumbersome processes of traditional financial institutions. The cumbersome nature of in-person visits, lengthy underwriting processes, and a lack of online convenience are pain points for SMBs.
- Rigid and Time-Consuming Procedures: SMBs often grapple with traditional banking procedures’ inflexible and time-consuming nature, including extensive paperwork and cumbersome verification processes. These slow down access to financial services and hinder agility in seizing growth opportunities.
- Limited Accessibility and Personalization: Traditional banks may lack the personalized service and accessibility that small businesses seek. This one-size-fits-all approach makes it challenging for SMBs to find tailored financial solutions that align with their needs and aspirations.
- Restrictive Criteria for Credit Approval: Small businesses encounter difficulties obtaining credit due to stringent eligibility criteria set by traditional banks. Lengthy underwriting processes and strict credit requirements often exclude many SMBs from accessing the necessary funding to expand or stabilize their operations.
SMBs face these challenges within traditional banking frameworks, prompting the need for more flexible, accessible, and digitally integrated financial solutions. Fundbox addresses this gap by providing an automated, data-driven approach that ensures swift decision-making and a seamless user experience.
Embracing Embedded Financial Services: The Power of Partnerships
Fundbox’s success is attributed to its direct customer interactions and, more significantly, to its strategic partnerships. Prashant highlights the symbiotic relationship with partners, particularly vertical SaaS players like QuickBooks, Housecall Pro, and Jobber. These partnerships go beyond mere collaborations; they involve embedding Fundbox within the partner’s ecosystem, seamlessly integrating financial solutions into the daily workflows of SMBs.
The conversation delves into the growing trend of embedded financial services within various software platforms. Prashant discusses the significance of partnerships, emphasizing three key criteria.
- Scale as a Criterion for Partnership
- Partnering requires an investment, especially in adjusting and training models for scalability.
- It is important to consider partner readiness for scale. Early-stage vertical SaaS players may need to solidify their customer base before embedding financial services.
- Engagement Dynamics Matter
- Partners vary in their engagement cycles—some have daily interactions within their ecosystem, while others have less frequent customer touchpoints.
- The level of engagement within a platform or ecosystem affects the accessibility and integration potential for external services like financial offerings.
- Organizational Alignment and Incentives
- A growing trend involves dedicated teams within partner organizations focusing on embedded fintech opportunities.
- Understanding a company’s internal structure and incentives is important, as some have teams dedicated to integrating service providers like Fundbox into their offerings.
Partnerships that enable access to rich data and offer seamless user experiences hold immense potential in driving customer value.
The Future of Embedded Finance: Vertical vs. Horizontal Players
The future landscape of embedded finance unfolds in the discussion. Prashant predicts a shift towards vertical players capturing niche markets by offering tailored solutions for specific industries. He envisions a coexistence of horizontal players like QuickBooks alongside these specialized vertical players. Fundbox’s strategy aligns with this vision, aiming to serve a broad spectrum of small businesses through direct access and strategic partnerships.
Prashant concludes on an optimistic note, drawing parallels between the current evolution in financial services and the dot-com era’s growth trajectory. He emphasizes that despite the challenges, perseverance and a long-term vision will drive impactful innovations, ultimately transforming the landscape of small business finance.
Learn more about Fundbox and connect with Prashant on LinkedIn.
