FinTech Interview with Alek Koenig, Chief Executive Officer of Settle

Unlock the secrets of entrepreneurial success with Alek Koenig, the innovative CEO and Founder of Settle.

What led you to start Settle?

I come from a finance background. I started my career at Capital One, then later moved to Affirm where I cut my teeth in lending. These roles exposed me to the ins and outs of small businesses, many of them in retail/e-commerce.
The biggest learning from my experiences was that small business is the lifeblood of our economy. But were disproportionately underserved compared to larger organizations.

Software to manage basic back-office functions, like accounts receivable and accounts payable, was clunky and dated. Even more important, access to working capital was scarce. All of this still stands true today—and the urgency is perhaps even more pronounced today given the state of the economy.

The fact is businesses live or die on their working capital. Case in point: 80% of SMBs fail because of cash flow issues.

Our mission at Settle from Day One has been to provide a central system to manage a business’s cash flow operations, which encompasses AP, cash management, and lending. This unique integration is our big differentiator. The ability to leverage data straight from a company’s AP to streamline lending is powerful. More timely data enables us to lend faster and with lower risk, which changes the entire trajectory of many businesses.

What challenge is Settle solving for customers?

Growth companies—e-commerce companies especially—are in the business of turning inventory into revenue. But they need financing in order to purchase the inventory, to begin with.

Simultaneously, they need to be out there winning customers, not worrying about the minutiae of paying bills, cash flow, and hunting for working capital.

The answer: to take all the back-office hassle off their plate and streamline their payments and financing so they can grow their business. It’s that simple.

Can you break down your solution and the various offerings?

Settle’s core product combines accounts payable software with payments, integrated with alternative lending and overall accounting. Our software ingests our customers’ invoices from their vendors. We parse all the data and enable one-click payment.

We also sync their accounting activity into our software, so basically we always have their latest financial position and can lend working capital without delay. And since their vendors—many are international—get paid on our platform, we become part of their accounts receivable solution.

By combining these functions, we save huge amounts of time for our customers. The magic recipe is that we are a direct lender that does not have to wait for their financial reports. The fresh data we need to finance them comes straight from their banking, purchasing, and accounting activity. That makes us a very well-informed lender, able to immediately provide the working capital our customers need.

Settle packaged all that into one coherent solution. Incidentally, we automatically perform a sort of auditing or compliance function for our customers; on 25% of their orders, we find some discrepancy between invoice, PO, and what was received.

At the heart of it, we relieve most customers of their big challenge of obtaining working capital, bypassing all the usual documentation and tedious approvals. We improve their cash conversion cycle, but even more importantly, we can help boost their company revenues exponentially. Case in point: we have a current customer that we recently helped grow by 7x!

We understand cash flow/working capital can be complex. Can you explain to us the different use cases your customers deal with?

Our biggest market is e-commerce and consumer / CPG companies. Often high growth, absolutely driven by cash flow needs. Many could add venture capital, but our solution is non-dilutive.

For many startups, debt is preferable at earlier stages. We provide the financing with flexible payment terms so it can work for their specific business. In turn, they can increase their inventory to scale revenues. Then they can raise equity after they have the benefit of that additional scale—for less dilution. Scale lets them cut per-unit purchase, sales, and shipping costs and boost profitability, or achieve profitability faster.

What makes Settle stand out from the competition?

As I mentioned previously, our ability to integrate AP data to accelerate lending is critical to getting businesses the runway they need, when they need it. This is especially important for entrepreneurs in inventory-heavy industries like e-commerce and CPG.

We provide a much faster, more accessible credit solution by virtue of knowing a business’ accounting down to the rivets. This level of engagement bonds us to a business’s progress, triumphs, and challenges. Lots of lenders talk about knowing their customers’ business; we actually do.

We also pride ourselves on bringing products to markets fast and providing a delightful user experience. The latter is lacking in most AR / AP solutions today.

Has cash flow management become more in demand given the economic headwinds?

Absolutely. With the pandemic, which we hope was a thousand-year event, cash flow leaped in importance. Consumers turned like never before to e-commerce, which is our biggest vertical. E-commerce startups usually have a cash flow gap between ordering inventory and turning it into revenue to pay the vendor.

The interest rate hikes had a huge impact on cash management and liquidity. This year, it’s harder to borrow, lenders tightened up, customers cut back, and vendors are more reluctant to extend terms. If our customers choose, we pay their vendors directly with Settle’s money. Our customer pays us back in on flexible terms. Our “just-in-time working capital” helps companies scale rapidly,

How do you see the cash flow management space evolving in 5-10 years?

B2B payments are still ripe for innovation. Right now, there’s a bit of a lull in financial services technology, but this is temporary. We are going to see another explosion of startups competing for a share of the SMB mindshare, primarily because the pain points are real and the market is huge.

And we welcome competition. The more players in the space, the better the ecosystem becomes. And the more options for brands, the better. More solutions with increased flexibility and integrations to manage accounts payable, working capital, and accounting will make it easier to scale a business rapidly and boost ROI.

Tell us a bit about your culture. What makes Settle’s culture unique?

We’re hyperfocused on people, we hire wicked smart people with a built-in bias for action – same as the founders we serve – which helps us better connect with small business owners. As a startup, we are humble, we understand their challenges and work tirelessly to build a 10x or 100x better solution that can positively impact their businesses.

What motivates you to get up every morning? What do you take pride in when it comes to your company?
The perfect segue from your previous question. We’re driven by helping our customers grow. Cash flow is king. The more we can facilitate capital, the more quickly they can scale. Cash flow is a force multiplier!

We get to see how this energizes their business, and we hear stories that Settle’s help up-leveled or even saved their company. That’s electrifying to hear; we know our customers in a way few lenders can, and when they take leaps and bounds—it’s like seeing your favorite sports team win.

We are a payments company and alternative financing provider, but our mission is bigger: to address cash flow management and unlock easier sources of working capital—and working capital is the unheralded driver of business success, and make optimal use of data about all business activity of a company.