If the pandemic taught merchants anything, it’s that supply chains are only as strong as their weakest link — and trucking carriers are among the most vital of those links. And in Mexico, as in other countries, the trucking industry is dominated by small firms — more than 95% of the nation’s roughly 200,000 carriers have fewer than five trucks on hand.
It’s a notoriously capital intensive business: Cash is needed upfront to buy and maintain the vehicles, to keep them on the road, and payment for a delivery can take weeks or months to arrive. But as Jaime Tabachnik, co-founder and CEO at Mexico FinTech Solvento, told Karen Webster, “Demand is growing at a much faster pace than capacity,” especially since there’s a driver shortage and U.S. retailers are in the midst of reshoring and near-shoring efforts.
It’s essential to build loyalty among carriers. Among the best ways to do so is to step in and fill the cash flow gap that exists for these carriers, ill-served by banks and FinTechs, by streamlining and speeding freight payments and invoice financing for third-party logistics providers, especially those transactions done cross-border.
The cross-border carrier/shipper relationship may be more complex than might be seen in a domestic setting, but as Tabachnik noted, “Sometimes complexity means a bigger opportunity.”
As he remarked to Webster, to grow a business that’s marked by “negative cash flow is difficult — you need a lot of working capital.”
Solvento, which provides immediate payment solutions to the freight industry, with a focus on Mexico, is harnessing artificial intelligence (AI) and an end-to-end accounts payable process to solve the challenges related to doing business in multiple currencies, foreign exchange rates and country-by-country legal frameworks.
At the end of last year, the company launched its Solvento Audita AI-powered software to enable shippers and brokers to offer quick payment to trucking firms, which in turn enables drivers to be paid more quickly.
And while, a few years ago, the FinTech got its start going directly to small carriers, offering working capital loans on an outfit-by-outfit basis, Solvento’s vision is to be “the financial platform … for everything that is related to the movement of money,” within freight payments. Solvento is targeting the freight industry aggregators (Uber Freight and Redwood Logistics, for example) that are making inroads into Mexico, to help boost scale as they pay their own carriers.
The aggregators’ customers that conduct business cross-border need to be able to pay the Mexican freight players in their home markets and currencies. “A lot of the U.S. companies don’t know where to start — and the payment infrastructure that they currently have does not support them paying into a Mexico-based bank account.” Solvento, Tabachnik said, offers a “plug-and-play solution so that they can start paying Mexican carriers in 24 hours.”
The Solvento Audita uses APIs to integrate into any existing software, able to read and detect documents and validate them — offering proof that the delivery’s been completed and payment is warranted, including for what he said are “accessorial” or unplanned expenses that need to be paid too.
“This auditing process is predominantly done manually in Mexico and in the U.S.,” said the Solvento CEO, “and if you have already audited the invoice and the proof of delivery, then you have underwritten the biggest risk in factoring, which is that the invoice is going to be paid. This is why the combination of freight auditing, payment and factoring is super-powerful,” he added. The combination offers what he termed a “magnificent wedge” to continue to verticalize its product suite and transform the freight market and also continue to differentiate Solvento from banks and other FinTechs.
“By achieving our mission of making payments immediately — after deliver and a few minutes, after the audit,” Tabachnik said, “this is going to be a game changer for the industry” and even bring more drivers into the fold as cash comes to them more quickly, alleviating at least some supply constraints.
On Tuesday (Nov. 19), the promise of Solvento’s Mexico and cross-border efforts got a $12.5 million vote of confidence through a Series A funding round led by Cometa. Investors included Quona Capital, Ironspring Venture, Dynamo Venture and others, through instant bank account wires.
The current capital influx comes after an initial 2021 prerevenue round and a $5 million 2022 seed round. This time around, Tabachnik said, the funding environment’s markedly different, having taken about five months from beginning to end in an environment where rates are higher, capital’s more expensive. “A Series A,” he told Webster, “was always going to be about [the company’s] traction and product market fit.”
Looking ahead, he said that with the Series A funding in hand, Solvento is building out its sales team and will look to release a new product, Rate Insights, that will help firms compare the rates that they are paying to truckers vs. industry benchmarks. The potential is there, too, to create a sort of “ratings” product for both sides of the platform (the demand and supply, i.e.. the truckers) to help carriers make informed decisions about the shippers with whom they do business, and who pays on time, or not.
“We hope to partner with different marketplaces that are being built with different strategies and angles,” including traditional brokerages. The next two years will be focused on modernizing Mexico’s freight industry before branching out geographically, Tabachnik said.
“Mexico is big enough for us to build something gigantic,” he said.
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