Big deal: CDPQ and Temasek help transfer $300m to AvidXchange

Temasek and Caisse de dépôt et placement du Québec have contributed to a $300m funding round for AvidXchange that also attracted Mastercard and Peter Thiel.

US-based fintech developer AvidXchange raised $300m in funding on Thursday from investors including Singapore’s sovereign wealth fund Temasek and Caisse de dépôt et placement du Québec (CDPQ), the manager of Quebec’s public and parapublic pension and insurance plans.

Credit cards and payment systems provider Mastercard also took part in the funding round, as did Peter Thiel, who gained significant expertise in the financial sector as co-founder of online payment processing company PayPal.

Established in 2000, AvidXchange operates an automated invoicing and payment processing platform aimed at industries including real estate, financial services, energy and construction. The company said it now served more than 5,500 clients throughout North America.

The cash injection will support AvidXchange’s continued growth and enable the company to scale its business for strategic partnerships such as the one with Mastercard. The partnership will support the launch of the Mastercard B2B Hub, a platform aimed at getting small and mid-sized companies to replace paper cheques with online transactions.

The collaboration allows Mastercard to leverage AvidXchange’s expertise in payment automation, while AvidXchange will gain access to Mastercard’s commercial payment systems to increase its stake in the middle market – traditionally a sector that has proven averse to adopting technologies that could replace manual invoicing and payment processing.

AvidXchange is also expected to add hundreds of jobs – 200 this year and more than 600 in 2018.

Jennifer Roberts, mayor of Charlotte, North Carolina, where AvidXchange is based, said: “We want to build on these kinds of jobs and help brand Charlotte as a place where if you have the talents, you can be successful here.”

In fact, the latest funding round did not only involve Temasek and CDQP as state-backed actors, but was also driven in part by an incentives award to AvidXchange from North Carolina’s Job Development Investment Grant program. As long as AvidXchange hits certain recruitment milestones, that grant could bring in a total of more than $7.5m.

Temasek’s backing also comes on the heels of the firm opening an office in San Francisco in February, underlining Singapore’s increasing focus on opportunities in the US.

The investment is intriguing when considered globally. Temasek’s push into the US has continued despite the Trump administration causing much uncertainty for businesses – particularly with the decision to pull out of the Paris climate change agreement and a hostile stance towards immigration.

On the other side of the pond, a total of 97 sovereign wealth funds, pension funds and central banks rated the UK as the least attractive developed country for investments, following the country’s decision to abandon the EU. In a survey conducted by fund manager Invesco, the country was rated 5.5 out of 10, a significant drop from the 7.5 just a year ago. The US came out on top with a rating of 8.

Essentially, the challenges in the US and the UK boil down to the same issues – governments hostile to immigration and unwilling to listen to businesses – so it is surprising that one country is still doing significantly better than the other when it comes to attracting external investors.

Of course, the decreasing willingness to invest in the UK – where Temasek has an office in London – may have been made worse by the volatility of the country’s currency, which has dropped around 20% since the referendum. The pound was worth $1.49 just ahead of the referendum results and since then has fluctuated around $1.25. Investors may be getting more for their money in the UK right now, but the pound has been on a downward spiral, making a decent return on investment less likely.

AvidXchange need not fear international challenges quite yet, of course, and with globally active investors such as Temasek and Mastercard, the company is now significantly better prepared if it decides to expand outside North America.

With investors not shying away from injecting ever bigger sums into AvidXchange, the company also appears on the right course. The latest funding round added to an $18m investment in November 2016 led by Fifth Third Capital, the investment arm of diversified financial services firm Fifth Third Bancorp, that featured financial sector-focused investment firm Pivot Investment Partners.

AvidXchange received $225m in capital from investors led by Bain Capital Ventures in 2015. That round included Foundry Group, NYCA Partners, KeyBank, Square 1 Bank and TPG Special Situations Partners.

Michael Praeger, CEO and co-founder of AvidXchange, said: "We founded AvidXchange to revolutionise the way mid-size companies pay their bills. The strategic partnership with Mastercard will help us to realise the vision that we have had to transform an industry, and to reach the 350,000 businesses that are currently operating in the middle market with antiquated processes.

The round of funding that we closed will empower us to continue to make bold business decisions to serve the mid-size businesses, and scale our operations as we maintain focus on delivering a superior customer experience. We are thrilled with the group of investors that we assembled.

“The diversity in this cohort of investors is a sign of the growing interest in the fintech sector and acknowledgement that companies, like AvidXchange, are the way forward for business.”

Colleen Taylor, executive vice-president of new payments business at Mastercard, said: "Midmarket and small businesses are growth engines of our economy. The Mastercard B2B Hub is the latest way we are working to meet the broader payment needs of this segment.

"We see this solution as helping organisations maximise every minute and every dollar that they invest in their business. The comprehensive automated payment experience we deliver will help improve supplier relationships and accelerate the conversion of business-to-business payments from paper checks to electronic payments.

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