Fintech

How I decided to exit my startup’s original business

Bluevine got its start in factoring invoices for small businesses. CEO Eyal Lifshitz explains why it dropped that business in favor of “end-to-end banking.”

Photo of Eyal Lifshitz in a blue T-shirt with "BlueVine" written on it

"[I]t was a realization that we can't be successful at both at the same time: You've got to choose."

Photo: Bluevine

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Bluevine got its start in fintech by offering a modern version of invoice factoring, the centuries-old practice where businesses sell off their accounts receivable for up-front cash. It’s raised $240 million in venture capital and about $700 million in total financing since its founding in 2013 by serving small businesses. But along the way, it realized it was better to focus on the checking accounts and lines of credit it provided customers than its original product. It now manages some $500 million in checking-account deposits.

In January, Bluevine sold its factoring business to a competitor, FundThrough. While the terms of the deal were not disclosed, FundThrough said at the time that it expected the deal to double the size of a business already processing $120 million in funding per month.

Eyal Lifshitz, co-founder and CEO of Bluevine, explained the company’s decision to sell its original business and how that positioned it for what's next in fintech.

This interview has been edited for clarity and brevity.

It was a hard decision to make because it was a business that was actually profitable. What ended up driving the decision is that management attention is so scarce. Even though it is a business that's been with us for a long period of time, putting aside the emotional connection to it, the right thing was to part ways and make sure we are focusing on what is North Star for the company.

My father was a small-business owner, my grandfather was a small-business owner. I know the pride of running a small business but also the challenges. Financial services was never one of those things that was fun for a small business. They have never been really prioritized by traditional banking or financial institutions. I felt like with the emergence of technology and online services, there’s a real opportunity to deliver a better future for them financially.

The first realization we had was that the product wasn’t great. Our first product — we labeled it factoring. But it was really a little bit of a hybrid: a factoring and line-of-credit product. We felt like factoring was a good product for a small business but not in the shape that it was done historically. But the hybrid product wasn’t solving for what we wanted and was both an inferior factoring product and an inferior line-of-credit product. We took that initial version and separated it into a true line-of-credit offering and more of a true factoring product.

With credit, we were solving one pain point for small businesses. But the real opportunity we saw is greater: to solve the needs of small businesses with end-to-end banking. We launched our checking account product in the beginning of 2020 and later on introduced a bill-pay product, and today we are offering a wide range of solutions. It's a massive market, serving non-commercially banked small businesses, typically less than $5 million in revenue. Over time, for us, factoring became a little bit more of a mid-market product, slightly bigger businesses. It felt like a product that made sense but was less and less fitting our overall strategy for how we are serving our customers.

To continue growing it to be uber-successful would require a different muscle than the core vision of the company. So it was a realization that we can't be successful at both at the same time: You've got to choose. There were deliberations. Maybe we spin this off? Create another business that can truly focus on factoring. Or is there another home for this that makes more sense? Ultimately we started engaging with FundThrough and felt like it would be a great home for factoring: They are 100% focused on it, and we share a lot of the same values.

The only way to succeed is to be hyper-focused. Companies are recognizing that to succeed within SMB, you need to be specific to the category that you're actually serving. A five-person company is very different from a 300-person company. A tech startup is very different from a restaurant in terms of what they need. I think you are seeing a maturing of fintech in general for SMBs. SMB is a nice acronym, but it doesn’t mean much. You need to go a step further and say who is the customer you are really, really focused on?

Update: This story has been amended to reflect the correct amount of Bluevine's venture capital funding.

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