This Pitch Deck Helped AI Fintech OppZo $260M in Seed Funding

0
  • OppZo uses AI to provide rapid access to funding for eligible government contractors and SMEs.
  • The startup raised a $260 million debt and equity round, led by Arcadia Funds.
  • Here’s the 12-page pitch deck that Oppzo used to elevate the tower.

The massive market for federal government contracts approached $700 billion in 2020, and it’s likely to grow as spending accelerates amid continued pressure to invest in the country’s infrastructure.

A large portion of those dollars goes to small and medium-sized businesses, even though large companies are awarded the bulk of volume contracts. Of the roughly $680 billion in federal contracts awarded in 2020, about a quarter, according to federal guidelines, or some $146 billion that yearwent to small businesses.

But taking a peek under the hood of the procurement process, OppZo co-founders – Randy Garrett and Warren Reed – saw an opportunity to streamline how small businesses can leverage these contracts to tap into the capital.

Getting a deal is “a government contractor’s best and worst day,” as Garrett, the president of OppZo, likes to say.

“At that point, they have to pay vendors and hire people to start the contract. And they may not receive their first contract payment from the government for 120 days,” Reed, CEO of the startup, told Insider. .

This is where OppZo comes in. The fintech, founded in 2020, works with financial partners to provide working capital loans to companies that have won contracts and then need cash to quickly scale their businesses. Interest rates on OppZo’s loans, which range from $100,000 to $1 million, have a floor of 8% and a maximum term of 18 months.

On Thursday, OppZo announced that it had raised $260 million in seed funding. The capital is a mix of $5 million in equity investments and $255 million in debt financing led by Arcadia Funds. OppZo has already launched in beta, but the new investment will help build the balance sheet the startup needs to start making loans.

OppZo digitizes a process that is often still manual and relies on PDF files, extracting data from various sources and relying on an artificial intelligence-based algorithm to speed up the underwriting process.

“We’re taking this whole six to eight week process and condensing it down to a week or two. The goal is to continue to reduce that overall time frame to one or two days,” Reed added.

Closing this funding gap can have a huge impact. Small and medium-sized businesses are too often denied access to credit from traditional lenders, Garrett and Reed said. But in their view, a government contract is a valuable and untapped source of funding that “is basically as good as Treasury paper.”

OppZo focuses on small businesses operating in Opportunity Zones or Economically Distressed Areas designated in the Tax Cuts and Jobs Act 2017 as eligible for tax-advantaged private investment.

Reed, who before starting OppZo worked in wholesale payments at JPMorgan, also worked at the US Treasury from 2014 to 2017, where he saw first-hand the beginnings of Opportunity Zone politics. “I had a lot of history around this particular legislation and the impact of driving capital to these particular communities,” Reed said.

OppZo now has some 2,000 customers in its pipeline, Garrett and Reed said. By the fourth year of operation, they hope to generate more than $4 billion in loans. And after launching in Florida, Maryland, and Virginia, they plan to expand OppZo to Opportunity Zones across the United States.

See the 12-page pitch deck OppZo used to raise $260 million in equity and debt capital.

Share.

About Author

Comments are closed.