Hokodo provides “buy now, pay later” solutions to the B2B market, enabling business customers to benefit from instant, frictionless, interest-free payment terms. A leader in the field in the UK, Hokodo is currently expanding into continental Europe. Here, co-founders Louis Carbonnier, Richard Thornton, and Sami Ben Hatit reveal how three friends came together to set up and operate the company.
What brought you to the idea of Hokodo and what other experiences led up to your founding Hokodo, along with your co-founders?
”Hokodo was created because there was a glaring gap in the market,” explains Louis. ”Having worked with Richard (Thornton, co-founder and co-CEO) for several years in the embedded finance space, helping big banks and insurers to sell financial services at the point of need, I moved on to join Allianz Trade (fka Euler Hermes), the leading provider of trade credit insurance. Euler Hermes provides a great product for supporting credit terms but, after a while, I began to notice a few shortcomings.
“Firstly, it’s so complex that a sophisticated finance department is required to manage the product, and so only large corporates can benefit from it. Secondly, working on a 48-hour cycle, it’s designed for offline trade, so it excludes the e-commerce market by default. At this point, I began investigating whether there was an alternative, a financing or lending model for B2B that all businesses could access.
”I mentioned it to Sami (Ben Hatit, co-founder and CTO) and we started to prototype some BNPL APIs. Then Richard came on board and, once we’d agreed we were on to something new and exciting, Hokodo was born.”
Hokodo has multiple co-founders. To some entrepreneurs, this can be difficult, as they may want full control over the vision of the company. How did your founders come together and how do you work well together?
“Louis and I met and became friends while studying at college,” explains Sami. “We had shared interests and remained friends as we went our separate ways into the world of work, sharing experiences and ideas. So, for us, starting a business together was almost a natural progression.”
“And I met Richard later on when we were both employed at Oliver Wyman,” adds Louis. “As a young professional, Richard’s work ethic and attitude made a huge impression on me. I recall a particular consulting engagement where we had finished nearly all the work our client had requested in a much shorter time than had been allocated. Many of Richard’s peers would have stretched out the final tasks in order to squeeze every penny from the client but, instead, he chose to return some of their cash and move on to the next job.
“When it came to setting up Hokodo, deciding to bring Richard and Sami on board wasn’t a difficult choice for me. We all have different skill sets and experiences, and any Hokodian will tell you we are very different people! But this works in our favour, rather than against it, allowing us to focus on the areas where we excel, while knowing the other areas are well taken care of.”
There has been a lot of noise recently around BNPL. What makes Hokodo stand out from the rest of the BNPL space?
“Our real point of differentiation is that Hokodo meets all the requirements of B2B merchants,” says Louis. “So, they have one provider managing the end-to-end process – from checkout, through credit scoring and fraud detection, to financing, payment, and collections. This means that merchants don’t have to worry about the admin or the credit checking. They can simply concentrate on business growth, leaving Hokodo to handle the rest. Our other advantage is the geographical reach of our platform, which already serves the six largest European markets – with more to come very soon.”
Hokodo has recently raised funding. As an entrepreneur and, more specifically, a tech entrepreneur, what advice would you give to other entrepreneurs who are wanting to raise investment in their startup?
“At Hokodo, we’re lucky to have completed our raise when we did,” says Richard. “Given the current economic climate and impending recession, tech entrepreneurs everywhere should be aware that raising investment is going to be very tough for the foreseeable future. Investors are going to be much more conservative with their money. Therefore, being able to demonstrate profitability will be more important than ever.”
“As investors continue to tighten their purse strings, only the startups with the best tech and a unique proposition are going to have what it takes to survive,” adds Louis. “My advice for any entrepreneur is to ensure that you invest in your tech stack and make sure that the product you’re taking to market has a unique edge which pushes it ahead of the competition or incumbents.”
Innovations in technology are constant in almost every industry, but what changes have you seen specifically in the fintech/paytech space in recent years? How has this changed the way you run your business?
“We’ve seen many marketplaces and e-commerce operators in the B2C space turn to various forms of embedded finance in recent years,” says Sami. “They’re looking to satisfy the financial needs of their customers in a streamlined way. And they have a range of options to choose from now – digital wallets, PayPal, and “buy now, pay later” options, as well as the more traditional methods.
“As consumers, we are all used to seeing and using these embedded finance tools at the point of purchase, but they’ve been absent in B2B trade until very recently. Now we’re beginning to see them come through, often connected to the checkout via an API. The more businesses that see these solutions when making trade purchases, the more receptive they become to products like ours.
“Embedded finance works by coming in at the point of need, adding value to the buyer journey. This is turning the payments space into an entry point for many additional financial services, and you can take Hokodo as an example of that. While clients perceive us as a deferred payment method, we actually aggregate many services.
“To manage deferred payments, we need to provide instant credit checks, fraud detection, collections, insurance against non-payments (aka credit insurance), and financing. Previously, these have been services that would operate independently. But by amalgamating them, we are streamlining the entire system for sellers, as well as their customers. We give our clients one single API to manage the whole trade credit cycle.”
There are many companies that have made big names for themselves in the consumer BNPL space. Do you believe it’s harder to be heard in the B2B space? What particular challenges do you face?
“Being heard in the B2B space isn’t necessarily harder than in the B2C space,” says Louis. “But the challenges around marketing, communications, and PR are certainly very different in B2B. At Hokodo, we think of ourselves as a ‘B2B2B’ because our clients are businesses (merchants and marketplaces), but their clients – the ones choosing to pay using Hokodo’s solution – are also businesses. So, we need to create communications and content which speak to two different groups of customers.
“One of the main reasons that B2C BNPL providers like Klarna have made such a huge name for themselves and created such strong brands is just the fact that they’ve been operational for longer than Hokodo and its peers, so have been able to spend more time and resources on their marketing than we’ve yet had the chance to do.”
What are you most proud of about Hokodo? What have been some stand-out moments and successes?
“For me, it’s the Series B fundraise,” says Richard. “Securing €37 million in funding at what has been something of a turbulent time in terms of global finance, was a real show of confidence in our product and our team.”
“Yes, it’s the team that has to take a lot of credit for the strength of Hokodo,” says Louis. “So that’s probably what I’m most proud of at this stage. We’ve built a team – currently of about 80 people – all of whom are exceptional in their own way. And they’ve all shown such commitment to the business.”
“It’s the solution itself for me,” adds Sami. “Creating an end-to-end tech, credit, and analytics stack that has proven so effective is a massive achievement.”
Lastly, what do you see for the future of B2B BNPL and what does this mean for Hokodo?
“We don’t claim to have a crystal ball,” says Richard. “However, we can make an educated guess about where B2B BNPL is heading. In the short term, things are going to be tough – in B2B BNPL, in B2C BNPL, and for businesses in general. You’ll have seen that many B2C BNPL players are currently struggling to stay afloat financially. These hits are going to be made worse by the fact that we’re almost certainly heading towards a recession and that fintech funding has rapidly dried up over the first half of 2022.
“As if that isn’t enough to deal with, government scrutiny is also increasing and, while this is mostly focused on protecting consumers who are using B2C BNPL, it remains to be seen how impending regulation might impact B2B lenders like Hokodo. However, this is not entirely bad; these conditions will result in consolidation and the disappearance of weak business models.”
“Longer term, things look brighter,” adds Louis. “Trade credit has been the payment method of choice in B2B trade for hundreds of years, and it’s here to stay, optimised for e-commerce in the form of B2B BNPL. The continued need for innovative, digital-first payment solutions will support the growth of BNPL companies – as long as they are able to operate on a global scale.”
Executive Profiles
Louis Carbonnier – is a co-founder and co-CEO of Hokodo where he leads the commercial strategy and product development of the company’s B2B “buy now, pay later” solution. Louis was previously the head and founder of the Digital Agency at Euler Hermes, the world’s leading trade credit insurer and part of the Allianz Group. Louis started his career in strategy consulting at Oliver Wyman, where he was a principal in the financial services practice.
Richard Thornton – is a co-founder and co-CEO of Hokodo, where he leads the back office functions, including risk analytics, operations, finance, and legal. Richard was previously the Group Chief Risk Officer and then Group COO at the global (re)insurer Aspen. Richard started his career working as an economist at the Bank of England before spending 14 years working in strategy consulting at Oliver Wyman’s financial services practice.
Sami Ben Hatit – is a co-founder and CTO at Hokodo, where he leads and oversees the technical architecture and engineering team. Sami was previously the CTO at Euler Hermes digital agency after a career in software engineering.
