Rainforest, a startup that integrates payment processing into other software platforms, has raised $20 million in Series A funding — less than a year after announcing the end of its seed funding.
Posting rounds back to back was more common in 2021, but we don’t see it happening as often in this new environment. Rainforest’s appeal is likely what helped attract new investors Matrix Partners as well as backers Accel, Infinity Ventures, BoxGroup, The Fintech Fund, Tech Square Ventures and Ardent Venture Partners. In total, the company has raised $31.75 million.
In the last six months alone, Rainforest says it has grown its payments volume by 17 times, signing on “dozens” of platforms across various industries. The two-year-old Atlanta-based company also claims to have increased its valuation “by more than 2 times,” but declined to share specific numbers.
CEO and founder Joshua Silver describes Rainforest as a payments-as-a-service provider that helps software companies “build and optimize” integrated financial services. He’s hardly alone in his mission, but Silver claims his startup is doing it in a way that helps its customers make more money while being built for the specific needs of SaaS companies.
Rainforest is a Stripe alternative that allows software providers to facilitate payments from end customers to their business customers. For example, a software platform for residential roofing contractors would allow payments from homeowners to roofing contractors. Rainforest claims it’s different from competitors that already do this (like FIS, Fiserv, and Stripe) because it’s designed specifically for SaaS companies and offers a white-glove service.
“There are too many payment products similar to fast food — they fill you up, but you’re lazy, you’re not fed. Same for a SaaS,” Silver told TechCrunch. “Software companies can increase revenue per customer by 2x-5x by adding fintech, earning more revenue from embedded financing than from their core product. But this is only possible when it is fueled in the right way.”
Silver previously founded Patientco, a healthcare SaaS that he sold to Waystar (which was released earlier this month). Before starting Rainforest, he said he consulted with more than 50 software platforms on their payment strategies and learned that they were unhappy with existing embedded payment providers. So he set out to try to make a better one.
Competitors, he found, were usually large modern PayFac processors or providers, all with DIY service models. And none were built directly for software platforms — rather, they were designed with marketers in mind.
“None of the modern processors were built specifically for software platforms. Most of them were built directly for merchants and all had to retrofit their platforms to even host basic payment processing and reporting functions for software companies,” Silver told TechCrunch at the time of Rainforest’s latest raise.
As a result, he said, Rainforest is capturing volume as software platforms migrate from legacy processors like Fiserv and FIS. As it does, it’s competing with companies like Stripe to integrate financial services and payments.
“We are purpose-built for software platforms, whereas large modern processors such as Stripe were originally built for direct processing by merchants. They have retrofitted their platforms to support integrated payments, but mid-market software companies are not Stripe’s primary target,” Silver told TechCrunch. “We hear every week from software companies who aren’t getting the support they need from Stripe. It’s no surprise, as when you look at Stripe’s recent annual letter and product announcements, they’re all focused on business.”
Rainforest’s revenue model is entirely consumption-based, much like its cloud services, with the company earning a small percentage of each transaction processed. Silver believes Rainforest’s white-glove service and transparent pricing help it win over customers.
“We have a simple, transparent pricing model and it’s published publicly on our website because we have nothing to hide,” he said. “We handle the entire service, which in the payments space includes risk management and merchant onboarding, and compliance — all things that software companies typically aren’t very good at. And for our partners, we manage all the risk.”
One of its biggest recent client wins is landing a CRM and marketing automation platform Keepwhich has 200,000 users and processes billions of dollars in payments.
“Signing Keap was vital because it shows that we can help large, established companies and that we can win against large competitors,” said Silver.
Over time, Rainforest expanded into more industries, such as rural services and professional services, and penetrated existing industries such as healthcare, retail, and nonprofits.
On the product development front, it has added support for Apple Pay, 3DS and Plaid — which Silver believes will help the platforms increase payment adoption while further reducing fraud.
“We are one of the only payment providers that uses instant bank verification to speed up merchant onboarding,” he said.
It’s a big market. Financial services embedded in e-commerce and other software platforms count $2.6 trillion of total US financial transactions in 2021and by 2026 it is expected to exceed 7 trillion dollars.
“The market we’re in right now is huge and nowhere near being penetrated. There are thousands of vertical mid-market SaaS platforms in the US alone,” said Silver. “UBS estimates total US SMB merchant processing volume at $2.2 trillion, and a growing portion of that volume is processed through SaaS platforms as SMBs move away from traditional processors.”
Looking ahead, Rainforest plans to use its new capital to “double down on product and support.”
Currently, it has about two dozen employees.
Matt Brown, partner at Matrix Partners, believes “trillions” in payment volume are shifting from “old-school solutions to modern software platforms with integrated financial services.”
“I have founded and invested in companies with this software and integrated financial services model for the past decade. I’ve seen dozens of approaches to payments, but none come close to Rainforest,” he said. “They’ve built their core technology, not just a wrapper around others. They are experts not only in payments, but in SaaS, platform development, risk and many other areas you need to make it happen.”
Another company in the space that recently raised funding is Forward, which works by enabling SaaS companies to rent its offerings as a service, collecting its own fees. Its software resides inside its customers’ software, saving them money. And there’s also Gynger, which offers vendors selling technology a way to offer embedded financing through an accounts receivable platform that provides “flexible” payment terms. It recently announced a $20 million raise.
Want more fintech news in your inbox? Subscribe to TechCrunch Fintech here.
Want to get in touch with a tip? Email me at maryann@techcrunch.com or send me a message on Signal at 408.204.3036. You can also send a note to the entire TechCrunch crew at tips@techcrunch.com. For more secure communications, click here to contact uswhich includes SecureDrop (instructions here) and links to encrypted messaging applications.
