There’s a reason B2B payments hasn’t been solved. It’s so complicated – the need for different terms, payment forms, approvals and workflows makes it damn hard to automate and digitize. So to really get at the heart of B2B payments, you have to first start with the quoting and invoicing process – payments come later. That’s just what Jiga is doing for the manufacturing sector. The SaaS company has zeroed in on improving the work that goes into everything that comes before payments in manufacturing – embedded payments is just the next piece.
Jiga’s co-founder and CEO Adar Hay joins us on the podcast today to discuss the evolution of his early stage company. From the pandemic-era genesis story, we move on to how the firm’s product supports the different players in the manufacturing value chain through payments. Adar Hay is my guest today on the Tearsheet Podcast.
Subscribe: Apple Podcasts I SoundCloud I Spotify I Google Podcasts
The following excerpts were edited for clarity.
I am Adar. I'm the CEO and co founder of Jiga. Jiga automates sourcing tasks for manufacturing companies and it helps them centralize their quoting and order data in one place.
I personally didn't come from manufacturing. Two years ago, I went to visit my friend, Asaf. He is my co-founder and was running a machine shop in Tel Aviv. I saw how manual his work was – his customers, his team – everything was very manual. And we decided to do something about it. It was a very manual beginning.
The transaction is very complex. There are a lot of interactions involved. We just started with a web form, storing parts in our living rooms, and just started delivering orders. This was the beginning of COVID, so everything was a little bit crazy. In a way, people were more open to listen to things and to clunky startups that are just starting out – to try them out. So that was the beginning and we added a technical co-founder later.
Early ‘manual’ automation
The customer thought that a lot of the things that we currently automate were automated but back in time, they weren’t – it was just a fancy web form that I knew how to design but nothing behind it, just humans that deliver parts to the places that were ordered from.
Challenges of manufacturing supply chain
If you think about manufacturing, it’s a traditional industry with a complex workflow. You basically drive goods from one place to another, so one one of the interesting questions about payments is when do you pay? Do you pay when you receive the goods? Do you pay when everything is quality approved? Do you pay when someone started production?So there are a lot of issues around payment. And there's a lot of pain that comes with it to the supplier. So a lot of workflow and complexity around payments as well as just iterations around parts, delivery times, schedules, changes of purchase orders – many, many different aspects around this workflow that had to be taken into account.
Need entire workflow
One customer told us, yeah, but we need purchasing’s approval. And one time a customer said it has to have a stamp of quality assurance, or I have to know when it is out for delivery, and I have to have it integrated with my delivery and shipping service. They want to use my own shipping service and not the supplier’s shipping service. We had to have both options. And everything like piled up into what we are now today – we proudly support this entire workflow. We usually don't have many requests that we don't already know.
B2B payments require trusted relationships
With B2B payments, you create a relationship between two sides. And there's a lot of things that happen there. So it makes a lot more sense that consumer payments started first, and only then, B2B will come after. Because if you think about it, consumer is very simple. You only do the transaction and it's finished – it's usually not a very big deal. Think about ordering a taxi.
But if you think about buying a part and buying a part multiple times from the same supplier, the business model should be different, because you cannot charge 30% over an existing relationship – people will just go around you, because it isn't worth the extra efficiency. There's also a lot of complexity in that workflow, so it makes a lot of sense why it takes so much time to bring that payment online. But there is a huge opportunity there for many, many industries.
Embedding payments into manufacturing
As part of our platform, there's a possibility to discover new suppliers as well as working with your existing ones. And we treat these two cases differently. With supplier discovery, we handle the payments for the customers. There's a lot of friction in terms of onboarding new suppliers and getting them to the system and qualifying them. So we do all of that heavy lifting, like legal and everything around that. And according to the supplier and the customer's requirements, we let them discover these suppliers, and then we handle that payment. So handling that payment reduces the friction. And not only that, it creates trust, because it's like we serve as an escrow. And according to the agreement between the two sides, we only then deliver the money.
So if you think about that, it's the whole issue about who should hold the money. It's sort of like the older B2B platforms like Fiverr or Upwork, where they held the money.
Building or partner on payments
I think that the core things that we focus on are supporting the transaction workflow and everything that streamlines that. There's amazing payment infrastructure that wasn't there before that we integrate with. So first of all, integrations play a key part of what we do because people want their workflow not to be in separate places, but to be centralized in the same place. So this is something that's very interesting, like integrating with ERP, integrating with shipping providers, integrating with other kinds of software. Just consolidating that information into one place and supporting that workflow in a way that that serves the manufacturing industry is really something that's a core part of our business,
So currently, we use Stripe, which provides a very good experience to the developers and also to the customer. We're very happy, but we do think about other solutions that would serve other parts of the workflow. Right now, we don't do all payments online, because there are some things like bank transfers, stuff like that, that we didn't digitize yet. So we are looking at solutions, but right now, Stripe serves as a very good solution for now,
Scaling B2B payments
The payment is a huge pain in the manufacturing industry. If you think about the small machine shop, that has to be paid – they have expenses and the customer pays them 90 days from now. That's a big pain. So anything around financial services that you can provide to customers is a really interesting thing that you can make, like lending and insurance.
Because once you have the transaction, you can do interesting things with they value you can provide. So you cannot take huge transaction fees, obviously, because you want the business to keep going on on your platform, but then you can give the customers value in different forms that they actually need, because you're already there.
So for example, you can pay the supplier ahead of time in exchange for a certain fee. That's a good example of something that suppliers might really want – that they might even use a similar service – that we can provide. That's a huge advantage.
How Jiga makes money
We're take subscription fees for the actual software, because if you think about it, we're SaaS first, at least for now. We just sell license fees, because we're first the software to streamline and automate parts of your business. And you don't even have to work with outside suppliers, as you can just streamline your own business processes.
But then we also take small transaction fees for suppliers that we connect clients with. These transaction fees you can live with and are worth the extra efficiency and automation. The fact that suppliers are already on our platform [is worth paying for].
We are a YC company. We got out of YC about a year and a little bit ago. We're a seed stage company – we raised $3.1 million a little bit after YC. We are currently focused on requiring more customers and building the business.
We are really focused on the RFQ, the request for quote process, and purchase order changes and stuff like that. So everything from RFQ to purchase order. Also data and expanding the workflow services and moving up market are some of the stuff that we're looking at. And maybe then later, expanding the offering.
Vertical vs. horizontal payments
I think that just by going vertically to manufacturing, we could go even deeper into one aspect of manufacturing, but we see pretty similar problems across the space. So we don't want to go too specific. But definitely, we are currently focusing on the manufacturing vertical. Because if you look at this specific vertical, the workflows and the way they work is very specialized, and you have to get many things right.
I think the most satisfying thing is to see how we can accelerate a product that and bring them to life faster than they used to. So think about like, we can accelerate the purchase order process from 30 days to four days. So this is like getting medical devices faster to market and sustainability products and hardware products are doing a lot of good to the world. So that's my main driver. And I think that in five years from now, I will definitely want to be a place where every manufacturing company considers as as a way to, at least for that specific workflow to to use and go to and only think about going forward.