Rainforest, a payment provider purpose-built for software platforms, yesterday announced it has raised an oversubscribed $20 million Series A funding round led by Matrix Partners. Additional participating investors include Accel, Infinity Ventures, BoxGroup, The Fintech Fund, Tech Square Ventures, Ardent Venture Partners – all of whom participated in the company’s seed round announced in 2023. The fresh capital brings Rainforest’s total funding to $31.75 million and will be used to advance the company’s core technology and product offerings, expand its platform success team, and accelerate its growth via new go-to-market initiatives.
Rainforest helps software platforms grow revenue by embedding payments into their products, without introducing any risk or compliance complexities. The company has achieved a stronghold amongst software companies processing $50 million – $2 billion in annual payments, a previously underserved segment. Rainforest provides a data-driven customized risk model for each platform, creating vertical-specific merchant scoring and precise fraud monitoring.
Since Rainforest’s seed round last year, the company grew its payment volume by 17x. It has signed dozens of platforms representing billions in processing volume across a variety of industries, including trucking and logistics, healthcare, specialty retail, professional services, field services, donation management, and more. The company has also advanced its product in ways that help software platforms grow payments revenue and reduce fraud.
- Streamlined merchant onboarding, including becoming one of the few PayFacs to enable Plaid bank verification and self-service options
- Added support for Apple Pay, reducing checkout friction and growing platforms’ payment volume
- Reduced fraud through implementation of 3DS
- Optimized interchange passthrough fees to help platforms save upwards of 20-30 basis points
- Certified for Visa SMB rates which enables qualified merchants to save up to 10-25 basis points
The overall payments landscape is quickly evolving
According to UBS, SMBs account for 25-30% of U.S. payment volume but 65-70% of net revenues. The portion of SMB merchant acquiring revenue processed through horizontal and vertical SaaS platforms is expected to increase from 24% of total merchant acquiring revenue in 2022 to 33% by 2027, as SMBs move away from traditional processors. Financial services embedded into e-commerce and other software platforms accounted for $2.6 trillion of total U.S. financial transactions in 2021, and by 2026 it’s expected to surpass $7 trillion. This represents a growing opportunity for SaaS platforms to capture SMB payment processing revenue.
SaaS platforms rely on payment providers to increase sales and satisfy consumer demand via secure, embedded payment processing. To date, incumbent providers haven’t served these platforms well for two primary reasons. One, they reserve higher-touch support for larger enterprise software platforms, leaving mid-market platforms hugely vulnerable with low support DIY models. Two, many incumbent providers started as direct merchant acquirers and later retrofitted their offerings for software platforms, meaning that core functions including merchant onboarding, reporting, and reconciliation were not optimized for platform use cases. This tacked-on tech model creates customer support nightmares with a snowball effect that impacts both the platforms themselves and the SMBs that rely on them.
“Historically, Stripe excelled at helping startups take their very first payment – but they’ve very publicly shifted their focus to large enterprises, leaving mid-market platforms to choose between a DIY Stripe solution built for early stage startups or cobbled-together solutions from a bevy of upstarts. These mid-market platforms tell us that, prior to Rainforest, it was impossible to find a payment provider that offers a full package of modern technology, platform-friendly commercials, and high-touch support,” said Joshua Silver, founder and CEO of Rainforest. “With Rainforest, software companies don’t have to sacrifice or choose between robust technology, excellent support, and attractive contract terms. By providing embedded payments via white glove service that’s risk-adjusted and customized for software platforms, we’re empowering more companies to focus on what they do best: building software that improves economies and experiences for everyone.”
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