London based fintech startup Hokodo has been awarded a €2m (£1.4m) grant by Horizon 2020, the funding programme for research and innovation run by the European Commission.
Awarded to Hokodo’s French office, the funding will enable the launch of its API-based invoice insurance offering in Europe, which it said could protect potentially millions of SMEs from unpaid invoices.
The Horizon 2020 grant will enable Hokodo to launch invoice protection and HokoScore in France and Germany within the next 12 months, as well as helping it to develop two new trade credit products for the SME market, which are due to go live by the end of 2019.
Hokodo was co-founded by Richard Thornton, former chief operating officer at Aspen Insurance, along with Louis Carbonnier and Sami Ben Hatit, former chief executive officer and chief technology officer of credit insurance company Euler Hermes. The trio set out with the aim of giving small businesses access to the financial and insurance services that were once reserved for large corporates – starting with invoice insurance.
Research shows that more than 20% of insolvencies are caused by the late or non-payment of invoices, yet invoice insurance is traditionally only sold by brokers, for whom the commissions generated by SMEs are too low to justify the cost of sale. Hence, current market penetration for SMEs is only 0.25%.
Using APIs, Hokodo is distributing its products via the platforms that SMEs use on a daily basis, such as accounting, invoicing or sales tools – in much the same way as travel insurance is offered on airline websites. This means that customers can take out invoice insurance at the point of need, in real time, when they are accepting a purchase order or raising an invoice, rather than spending time sourcing cover elsewhere.
Carbonnier said: “Every year across Europe, hundreds of thousands of companies are driven into insolvency because of late or non-payment of invoices. Trade credit insurance exists to mitigate this issue, yet SMEs have effectively been blocked from the market by an old-fashioned broker model, which doesn’t suit their needs. Hokodo is on a mission to rectify the situation, giving businesses the ability to protect their invoices when it suits them, and greatly reduce the risk of insolvency.
“Receiving the grant from Horizon 2020 is a huge boost for the business. Not only does it enable us to offer invoice insurance across Europe sooner than we would have otherwise, but we estimate we’ll be able to protect over €200 million worth of B2B trade over the next two years. It is also a huge vote of confidence for the importance of what we’re trying to do, and the role we have to play in supporting SME trade and success.”