Thinking About Thinking

Days like today are one of the reasons I love being in the venture business.  I love investing in companies with great people, doing very innovative things that can completely disrupt large, stodgy industries.  I love the idea of bringing millions of customers and users real value that they couldn’t imagine before.  I love any innovative service that creates transparency, levels the playing field, and lets the little guy win.  It’s all about putting the slingshot in David’s hand – and going after Goliath.  Today, Cortera is doing just that with their launch of the Cortera Credit Exchange at DEMOfall 2009.  Congratulations to the team at Cortera for their amazing effort. 

What does Cortera do?  The most impactful and disruptive innovations are often the simplest.  This is no different.  At its most basic level, Cortera’s service enables any business to rate any other business on how they pay their bills.  We think of it as Yelp for business credit.  In today’s launch, there are already over a million ratings on businesses like yours and mine.  There’s a lot more data on top of the ratings on virtually every company in the United States.  Why is this such a big innovation?  It puts power back in the hands of small businesses around this country in a couple of really critical ways:

Firstly, it enables the voice of the small business to be heard in the business credit world.  Traditionally, commercial credit ratings are driven by payment data contributed from a few thousand large companies.  While Cortera has included that data as well, there are tens of millions of smaller companies whose payment experiences have been left out until now.  On Cortera, the payment rating of a small business matters just as much as the payment rating of a large company.  Any business can go online at Cortera, right now, and enter a payment experience they are having with one of their customers.  The playing field has been leveled. 

Secondly, by leveraging the Internet for user generated ratings, Cortera can now offer commercial credit data for prices unheard of in the business credit industry.  Basic credit information and user ratings are now available for free.  Free is a term that has rarely been uttered in this industry.  And while traditional business credit reports from incumbent vendors can cost $50–$150 per report, you can now subscribe to Cortera for near-unlimited data access for most companies in the United States for as low as $29–$49/month.  This is a game-changing innovation to price structure of the business credit industry. 

Finally, Cortera enables small businesses to build a credit rating based purely on the ratings of its partners and vendors on Cortera.  Lots of small businesses have trouble building credit ratings because the payment data for traditional ratings come from big companies.  What if your business principally works with small companies?  The old model can leave a creditworthy small business on an island.  Now any business can take control of their credit reputation, and build a credit rating on Cortera directly through the feedback of the businesses it works with.  We hope to enhance the credit reputation of millions of small businesses. 

As we all know, it’s credit that makes the economy run.  Every accounts receivable (AR) is a form of credit one business has extended to another.  Every accounts payable (AP) is a form of credit received by one business from another.  Nearly every business on the planet has both AP and AR on their balance sheet.  Business transactions big and small are done on credit every day.  But, how does a business know if the party they are transacting with is credit worthy?  Cortera now makes it drop dead simple and cheap.  Type in the company name on Cortera, click on the right company, and you’re there. 

The world is changing.  You don’t go to a movie without looking at the ratings online.  You don’t go to a restaurant without checking ratings online.  You don’t book a hotel or plan a vacation without pouring over ratings online.  But, you’d give someone 30 day terms on a $50,000 order without checking credit ratings online?  Not any more, not with Cortera.  Congratulations to the entire team at Cortera for introducing a truly disruptive service to an industry in dire need of change. 

(Disclosure: Cortera is a Fidelity Ventures portfolio company, and I sit on the Board of Directors.)