Thinking About Thinking

Congrats to Volition portfolio company, Cortera, which launched their new website yesterday.  Cortera has a pretty simple mission in life – bring great financial and credit information on businesses to users at their fingertips for free or nearly free.  Cortera also allows any business to rate any other business on how they pay their bills.  It’s crowdsourcing for credit. 

It may not be obvious, but business credit ratings are driven by a few thousand large companies.  They contribute accounts receivable data (information on how their customers are paying them) to companies like Cortera and others.  That data is sliced and diced to produce credit ratings that businesses use for every day decisions like extending payment terms and credit decisions.

The flaw with the model is that if you are not one of those large companies, the experience of how your customers pay you never enters into the calculus of credit ratings.  On the flipside, if you aren’t a customer of one of those large companies, you may never be rated for your credit worthiness, even if you pay your bills in a timely fashion.  Millions of small businesses are left out of the credit equation today.

The only way to address this problem is to democratize the inputs for credit ratings.  Allow any business to rate any other business on how they get paid.  Expand the data contributors from a few thousand companies to a few million companies.  And then make credit and financial data easily accessible and very inexpensive.  Better data for everyone is the result – that’s the aim for Cortera.  It’s a grand and worthy goal that we’re proud to be working with them on.