This Pitch Deck Helped AI Fintech OppZo $260 Million in Seed Financing

  • OppZo uses AI to provide rapid access to finance to eligible government contractors and SMEs.
  • The startup has raised a $260 million starting round in debt and equity, led by Arcadia Funds.
  • Here’s the 12-page pitch deck that Oppzo used to raise the round.

The massive federal government contract market approached $700 billion in 2020, and it is likely to grow as spending increases amid continued pressure on investment in the country’s infrastructure.

Many of those dollars flow to small and medium-sized companies, even though larger companies get the majority of contracts awarded by volume. Of the roughly $680 billion in federal contracts awarded in 2020, about a quarter, according to federal guidelines, are or about $146 billion that yearwent to smaller companies.

But while peeking under the hood of the procurement process, OppZo co-founders — Randy Garrett and Warren Reed — saw an opportunity to streamline how smaller companies can use those contracts to tap into capital.

Closing a deal is “a government contractor’s best day and their worst day,” as Garrett, the president of OppZo, likes to put it.

“At that point, they have to pay suppliers and hire people to start the contract. And maybe they won’t get their first contract payment from the government for another 120 days,” Reed, the startup’s CEO, told Insider.

That’s where OppZo steps in. Founded in 2020, the fintech works with financing partners to provide working capital loans to companies that have won contracts and then need cash to quickly ramp up their business. The interest rates on OppZo’s loans, which range from $100,000 to $1 million, have a minimum of 8% and a maximum term of 18 months.

OppZo announced Thursday that it has raised $260 million in seed funding. The capital is a mix of $5 million in equity investments and $255 million in debt financing led by Arcadia Funds. OppZo has already launched in beta, but the new investment will help build the balance sheet the startup needs to make loans.

OppZo digitizes a process that is often manual and dependent on PDFs, extracting data from various sources and using an artificial intelligence-based algorithm to speed up the adoption process.

“We take that whole process from six to eight weeks and shorten it to a matter of a week or two. The goal is to keep compressing that total time frame into one or two days,” Reed added.

Bridging this financing gap could have far-reaching consequences. Small and medium-sized businesses too often don’t get access to credit from traditional lenders, Garrett and Reed said. But they say a government contract is a valuable, untapped source of funding that’s “essentially as good as Treasury bills.”

OppZo focuses on smaller companies operating within Opportunity Zones, or economically distressed areas designated in the Tax Cuts and Jobs Act 2017 as eligible for tax-advantaged private investment.

Reed, who worked in wholesale payments at JPMorgan before starting OppZo, also worked at the US Treasury from 2014 to 2017, where he saw firsthand the beginnings of the Opportunity Zone policy. “I had a lot of history around that particular legislation and the impact of driving capital to become these particular communities,” Reed said.

OppZo now has about 2,000 customers in the pipeline, Garrett and Reed said. By the fourth year of the operation, they hope to secure more than $4 billion in loans. And after launching in Florida, Maryland and Virginia, they plan to expand OppZo into Opportunity Zones in the US.

Check out the 12-page pitch deck that OppZo used to raise $260 million in equity and debt.

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