Flint's Blog

Billtrust Announces Major Capital Raise of $25 Million

We're very excited to announce that last week we closed on $25 Million in new financing from Bain Capital Ventures.  It was covered in a number of press journals including here and here.

I've received a number of questions about this so this will be my first FAQ blog post.

 

Q: Why are you raising so much money?

A: Over the last two years we've entered in another phase of our growth where we think there are some excellent opportunities to grow through mergers and acquisitions as well as traditional organic growth. Last year we acquired two companies and we expect to target 1-2 new deals per year.  This capital raise gives us the opportunity to do this more aggressively.

Q: What does this mean for existing Billtrust customers?

A: We think all good things. We will continue to invest heavily in our products, infrastructure, and support team.  We launched several brand new products in 2012 to help our customers deal with billing and payment challenges and we expect this pace of innovation to continue or accelerate.

 

Q: How long did it take from the moment you started to when you closed on the financing?

A: Raising money is hard work. You need to produce a lot of materials, have a lot of meetings, so you can expect to have it suck 4-8 months of life away.  We decided to get some assistance and hired an investment banking firm - Raymond James - to help us.  So it still a took about six months, but Raymond James did about 75% of the work.

 

Q: What was the fund raising process like?

A: Raymond James ran a process where they identified over 50 possible investors that would potentially be interested in Billtrust.  Each potential investor was asked to sign a Non-Disclosure Agreement (NDA) and then they were sent a Private Placement Memorandum (PPM).  A PPM is basically a 50 page PowerPoint that covers all areas of the business including what you're planning on doing with the money. 15 firms submitted offers to invest of which 5 were deemed serious. The Billtrust management team met individually with each of the 5 and then after a bunch of back and forth, we selected Bain Capital Ventures.

 

Q: Why Bain Capital Ventures?  Are they the same Bain Capital that is being vilified in the press for sending jobs overseas?

A: Bain Capital Ventures (BCV) invests in high growth opportunities and is a separate entity from Bain Capital. They stood out for a number of reasons.  Any of the 5 finalists would have been a great partner.  They all could have helped finance our M&A strategy.  BCV stood out for two major reasons. The first is their incredible network of business contacts.  I spoke with one BCV CEO who said that intro's from the Bain network resulted in about 80% of his new business.  The second big reason was the person who would be joining our board - Matt Harris.  When you raise money, the firm you raise the money is important, but far more important is the person from that firm you'll be dealing with.  Matt has an incredible amount of payment experience, understands what Billtrust is trying to accomplish, and can challenge us on ways to make us even better.

 

Q: Is Billtrust profitable and if so, why do you need this money?

A: Billtrust is very profitable, which coincidentally also a good time to raise money.

 

Q: Is it time for a victory dance?

A: Not at all.  Raising money is not a time to celebrate (maybe for a moment).  Raising money is simply a milestone on the journey.  For us, we hope it's a journey that leads to us being a nationwide powerhouse in the billing an payments space.

 

Q: What's next for Billtrust? 

A: I don't know and I'm OK with not knowing.  I've always been a firm believer that if you build a great company,  you'll always have a lot of options.  

 

If I missed anything, please ask in the comments.

What is "Customer Centric Billing?"

For 11 years we've been positioning Billtrust's "outsourced billing service" as a solution to all of a vendor's accounts receivable needs - everything from print/mail to email to world class electronic billing and payment. We've had tremendous success thanks to a great team and a real market need. However, we think that maybe we've been going about it the wrong way. We've been focused on solving Vendor Centric Billing problems which I'm starting to thinking is backwards.

One of the blessings and curses of what we sell is that we save companies a lot of money. That's obviously a great way for clients to justify a purchase - if we partner with Billtrust we can cut our billing expense by 20%-40%. Nothing wrong with that. However, there is something far better than a cost saving project, and that's a revenue adding project. Clients like saving money but they really love growing revenue. How can a back office function like billing grow revenue? We call it Customer Centric Billing and we think it's going to be a game changer for us.

There's been a big shift in the past 5 years with consumers and businesses requesting, and often demanding, that the vendors they deal with be more flexible with their billing and payment options. Consumers increasingly want their bills on bank sites and SmartPhones. Medium and large businesses have been increasingly use Accounts Payable portals like OB10 and Ariba to consolidate their inbound invoices. These are just a few examples of what we're seeing.

Vendors often try and deal with problems like billing in ways that benefit themselves. Symptons of Vendor Centric Billing are:

• Trying to drive customers only to your website to review/pay bills
• Encouraging paperless billing to "help the environment" when everybody knows your doing it to save cost
• Ignoring the generational shift to Mobile devices

A Customer Centric Billing organization embraces change. They listen to what their customers want and provide it because they know over the long term happy customers tend to stick around longer and are more profitable.

Below is a picture of a billboard that I just love. It's a great example of Customer Centric Billing. Cure Auto Insurance is advertising not based on price, not based on great coverage, not based on your driving record. They're advertising that you should use their product because you can Pay By Text. That's it. They've clearly done some research and come to the conclusion that customer demand is high enough for Pay By Text that they don't have to mention anything else. Very cool.

In the B2B billing world, the need to be Customer Centric is even greater. Some businesses are now refusing to do business with vendors if they can't provide billing data in their specific format. Most businesses can't so they're rekeying invoices into their customer's web sites. I was with a client last week who was spending close to 2,000 hours a month rekeying invoices. It was either that, or not get the business.

Vendors that embrace these "Customer Demands" will win in the long run. You can either practice Customer Centric Billing or put your customers at risk.  It's your choice.

Why We Do What We Do

The most rewarding thing for me about business is when customers get real value out of our solution. We're solving real problems and we're making their lives easier.

You know what's even better?  When our customer's customers also get real value.  

This article in CFO magazine says it best - Click Here - with a great story about a Billtrust customer AND their customer.

Congrats to our Invoice Central and Marketing teams!

If I Wasn't So Busy I Could.....

This weekend I was at my Mom's and I was encouraging her to get on this new Facebook thingy so she could better stay in touch with her grandkids.  Her answer, which she has given me before, was that she was just too busy.  My Mom is retired and plays a fair amount of bridge but I think she could probably squeeze in a few minutes here and there so I probed.  We didn't really come to any conclusion, it wasn't a fear of technology, or a fear of something new.  It was mostly a prioritization thing, she wasn't interested enough to prioritize it over anything else.

Curiously enough, the NY Times had a piece on Sunday about almost this exact topic called "The 'Busy' Trap' - you can read it here.

The take away for me is that "Being Busy" is a state of mind.  I work with some people that are so incredibly busy that they can't get basic things done.  While others seem to get a ton of things done and always willing to take on another challenge.

I like to consider myself a pretty organized guy, I don't stress too much, I work hard but not excessive number of hours.  So as the CEO of a company, how do I have time for coaching our kids, playing basketball and softball, reading magazines/books, and the occasional Facebook post.  The answer is really pretty simple, you just do it.  Figure it out.  You prioritize things you want to do over other things.  It simply comes down to choice.  Do you choose to watch that reality TV show or do something else?  Do you choose to wake up early and exercise or sleep in ? (I choose sleep in)

So the takeawy for my Mom is - it's not that she doesn't have time for Facebook, it's simply she chooses to prioritize other things over it.  

P.S. - Hi Mom, tell TK I miss him.

The Mystery of Patents

A patent used to be something to be proud of.  You work hard, invent something creative and new, and protect your invention with a patent so nobody could rip off your design.  Thomas Edison had over 2,000 patents granted to him to protect his inventions.  

We've done some amazing things at Billtrust over the last 11 years, but one of things we haven't done is try to patent anything.  I've always been a firm believer that vision and creativity are important, but execution is the name of the game.

So I was somewhat surprised to learn that on April 24th of this  year, I was awarded a patent.  Yay me! You can read about it here.  This is actually a patent that was filed for way back in 1999, when I was at Paytrust, and VCs were enamored with funding companies with I.P. ("intellectual property").  

This patent is a relatively new type of patent and it's not for an invention, but for a way of doing things - they're called Business Method Patents.  Business method patents are issued for lots of things, like one click purchase from Amazon. This certainly doesn't feel Edison worthy, but the rules are the rules. I personally think they're completely bogus but I'm starting to question my beliefs.  

One of the more repugnant types of business that are out there these days is the business of being a Patent Troll.  These companies buy Patents from others for the sole purpose of suing companies with deep pockets.  It's almost always cheaper to settle out of court so these companies make money with just the threat of a lawsuit.  They don't invent things.  They don't protect they're inventions.  They exist solely to sue others.  Gross.

Much has been written about patent reform, how we should do away with business method patents, but congress doesn't seem to want to do anything about it.  Brad Feld writes about it persuasively and often - see here.

It's gotten so ridiculous that companies now buy blocks of patents from others just so they can have something to defend themselves with in case they're sued.  AOL recently sold patents to Microsoft for $1.1 Billion dollars.  Perhaps the only smart thing AOL has done in the last 15 years.

I say it's broken.  The folks at Twitter think it's broken and have said they won't attack other companies with patents.  Just about everybody thinks the patent system is broken, except for the trolls.

Since I'm a "Fix the problem, not the blame" kind of a guy, let me propose a solution.  Let's "open source" our patents.  If enough people agree to share their patents for the sole purpose of providing defense against frivolous lawsuits, we might be on to something.  If Wikepedia can exist, this doesn't sound that hard.

I'll start. I hereby grant patent 8,165,958 to the common good.  Who else is with me?  

 

 

Great By Choice

Just finished the new Jim Collins book, Great By Choice, and it was a home run.  Collins is obviously a legendary business author so the bar was set high, and in my mind he cleared it easily.  In typical fashion, the book zeros in on a handful of companies that had great success. The difference this time was that these companies thrived in an extreme or uncertain environment.  He also does a masterful job of comparing them to some similar peer companies to try and demonstrate where the causality was, which is always tough.

Many great takeaways but I'll give you the two that really resonated with me:

Fire Bullets, and then Cannonballs - The premise here is that the best companies don't take more or less gambles than their competition, they are just more disciplined about the approach. They fire bullets at a variety of targets, and then they unleash their cannonballs on those that worked.  Think of Apple building one Apple Store in a controlled environment, getting it completely wrong, doing it again, and then launching it globally.

Return on Luck - I've always had a bit of pessimism about some business books when they write about companies that had great success without talking about luck.  Maybe they were just in the right place at the right time.  It doesn't take skill to win the lottery, just ask the Pet Rock guy.  Collins took this issue head on and actually researched how many luck events that companies had.  He statistically made the case that the number of good luck and bad luck events were about the same in peer companies, but what really was different, was what the great companies did with the luck events - or what he called return on luck.  Seems obvious in hindsight, but every once in a while a big opportunity lands in your lap, and how you capitalize on it can make all the difference.

A blog post certainly can't do this book justice.  If you're involved in business management, this book is a must read.

YACS - Invoice Central

Over the last ten years, Billtrust has been very successful in helping companies roll out what the industry calls "biller direct" electronic billing sites.  If you go directly to one of our customer's web sites, there will usually be a link to eBilling, which is powered by Billtrust.  It looks like the biller's web site, but it's managed and hosted by us.

This strategy has served us and our customers very well.  There are hundreds of thousands of businesses in North America and most need help navigating the world of eBilling.

Our success in building all of these eBilling sites has created a problem.  In one industry that we serve, wholesale distribution, we have hundreds of these "biller direct" eBilling sites.  The small businesses that go to these sites, are with increasing frequency going to multiple "biller direct" sites.  This is not an optimal experience (i.e. it sucks).  The small biz has to go to multiple sites, multiple passwords, enter payment information multiple times, etc.  It's not pretty.

Fortunately, the industry has a solution for this problem, and it's called the "consolidator" site.  A "consolidator" site is a third-party site, like a bank or portal, where a customer can sign up to receive and pay bills from multiple vendors.  Most experts agree that the "consolidator" solution is more desirable for the bill recipient than the "biller direct" solution because of simplicity and ease of use.  However, the real world doesn't always listen to experts and the market continues to be split.

The big problem with "consolidator" sites is content.  Content, in this world, are bills.  Getting lots of billers to agree on a standard to distribute bills and accept payments through third party sites has been impossible in the United States.  There's just too many competing agendas.

And it's not like people aren't trying.  CheckFree/Fiserv, FIS/Metavante,  and iPay/Jack Henry have been powering bank consolidator sites for many years.   Recent entries to the consolidator space include Manilla, Zumbox, Doxo, and Volly.  In fact, I co-founded a company called Paytrust 13 years ago to try and solve this problem for consumers.

What all of these vendors have in common, is a focus on billing to consumers, or B2C billing.  And there's been no one focused on billing to businesses, or B2B billing.  Until now.

Billtrust has been working stealthily for the last year on building the world's first Business Invoice Network and we're calling it Invoice Central.  Invoice Central is a consolidator site that is focused on the needs of businesses.  B2B billing is not as sexy as consumer billing, but it's much larger from a dollars perspective and far more complex.  The average small business receives 50 bills a month compared to a consumer who receives an average of 12.  

We're also in the enviable position of being one of the largest B2B billing service providers on the planet so we've got lots of content.  Approximately 75 billers have signed up as "charter" members and we expect many more to join.

We're not sure if we've hit the mark perfectly with the launch of Invoice Central.  But there is a big need in the B2B space and we're confident we will figure it out.

Flint

PS - In a nod to my inner geekness, YACS stands for....any guesses?

 

How fast is Too Fast?

I've been blogging for almost 4 years.  I started off strong, like most bloggers, with several posts per month. Over the last year or so, I've settled into a once or twice per month rhythm. This is my first post in over two months. Not because I don't have anything interesting to say (although that is always debatable), but because we've literally never been busier. We're so busy, that sometimes I worry we're moving too fast. Let me explain.

In September we turned ten years old and announced our first acquisition, a company called Invoice Connection. Most people understand that the hard work with acquisitions occurs after the deal closes. You've got people, products, customers, facilities, all that need attention. We had a plan and we've been executing on it. So far I'd probably give us a B+ on our efforts.  

In the fourth quarter, we've continued with our aggressive expansion efforts. We've announced new partnerships, signed dozens of new customers, and continue to grow aggressively. Just last week we moved into a new corporate headquarters (picture below, ain't she pretty?), launched a new product called Invoice Central, and biggest of all, closed on a second aquisition/merger that we will soon be announcing publicly.

All of this brings me to the title of this Blog post and something that I worry about a lot - "How fast is Too Fast?" Are we trying to do much? Are we stretching our organization too thin?

I've shared this concern with several people that I trust. Our VP of Sales/Marketing worries that we're not moving fast enough. Well he's just a sales guy (Oh snap!), what does he know? A long time friend and successful business person told me that we should always move just as fast as we can.  Well that sounds good but what does it really mean?  I spoke to a member of our Board of Directors and his quote was something to the effect "That's why you're paid to be the CEO, to figure these tough things out."

I believe there are no easy answers to the question of "How fast is Too Fast?" However, there are a lot of useful questions that we've asked to help figure it out.

• How fast is the competition growing?  (This should be the bare minimum threshold for growth if you want to be the market leader)
• How fast are the industry leaders growing in other market segments that are comparable to our business? 
• Is customer satisfaction steady or increasing?  
• Is product quality high?
• Are people getting burned out?
• Are dates being hit?
• Do you have the right team in place?
• Are your internal systems keeping up?
• What's the ultimate goal?  Slow and steady growth, life style business, IPO?

Billtrust has grown to be a very successful organization and how successful we become really comes down to balancing "How fast is too fast?"  As of now, it's full steam ahead.  We've got grand ambitions, and now is not the time to pause.

 

 

Biltrust Chapter 3 Begins

Below is an email that I recently sent out to our entire company.  Since a lot of our customers and partners read this blog, this may be interesting for you.

Billtrust recently turned ten years old.  Not only was this a big event, it also marked the beginning of the next chapter in Billtrust’s path to greatness.  Let me explain.

Chapter 1 was the beginning.  The company officially was founded in September of 2001.  There were a million things to do - create a business model, write a lot of code, land some customers, and build a core team.  We made a ton of mistakes but also made some incredibly great decisions, the best of which was to create a value system that focused on the customer.  Solving all of a customer's billing problems, framing all questions around “What would the customer want?”  We were small, our processes were ad hoc, and communication was easy, you just hollered out in the office.

Chapter 2 began in October 2006 when we raised our first, and only, round of venture capital.  Stuff that worked in chapter 1 wasn’t going to work in chapter 2.  We needed more processes, more discipline, and more automation.  We rounded out the executive team, opened new processing facilities, released new versions of our products, and started landing showcase clients like Kraft Foods. These were some great accomplishments that we are proud of.  But this chapter is now over.

Chapter 3 officially began on September 1, 2011.  Not because we turned ten, but because we closed our first of what we hope to be many acquisitions.  Our organization is growing at an astounding clip, we’re moving to shiny new offices, we’re doing acquisitions, and we’re partnering with some of the largest financial service companies in the world.  What worked in Chapter 2 is not going to work in Chapter 3.  We need to become more creative about solving problems, we need to find better ways to communicate with each other, we need to be more creative about how we drive sales, build products, and make decisions.  We need to stop making silly mistakes that aggravate customers.

This is what all great companies do.  They recognize that as they mature, their people and processes need to mature as well.  

You’ll be seeing a variety of changes over the next few months.  We’ll be doing more company meetings to try and improve communication.  We’ll be formulating our values so that new hires can understand better what makes us tick. We’ve hired a VP of Quality to focus companywide on getting things done correctly each and every time.

In each chapter of our evolution, leaders emerge to propel us to the next stage.  They’re not appointed.  It’s not predetermined.  They are people like Sunny D’Souza who has his basement destroyed by a flood but gets on a plane to California because he knows our first acquisition is critically important.  They are people like Dan Nies who exceeds his quota in the first half of the year but is still working his ass off because he feels like the previous year was subpar and he wants to make up for it.  There are dozens of stories like this.  These individual stories make up the fabric of what makes Billtrust great.

I’m not sure which leaders will emerge in Chapter 3.  What I do know is we need to improve in just about every area.  How do we get customers live faster?  How do we improve eAdoption?  How do we reduce our cost per envelope?

We need everybody focused and working hard on the mission to be successful.  But we also need the next generation of leaders to emerge to solve this new set of problems. 

I look forward to the challenges ahead not with fear, but with excitement. After all, We’re Billtrust, we can do anything.

Billtrust Chapter 3 has officially begun and we're pretty excited about it.  

Why We Bought Invoice Connection

Today we announced the acquisition of Invoice Connection (press release here), a competitor in the outsourced billing space.  Billtrust and Invoice Connection have been competitors for several years. Despite the rivalry, there has always been a mutual respect for each other.  We felt that the combination of our companies made strategic sense.  More specifically, here's some of our thinking.

1. If I were to ask you "Who are the nationwide powerhouses are in the payroll space?" you would likely say ADP or Paychex.  If I were to ask you the same question but substitute in "the billing space" you would have trouble coming up with an answer. Our vision for Billtrust is to become the nationwide powerhouse in billing solutions and acquisitions like this get us closer to our goal.
   
    
2. Billtrust is the number one provider of billing services in the wholesale distribution space. Invoice Connection was number two.  Having a large number of customers in an industry allows us even more opportunity to provide our customers with exciting new products and services.  We have an exciting new product that we’ll be announcing early next year that we think will be a big hit with our wholesale distribution customers (consider this the first initial tease of things to come).
   
   

Unfortunately, as most people know, most mergers fail (see here).  We go into this knowing we have to perform exceptionally well to make this a success.  We need to go the extra mile for all of our new customers but also continue to perform at a very high level for our existing customers.  We’re confident that we can do this.