Today marks the announcement of our investment in Bill.com, a provider of integrated bill payment, invoicing and cash flow management solutions for small businesses. There are certain characteristics we look for in an investment and Bill.com proved to be a perfect fit for ScaleVP. Here is what gets me excited about this deal:
1) The need for the product
I was CEO of a start-up. The job I hated most was the job I had to do the most, especially when times were tough, juggling cash to stay alive. I would sit there at night, trying to figure out when cash would come in and what bills I could afford to pay. “If those guys pay me Friday, I can cover wages and three vendor invoices, if they push until Tuesday, I can only cover wages and one vendor. What should I do?” I would work with my CFO, write notes, make contingency plans, and then have it all upset when I had to pay an unexpected bill at the last minute.
Every startup CEO or CFO knows this dance and knows what a vital but broken process it is. Vital because while businesses are ultimately scored based on Profit and Loss, they survive every day based on Cash Flow. Broken because random spreadsheets plus sticky notes to the CFO are a band-aid, not a solution.
You might think that an accounting package or even a budgeting package solves this problem. If you have tried either solution, this is where you laugh derisively. Juggling near in cash falls squarely in the gap between accounting – which shows you what has happened, and budgeting, which shows you what should happen over the next year if everything goes according to plan. Neither product can help you figure out what bills are approved, whom to pay next week and what to do if the customer only pays half of what they promised.
2) The Bill.com solution
Bill.com solves this problem. The service allows a small business CEO, or finance team, to plan out when bills are paid, set up the approval process and then make payments as cash is received. For larger companies the service can set up internal approval mechanisms, so that individual managers, who would never get access to the accounting system, can approve vendor payments based on having verified the work done. Using the Internet, companies can collaborate with suppliers and customers to more quickly sort out queries on bills, with the result of getting paid quickly. Once a company tries the product, it will never go back to paper.
We love to invest in companies that simplify complex broken business processes. We especially love to solve problems that every business faces because that is how to build a big enterprise software company. Box made file sharing simple, Docusign eliminated the need to ever fax a signature again, and now we believe Bill.com will eliminate the need for CEO’s to stay up at night and write multiple “what if” plans to keep vendors from shutting them off.
3) The team
We like the team. CEO, Rene Lacerte, lives this stuff. A successful serial entrepreneur with a family background in the financial software business, he has lived the reality of the problem he is solving. When you talk to him about the product, it is not a theoretical discussion but a practical one about how to make the life of the CEO or CFO better. Around him he has assembled an experienced team of executives, some from his prior company Paycycle and some from other great SaaS companies like Salesforce.
4) The Timing
Now is the time for Bill.com. It is stunning that ten plus years after consumers got online banking and Fortune 1000 companies got multi-million dollar treasury management systems, most small businesses are still doing this by hand or by building a spreadsheet off the accounting system to track cash. The reason is part technology and part distribution. It is really expensive to reach small businesses at scale (pun in part intended) but we have been fortunate to have in our portfolio companies like Ring Central and Hubspot who have solved this and successfully reached thousands and thousands of SMB customers. We think we know how to make this happen and the timing for Bill.com feels right. Partnerships are key and the company is seeing strong interest from financial institutions (Bank of America, Fifth Third and American Express all invested in this round), software companies and accounting firms to distribute the product.
5) The Upside
Bill.com is really focused today on the small and medium sized customer but we would not be surprised to see them grow upmarket over time. We have seen over and over again that the “adoption cycle” for great SaaS products starts with small businesses using the product and enterprises sticking with prior solutions, but that over time, the elegance and simplicity of the new solutions results in adoption moving upmarket. In fact, we are seeing this so frequently, that is the theme of our next Scaling Dinner, taking place this week and featuring Lesley Young of Box and Zack Urlocker formerly of MySQL and Zendesk.
Salesforce has been the biggest beneficiary of this, and is now signing single deals in the multi millions. Many of our portfolio companies have seen the same upward tug and we would not be surprised if Bill.com was to see it too. The focus would probably be less on cash juggling and more on workflow and authorizations but the core engine is the same.
We are delighted to be investors in Bill.com and we look forward to a world where Bill.com ensures no CEO or CFO spends their evenings juggling cash projections on a sticky note or a jury-rigged spreadsheet, leaving more time for the important stuff…new products, new customers or even more time with the family.
