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Latest to join the e-invoicing startups to be funded by Venture Capitalists is TBiConnect run by Simon Fox. Both OB10 and Burns e-Commerce top the VC funding tables for attracting the most cash to date. Among other funded companies include Accountis from North Wales, but they still require a significant funding round to enable an European expansion. For some reason, I do not see Accountis conquering the world similar to OB10, so their best hopes remain within the Europe, capitalising their key customer, DHL. UK companies looking for VC funding include United Data, which is yet to launch its e-invoicing solution. United Data’s Founder and I go back a long way, and I hope Mark Morahan will finally launch his much anticipated e-invoicing hub this year with a realistic business model than the last time (conquer UK before the world!).
I have known Simon Fox of TBiConnect for well over a year, and I am delighted to hear the closing of the first round of £330,000 from regional venture capital fund, South West Ventures. According to GrowthBusinessUK, TBiConnect is an online payment specialist. As far as I know, TBiConnect does not handle payments, let alone on-line payments. Their expertise lies in the exchange of Purchase-to-Payment documents between the sender and the recipient (the buyer and the supplier), and provision of procurement solutions.
TBiConnect has a similar model to Accountis, i.e. enterprise licensed based product. Both companies claim to have the ability to offer a hub based solution. Given that Accountis has been trading for more than five years, and continue to offer licensed based solutions, my advice to TBiConnect is that think strategically when deciding on the license vs. hub based model. Whilst licenses might be financially rewarding today, it may be prudent to set-up a hub now rather than later. Perhaps it is better for me to cover hub vs. licensed model in another post.
According to the story, the fund has committed its maximum initial investment of £330,000. There is also the possibility of raising a further £330,000 from the same fund after six months. South West Ventures has invested £6.9 million in 24 companies (an average of £287,500 per company) with £18.1 million left to invest. The fund is managed by YFM Group, which over the years have become a VC powerhouse operating in many regions of the UK. Doug Stellman of YFM Private Equity recently spoke at the Northern StartUp 2.0 event organised by me at KPMG Manchester.
According to Nick Simmonds, investment manager at YFM Group:
“TBiConnect has developed a proven solution to address the business need problems faced by many organisations handling thousands of financial transactions. We have been particularly impressed with the excellent management team and are delighted to back this exciting solutionâ€.
As part of the funding package, former Amstrad CEO David Rogers has become the Chairman of TBiConnect. According to David Rogers:
“TBiConnect’s customer proposition is compelling. It delivers immediate cost benefits and control to financial systems. We’ve had immediate positive reception and industry recommendations from early customers on the strength of the ease, simplicity and operational benefit they’ve experienced. Investment from the South West Ventures Fund enables TBiConnect to make a forceful entrance for a long-term future in this emerging market.â€
According to Simon Fox, CEO of TBiConnect:
“We are delighted to have secured the investment from South West Ventures Fund to support our vigorous growth plans. The business rationale for our service grows ever more powerful as corporates struggle to increase performance in every department, while maintaining stability of operations and IT.â€
Just like many other players in the market, TBiConnect is no stranger when targeting the large buyers. TBiConnect targets medium and large organisations that generate over 100,000 transactions a year.
Whilst technologies are available, no UK company has emerged to provide a compelling solution to the SME. Accountis clearly has the technology but lacks a substantial business model to take the market by storm. Version One has early stage of technology, but requires significant development, which somehow I do not see happening under the current ownership structure. If Accountis is serious about the SME, it needs to consider setting up an independent company and provide the software under license to target the SME customer. The current set-up will not work. Why? Their matrices will never allow direct targeting of smaller customers, e.g. revenue per customer will be so low for sales team to get too excited. What this means is that the market is wide open for an innovative startup to penetrate the SME sector by storm. Who will rise to this challenge is not clear. I cannot see OB10 taking a punt at this market, as it’s ambitions are more global. What about Causeway Technologies?
What a pity! A lost opportunity! Anyone interested in exploring this opportunity more closely?
First of all, let me wish readership of PaystreamVoices a happy and prosperous 2008.
The European e-invoicing market continues to remain fragmented and small but potential market size remains significantly high. Unfortunately, not much has changed since the early 2000’s except for the increasing number of vendors entering the market place, as reported by Bruno. This is obviously a positive side of a maturing market and has led to minor improvements in the overall market share. However, the optimistic predictions of analysts continued to be missed, year after year. We are still addressing the fundamental problem of replacing paper based solutions with electronic systems. We also seems to have forgotten that our key competitor is none other than paper.
Whilst much has been spoken of supply chain finance, dynamic discounting and the second p (payment) of EIPP, none of these solutions are going to achieve traction until the fundamental problems are ironed out including the significant barriers faced in implementations. This is not to say that the best-in-class companies, as regularly reported by Aberdeen Group, are not enjoying the benefits of e-invoicing. All I am highlighting is that current deployments are a drop in the ocean, when compared to the potential market size, and significant drive from vendors, consultants and governments are needed if this market segment is to be taken seriously. Lack of profits within the service providers continues to dampen the spirit of the enthusiasm.
Niche players such as OB10 has worked tirelessly to promote e-invoicing globally whilst companies such as Ariba has entered the market as part of its product diversification strategy. The scanning and OCR providers, EDI houses and accounts payable specialists all admit that EIPP is the way forward. Many of these companies I have spoken to remain convinced that EIPP is yet to arrive. I do not think they are been ignorant. If a company does not change to satisfy changing market conditions, the survival of the company will be short lived. Their stand is simply based on customer requirements, i.e. none of their customers are asking for EIPP or e-invoicing. So something is missing from the market place. I put this simply down to lack of awareness which can only be addressed by EDUCATION EDUCATION EDUCATION.
Lately, many financial organisations have taken a vested interest in purchase-to-payment or e-invoicing document exchange. Most of the global leading banks are either offering services through partners or currently in discussion with partners to offer these services. At the same time, there are commercial lending organisations such as invoice discounters and factors taking an interest in the segment. This has also created an environment where traditional vendors for the financial sector is taking a closer look at EIPP, e.g. FundTech. Forrester has claimed this is the year for consolidation. No doubt there will be one or two major transactions, but it is more likely 2009 will be the year for consolidation.
What all of above means that the e-invoicing or EIPP market should start to make progress this year. More work is needed to encourage service providers to collaborate with each other. I would like to see much more activity at Hub Alliance and other initiatives this year. The problem with Hub Alliance is that there is no budget to drive the “alliance†forward. In addition, the members’ aspirations are limited by their own personal needs, rather than offering a “alliance†for everyone interested in e-invoicing.
Whilst I remain pessimistic about the market segment, I am hoping that I will be proven wrong this year. I see 2008 not as a year of consolidation but as a year of growth.
I would also like to see more debate taking place at edocr. Please note that you need to first register with edocr before taking part in any of the discussions. Others leveraging edocr include Ariba, Crossgate Group, Accountis, Causeway Technologies, Paystream Advisors, United Data, CashTech (part of FundTech) and ebdex. Why not join the debate today and build edocr into your market communications strategy? It’s all free! Do let me know if anyone is interested in championing special interest groups on “accounts payable automation”, “e-payments”, “supply chain finance”, “banking”, “purchasing cards“, etc.
We all need to speak more about e-invoicing if we are to give this market segement a chance. And part of that is you, as readers to engage in conversation. We need to hear your successes, your horror stories of implementations, and your aspirations for the months ahead. Start engaging today, either here or at my place.
Just following up from Will’s excellent post here, I came across a story from ioma, which speaks briefly about the importance of senior management buy-in for successfull EIPP project execution. Anyone who ever ran a project knows that people are the key in terms of successful delivery. Buy-in at the highest level is vital. A real killer for any project is movement of key people, especially the project champion. Give any project, you can always find a champion. Move the champion and you will see the emotional drive disappearing - ever heard of the term “pet project”. One of the key problems with large long projects are promotions. Obviously you want to promote good people to retain their continuous loyalty, but by doing this you end up moving them away from the project, thereby loosing the Champion. How do you manage such conflicting human resource issues?
According to Michelle Ross of RS Electronics (USA), the time spent on preparation of a business case was vital to senior management buy-in and subsequent execution. The benefits she identified include:
Timely receipt of invoices by customers (increasing the ability to utilise discounts)
Elimination of “lost” invoices in the mail by customers
Notification that customer’s shipment is en route
Reduction of time spent opening incoming mail
Reduction in all associated mail costs for RS Electronics (paper, postage, clerical time, etc.)
Possibility of improving RS Electronics cash flow cycle
To me, the greater advantage of any of these technologies are three fold:
Ability to improve cash flow cycle, i.e. much improved working capital management
Ability to improve profits by reducing operating costs
Ability to bring operational efficiency and accountability - reduce wastage and increase value addition
There are lot more reasons than this why you ought to consider e-invoicing/EIPP solution. In some cases, the key driver may not be any of the above reasons, it may well be the most trivial. This again proves that what’s important to one person or an organisation may not necessarily be important to another.
Crawling through edocr library of EIPP documents, I found these three gems written by none other than Accountis. These should help any business think about developing a business case for senior management buy-in as well as recording initial objectives, giving an early opportunity for accountability.
As you can imagine, I get to know quite a number of start up and early stage EIPP (and related) vendors, both here and across the pond. At the same time, I have also attracted a number of potential investors and acquirers seeking startup and early stage EIPP vendors.
While you may think that only start up and early stage companies require funding, I am aware of mature companies who have been in discussions with investment community in order to seek funding for growth. In these cases, funding is generally needed for geographical expansion. It is much easier for mature companies to raise funding than startups or early stage companies. While this is the general acceptance, courting potential investors for 8 to 12 months without closing the deal quickly, do put a significant strain on the business.
Given that EIPP is a growth market, almost every company continues to make losses year after year. Yes, I accept the cash flows are beginning to improve for companies such as OB10. Without further funding, their aggressive growth cannot be sustainable simply through cash flow generated. So how do they satisfy their funding needs? It then becomes a question of debt to equity ratio. Bank debt usually supports for short to medium term working capital needs and not geared for high growth requirements. As one expects, these companies are significantly shy to mention their funding needs, as they believe that the need for additional capital will be badly reflected in the market place.
At the same time, the world continues to become a smaller place, due to daily improving communications, both in terms of speed of communications and level of collaborative tools being launched. This environment makes competitors to meet each other and collaborate easily than ever before. Good examples are Facebook and LinkedIn. Whilst the LinkedIn functionality is somewhat limited and their Groups do not offer any functional support, innovative companies are using these on-line environments to seek potential partners and investors in addition to new customers.
In one occasion, while I was safeguarding a confidential discussion I had with one of the mature (simple rule of thumb: been around for more than 5 yrs) vendors, the market knew more or less of their funding needs. How is this possible? Do companies or advisers working on behalf of these companies leak limited information intentionally to test the market reaction? Surely, an adviser will not leak such information without the consent of their client, if they are breach confidentiality, they would not have clients for long. Damaged credibility is very hard to repair.
I would love to see EIPP market segment flourish with more vendors coming in to the market place. While we have seen some acquisitions, the market is not yet ready for mass consolidation. Believe me, while we speak about supply chain finance and dynamic discounting, across the pond, we are still addressing the same old pain - how to automate paper based manual processes?
Disclaimer: While I used the name of OB10, none of the content is written with OB10 in mind, except the sentence in which OB10 was mentioned. Slightly varied version of this article could be found here.
Digital Vision based in Northwich, Cheshire, United Kingdom is a system integrator who specialises in accounts payable automation. Its solutions are based on Kofax’s Ascent (DICOM), a data capture product that scans invoices and other purchase-to-pay documents. Through Optical Character Recognition (OCR) and Intelligent Character Recognition (ICR), Ascent converts data from paper to electronic data which can then be automatically fed in to an accounts payable system. As you very well know, this is not a bullet-proof solution, nevertheless it has a place in the current market until EIPP becomes the norm. Digital Vision also offers workflow and content management solutions to extend their data capture capability.Digital Vision has about 70 customers, some being UK based blue chips such as Barclays, BAe Systems, BUPA, DSGi, Countrywide, HBoS, Abbey/Grupo Santander and many SMEs. Founders Dennis Wright, and Peter and Robert Goodwin have done remarkably well to have such great names as clients on their books.
BasWare has acquired the entire share capital of Digital Vision for EUR 9.2 million, to be paid in two parts. EUR 9 million is to be paid upon completion of the acquisition. The remainder to be determined by Digital Vision’s net assets on the Interim Financial Statements on 31st August 2007 and to be paid by the beginning of October 2007. This could be interpreted as few anomalies on the balance sheet that require clarification.
It’s good to hear that BasWare intends to continue to employ the current management. This is a typical announcement at acquisition stage, for specialist companies such as Digital Vision. Organisational cultures will determine the survival of the management, plus whether the key shareholders would be keen to continue to build the business having worked so hard from inception to sale.
The acquisition strengthens BasWare’s presence in the UK market, both in terms of number of staff (about 70) and market share for data capture solutions (combining the offerings of Kofax led sales and BasWare’s own data capture solutions).
According to Hannu Vaajoensuu, Chairman of BasWare
“As a result of the acquisition, BasWare gains a leading position in the UK Enterprise Purchase to Pay market, be it in terms of the number of customers, net sales or the size of the organization. Additionally, we will gain valuable expertise on data capture and management. This improves our competitiveness in especially the financing segment and among multinational, large corporations. The expertise can be utilized within the global partner agreement we recently signed with DICOM”.
If you want repeat of this story with bit more juice, please click here.
The 3rd ExPP Summit was held on 10th and 11th of September at Millenium Glocester Hotel in London. I attended both days as a guest of Bruno Koch of Billentis. Bruno, who organized the event with Johannes von Mulert of Vereon AG, is to be congratulated for hosting an excellent gathering of the European e-invoicing community.
In the evening of the 1st day, I had the opportunity to speak to both Bruno and Jahannes. Whilst Bruno brings e-invoicing domain expertise and industry connectivity, Johannes brings skills and resources necessary to organize such a large event. Together, they have delivered a superb conference packed with users and providers of e-invoicing solutions as well as other stakeholders such as banks, regularity and legislative authorities. Johannes was fascinated by web 2.0 activities in the UK and is attempting to create a buzz in the Switzerland. I introduced him to the OpenCoffee concept as an excellent way to promote technology entrepreneurship in Switzerland. I also discussed with Johannes of my ambition to hold two e-invoicing seminars in the UK, one in the North and the other in the South.
This idea was generally well received by number of UK based vendors. My thoughts are of holding an event solely focusing on the corporates, perhaps inviting 30 or so prospects with five service providers. Keep it small, but effective. I know I have the full support of Henry Ijams at Paystream Advisors.
The only criticism I can draw on ExPP Summit is that it was not meant for users of technology but for providers of technology. Whilst EDI has been around for 40 odd years and XML based products has been around for seven or so years, we have achieved very little traction in terms of penetrating the market. According to Bruno, this sits around 3%. If that is the case, the priority ought to be “education education education” and not about technology - especially not about features and functionality. Unfortunately, ExPP Summit misses the opportunity to address this vital issue. Hence my thoughts of organizing two events in the UK.
I spent significant amount of time speaking to vendors, notably Accountis, OB10, Ariba and JP Morgan Chase. Ifor Williams of Accountis made some key introductions to those who are trying to address the issue of roaming. I personally do not like this terminology, but 100% behind the desire to interconnect e-invoicing networks.
According to Bruno, there are about 250 vendors operating in the European market, and he predicts this number to increase to 400 in 2009, a 60% increase with 15% market penetration. He also believes most vendors will achieve low penetrations of under 1 million transactions a year, resulting in eventual market consolidation. This belief has resulted in Bruno offering mergers and acquisition services. As you have already read in this blog, I have also discussed acquisition opportunities with one US company recently. I hope Bruno’s prediction will come true. This will certainly increase the level of activities injecting further funding into the sector, which will fuel development of new services as well as expansion both in terms of geographical coverage as well as provision of vertical solutions.
I always consider Bruno as the real guru of e-invoicing. Over the years Bruno has gathered significant market data. I will comment on this later once I get my hands on the relevant slides.
I also had the opportunity to meet Jamie Gunn, CEO of OB10 and Anders Hellermark of Trustweaver on 12th. I will cover these separately, as well as bringing more posts on the Summit. This is really a quick note to cover the event in brief as I have not kept up with blogging recently.
Since my entry into EIPP space 3 years ago, I have collected a vast number of documents on EIPP and related subjects (one reason for edocr). Among these were white papers and analyst reports produced by Paystream Advisors, which I found very informative especially with respect to understanding the US market. Over the years, I have come to respect Henry Ijams and his fellow analysts over their deep understanding of the Electronic Invoice Presentment and Payment (EIPP) and Supply Chain Finance (SCF). So can you imagine how delighted I was when Mitch Baxter of Transcepta asked whether I would like a personal introduction to Henry Ijams?
My first encounter with Henry took place less than 2 months ago and it became very clear to both of us that it made sense for us to work together. Henry was very interested in my blogging activities and the result is what you now know as paystreamvoices. Blogging allows Paystream to move from traditional analysis environment to new territory, not so much in terms of extending the services offered or markets and industries covered, but giving interactivity to what they do best. This should result in extending the loyal readership Paystream already has. I am a great believer that every corporate marketing strategy must include blogging as a mandatory component. If your’s does not, talk to me. A great example is Sun Microsystems.
I must thank William Donavan for his superb introduction, most of which I do not deserve. Will and I correspond on regular basis these days. Blogging helped me to establish myself as someone who has an understanding of the EIPP and SCF, as well as an entrepreneur. It also resulted in establishment of number of partnerships in early days for ebdex, notably with Pegasus. Blogging breaks corporate barriers - make it easy to do business. Bloggers also need to understand the impact their work has on others, both at corporate level and individual level (will address this through a separate post either here or at my place).
I see my role here as bringing awareness of the European EIPP and SCF to Paystream readership. I think you will also find my style of writing is different from Paystream, less structured and more opinionated. I hope you can forgive me for being less professional, after all I am a blogger trying to become an analyst. In conclusion, I am delighted to be part of the Paystream blogging family.
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