Enjoying the podcast? Don’t miss out on future episodes! Please hit that subscribe button on Apple, Spotify, or your favorite podcast platform to stay updated with our latest content. Thank you for your support!
Account payable automation software is one of those areas of fintech that doesn’t get as much coverage as it should. Creating an efficient accounts payable system is a pain point for pretty much every company, but particularly for those businesses occupying the middle market. This is the opportunity that our guest today seized upon when starting his company nearly 25 years ago.
My next guest on the Fintech One-on-One podcast is Michael Praeger, the CEO, Chairman and Co-Founder of AvidXchange. Mike founded his company all the way back in April 2000 and it is been through several phases in its growth to where it is today. It took them 10 years to get to $10 million in revenue but in the following decade they went from $10 million to $400 million. And then he took the company public. How he was able to do this makes for a really interesting discussion.
In this podcast you will learn:
- The catalyst that led to the founding of AvidXchange in 2000.
- How they were able to grow over 30% a year for 12 years in a row.
- What excites Mike is the business today.
- Why they decided to raise a large amount of money in 2015.
- How he describes the different components of their business.
- The huge number of accounting systems they integrate with.
- Why they focused on the middle market and have not gone after small businesses.
- The core benefit they are bringing to the table.
- How Avid Pay Direct is able to enhance a standard ACH payment.
- Why cross border payments is not a major part of their business.
- Why middle market companies are not focused on speed of the payment.
- Examples of how they are using AI in their systems today.
- How being a public company has changed AvidXchange.
- Why he decided to start his own podcast and what it is about.
Read a transcription of our conversation below.
FINTECH ONE-ON-ONE PODCAST NO. 508 – MICHAEL PRAEGER
Peter Renton: Welcome. After more than 500 episodes, I have decided to give the Fintech One-on-One Podcast a bit of a refresh. You’ll notice new music, a new intro, better sound quality, and some more subtle differences as well. And we’ll also be launching some new features soon. Of course, you still get the same quality interviews that have made this one of the most downloaded podcasts in fintech.
Michael Praeger: One of the things that I’ve learned in being in this business is that in business payments, especially when you go into the middle market, it’s all about the data and being able to have the data to reconcile the payment. The number one thing that a company in the middle market wants and needs is reconciliation data to go with the payment. So when they receive that electronic payment, they know exactly that it’s paying these three invoices in these amounts, and that data can automatically flow into my billing or my accounting system and auto-reconcile the transaction. And that’s the problem that we solve.
This is the Fintech One-on-One Podcast, the show for fintech enthusiasts looking to better understand the leaders shaping fintech and banking today. My name is Peter Renton and since 2013, I have been conducting in-depth interviews with fintech founders and banking executives. On the show today, we have Mike Praeger, the CEO, Chairman, and Co-Founder of AvidXchange.
Now, AvidXchange is not a new fintech company. They started in 2000 and Mike is one of the very few founders who has taken a company all the way through IPO and beyond. And they’ve built a sizable business focused on accounts payable automation for the middle market. Now, if you don’t know what that is, don’t worry. We delve into that in some depth. Mike provides a lot of interesting perspectives here. He talks about new payments rails, what that might mean for his business, he talks about AI and lots more. So let’s get on with the show.
Welcome to the podcast, Mike.
MP: Thanks for having me. Looking forward to being here.
PR: My pleasure. So, let’s get started by giving the listeners some background. I know you’ve been doing AvidXchange for quite some time, but why don’t you tell us a little bit about your career history?
MP: Yeah, perfect. I actually grew up in Wisconsin. I grew up in a small town called Sheboygan, Wisconsin, and left to go to Georgetown for school. Then, after my experience at Georgetown, I ended up doing venture capital in Boston with Summit Partners for over three years. That’s the catalyst that exposed me to not only entrepreneurism but also lots of different business models, especially around software. I became very interested in looking at opportunities of using technology to automate manual and paper-based processes. I actually had the opportunity after Summit to run a software company in Boston that was in the business of automating the tax billing and tax collection functions for municipalities. When we sold that business in late 1996, that was the catalyst for moving to Charlotte and searching for better weather, someplace where you could be outside year-round. It had access to a great airport and a great educational system for attracting talent. I came to Charlotte in 1997 and started another software company that was in the business of automating the hiring process for technology skillset workers in the visa process, everything that goes with the hiring process. I was able to exit that business and sell it to CareerShop, which was based in Orlando, in November of 1999. After that, the catalyst for starting Avid Exchange was when I went to dinner with a good friend of mine, a guy named Daniel Levine, who runs a large real estate company here in Charlotte. And he said, “Mike, you got time on your hands. Can you help me? I have this accounts payable problem. And, you know, I can’t find invoices when I need them. Our team has a hard time getting our suppliers and vendors paid on time. There’s probably some software out there that we could use. And can you spend some time with my CFO?” And so I said, well, I know nothing about accounts payable, but I do have some time on my hands. I went and met with the CFO, and I was like, holy cow, this is a really manual paper-based process. Long story short, that was the catalyst. I did a bunch of research and figured out there weren’t any really good solutions at the time, so I started AvidXchange to really solve Daniel Levine’s accounts payable problem in April of 2000. You know, next year will be our 25th year, but it really seems like a combination of probably four or five different companies along the way at different scale. Just to give you a sense of that scale. What we do is we’re a software company and we automate the accounts payable and the payment process for just over 8,000 middle market companies in the US. But we were a pure software company before we launched our payment network in 2012. It took us 10 years to get to 10 million in revenue. And then, in roughly the next 10 years, we went from 10 million to 400 million in revenue. And it was a phenomenal experience on average, growing over 30% a year for 12 years in a row. You know, when that happens to a company and first of all, it’s really hard to grow by 30 % in any one year, but to do it 12 consecutive years, by definition, every process that you have breaks at that level of scale every 18 months. And so to be in a business where there was a lot of chaos and to try to run a high-growth business, through that period, there were all kinds of really great lessons learned as part of that journey. Dial forward to today, we were fortunate to be able to become a public company in October of 2021. So we’re now, roughly finishing up our third year as a public company.
PR: Right. So you’ve gone through the three big crises of the last 25 years. You started in dot com just as dot com was crashing, and you had a technology company. And then you went through the financial crisis and then Covid. And you’re still here. You haven’t gone off into the sunset yet. So, you must still find it invigorating and challenging.
MP: What excites me is the overall market opportunity and really dealing with the problem set at different levels of scale. And that’s why I made the comment that it really feels like maybe four or five different companies along the way, at different levels of scale. People ask me all the time, “Mike, why do you still work as hard as you do? You made a bunch of money and why do you still have the passion?” And for me, it’s like, you know, getting up every day and working with great people, solving interesting and strategic problems is far better than playing golf. To me, it’s like going to the adult playground if I can work with people I enjoy working with who are bright and motivated, and we can feed off our energy combined with solving really challenging problems, that’s a lot of fun for me.
PR: Right. So before we get into where you are today, I want to go back, and you have a really different history as a company than most fintech companies I have on the show. You had a small-scale company that set up to $10 million in revenue over 10 years, and then you supercharged, and you never really raised much money, except when I went back and looked at 2015, when you had a really large round led by Bain Capital Ventures. What happened there? Why did you do that and why did you do it then?
MP: So we went out to raise our A round when I started the company in early 2000. I had a couple of successful exits and said, no problem, we’ll raise a $10 million A round. And we closed on our $10 million A round at a million and a half. And I put in half of that. In hindsight, that’s probably the best thing that ever happened because everybody else in our vintage who was able to get out before the dot com crash raised way too much money, and they were forced to spend it in ways that were unnatural. The market opportunities weren’t there, and they burned through an incredible amount of money. And so what happened is we built the business one customer at a time and got to what I call breakeven profitability. Our mission was to keep building the business and run the business to break even, to invest everything else back into the business to grow. And so, yeah, it took us like 10 years. We kind of grunted through, and there were a lot of, you know, dicey months and weeks where you had to close this one deal to make payroll, all those types of things in the early days. But what happened was we ended up building in the 2015 timeframe, really when we started those discussions, it was 2014, and we had roughly a $40 million software business that we built without really raising any institutional capital. We’d raised less than 10 million in capital from individual angel-type investment funds. And so when we met with the who’s who of venture capitalists who came to Charlotte to meet with us, because it’s pretty unique to build a $40 million software company without really any significant institutional capital, I really connected with Matt Harris from Bain Capital who runs the fintech practice at Bain Capital Ventures. He and I connected around the future of this business. Matt was the first one to say, “Mike, you know, you’re sitting on an opportunity to build a billion-dollar business and you don’t run across that many opportunities.” And so we did our first institutional round, which Matt led and that was a $250 million round. And then shortly thereafter in 2017, MasterCard came to us and wanted to create an exclusive strategic relationship to have us be their B2B payment partner for the middle market, and to support the partnership, they were adamant about investing $100 million. And that $100 million is a great story. A couple of other institutional investors were at MasterCard’s investor day; this was before the deal closed, and MasterCard was talking about this partnership they’re creating with us. And a handful of other MasterCard investors wanted to participate. So the $100 million turned out to be $300 million. And that followed up shortly afterward. We started investing heavily to build the infrastructure and scale to put ourselves on that trajectory of being a billion-dollar business at some point. So people asked me today, and I just wrote a book about the journey of CEO success and managing the seven practices of leadership in a high-growth business. One of the things I talk about is the importance of your talent and team at each scale of growth because you need very different skill sets. And when I think of our last 25 years, it’s probably, as I said, four or five different companies and really four or five different types of senior leadership skill sets that we needed at each stage of growth. And that’s one of the most difficult things in terms of managing. I do a lot of coaching for entrepreneurs, and people ask me, “What’s the number one piece of advice that you give?” I say the number one thing that I learned at a very young age in that first software company that I ran in Boston was the impact of hiring people better than you. And for a lot of entrepreneurs, that’s a scary thought. What does that say about me as a leader if I have to hire somebody better than I am, more skilled, and more experienced? The first thing I say is it makes you a better leader. And so, in every aspect of our business, I’ve been on a journey to hire great people who are better than me in every functional area of the business. And that’s been the leverage for building the business we’ve created.
PR: Right, right. That’s great. Fascinating. So then, let’s dig into AvidXchange today. How do you describe it, and what’s your product suite?
MP: Yeah, so we describe ourselves as a software company that automates the accounts payable and payment process for middle market companies. Simply put, it means that we eliminate the paper invoice and the paper check for our customers. What’s really interesting is that there are 435,000 middle market companies in the U.S., and the expanded definition is companies between five million in revenue and one billion. And it’s estimated 70 % of that market is still processing paper invoices and paper checks.
PR: Right.
MP: And so we go to market in nine different industry verticals, and in all nine verticals, we’re still single-digit penetration, and we’re considered a de facto industry leader. And so just massive runway of growth, you know, just in front of us in the markets that we’re at. So, our suite of products today, we have a suite of what we call Invoice Accounts Payable Automation Software Tools that manage from the time a supplier or vendor invoice comes in through the entire approval, coding, allocation, assigning general ledger codes, all that kind of stuff around expense management. Then, it becomes a fully approved invoice. It automatically then gets integrated directly into the accounting ERP system. And one of the things that really makes the middle market unique is of those 435,000 companies, 50 % of them highly align themselves to an industry vertical that has a unique business process or accounting system process that requires an industry-specific accounting system. We’re integrated into over 240 different accounting systems.
PR: Wow.
MP: Or ERP systems. There’s a long list of additional ones that our team wants to integrate with over time. But that makes the moat around what we are doing really significant, and it makes it really hard for other people to try to get into our market because there’s so much work you have to do not only from a product feature perspective but also from an integration perspective. The other big product offering that we have is our payment network. So once that invoice is in the accounting system, when the customer goes and creates a payment file of invoices that they want to pay, rather than that file going to a laser printer and checks being printed, that file comes back to our platform, and we decision how every one of those payments gets paid to each supplier based on how that supplier’s payment preferences are set up in our system. Today, we go to market on the supplier side with 25 different payment modalities, and we define a payment modality as four elements: the speed of the payment, the cost of the payment, the level of remittance data for reconciliation, and the level of automation. So we package those, and today we have 25 of those, 24 of which are electronic. And the 25th is a good old-fashioned paper check. If that’s what people still require. But obviously, we do everything we can not to offer the 25th. The third element of our business is what we call supplier financing. It’s an element of our payment network for if you have a supplier, and let’s say an average invoice has net 30 payment terms. So there’s an invoice out and they expect to get paid in 30 days. Well, a supplier in our payment network can send that invoice out and say, “Hey, rather than waiting 30 days to get paid, I need to get paid tomorrow.” And they can raise their hand, and we’ll advance that invoice for next-day payment. And we manage the credit risk of that invoice. But we have really unique information because we have both parties on our network and we have visibility into all the historical transactions between those two parties.
PR: Right, that’s super interesting. That’s a great place to play because it can be a fairly high-margin business. Okay, so one question. Have you never been tempted to go down market? Like you said, there are 435,000 mid-market companies, and there are millions, tens of millions, potentially small companies in this country. You’re a public company, and it’s a massive potential growth area. Why not?
MP: It’s a great question. When I think of the overall market, I think of it in three segments. You have the small business market, the middle market we’re in, and the enterprise market. And so one of the things that differentiates us, one of the things that we’re really good at is solving business process issues related to this business process. And we found that when you get down to the small business market, they don’t have a lot of processes around how they manage an invoice and pay their bill. It’s usually the owner or the entrepreneur doing the accounting at night, paying the bills over the weekend. The same person is receiving an invoice and then paying a bill, right? And it’s almost an extension of a consumer experience.
PR: Right.
MP: The software for managing a business process is very different. And it’s almost like a consumer experience versus the middle market. Our companies have built out finance teams, accounting teams, and accounts payable teams, and rather than managing 20 bills a month as a small business, ours are managing hundreds and thousands of monthly payments. And it’s a very different business process that they’re trying to support. Our average transaction goes through seven different levels of approval before it gets paid. As an example, our average customer has 2.2 accounting systems. There are multiple accounting systems across many different bank accounts. And so it’s just a different level of complexity. And then it’s also supported by all these hundreds of individual industry-specific accounting systems. In the small business market, basically, it’s QuickBooks, right? And then you contrast that with the enterprise market where, again, you have really big, sophisticated companies which many times were on the leading edge of automating this process many years ago, and they have it highly integrated into either SAP, Oracle, maybe some Workday and a very small set of accounting ERP systems that support that enterprise market. And they have very sophisticated requirements; many relate to procurement and managing the purchase order process even before it becomes an invoice. And so I would say that for people in these three markets, managing three very different types of problems, obviously we’re in the middle. And what we believe is that over time, actually, we’ve kind of grown up market as we continue to add more features and functionality to our platform rather than going down market. We have more value to a customer because we’re solving a bigger problem for them.
PR: So when you’re going in and someone’s signing up with AvidXchange for the first time, are they typically replacing something, or what is the problem they’re looking to solve? Because they obviously have technology, they’ve got a billing system inside their accounting system. So what do you bring that they can’t get elsewhere?
MP: Yeah, so great question, because you hit the nail on the head. Every one of our 240 different accounting systems that we’re integrated into has an accounts payable module, right?
PR: Right.
MP: But what we find is that that module really supports a paper-based process. Somebody’s receiving a paper invoice, and they are entering that information into their accounting system. Most of these companies, when they pay their bills using the accounting system, print paper checks. And so what we do is we’re the front end of that process where everything comes in digitally, electronically for our customers. No one ever enters an invoice into an accounting system ever again. When it gets managed electronically, and that approval happens, the data automatically moves into the accounting system without any data entry. And then, when they choose what bills to pay, rather than printing paper checks, signing checks, and stuffing envelopes, it comes back to our network. We decision how every supplier gets paid and execute those payments, and then update their system on the settlement information, how every transaction got paid. And so it’s an automated process. It requires no data entry, no handling of paper, no printing of checks. And that’s the business problem that we solve.
PR: Interesting. So then you’ve really got good window into payments trends, right? You mentioned the check, and obviously, there are still some people, for whatever reason, who want to receive a check. I’m curious about the rest. You know, there’s Instant Payments with FedNow and The Clearing House. What do you see when you look at the trends in spend management and invoice payments? Are these faster rails in demand?
MP: Yeah. So that’s a great question. And so one of the things that I’ve learned in being in this business is that in business payments, especially when you go into the middle market, it’s all about the data and being able to have the data to reconcile the payment. I’ll take AvidXchange as a great example of this. Our accounting department hates it when a customer pays us with just an ACH because an average customer probably has four or five different invoices outstanding at any point in time. And we receive a payment, we’re like, what invoices are they paying? Are they paying two invoices? Are they paying four invoices? You know, and then guess what happens? It’s a manual exception. And then, in order to resolve it, we have to have somebody on our accounting team call the customer and then play probably phone tag to get to the right person, and say, “Can you help us out? We got this ACH payment. What invoices were you paying?” And then now, that transaction is super expensive for us because of all the time and labor it took. You can imagine if you have to replicate that thousands of times, right? It gets really cumbersome. And so the number one thing that a company in the middle market wants and needs is the reconciliation data to go with the payments. So when they receive that electronic payment, they know exactly that it’s paying these three invoices in these amounts. And that data can automatically flow into my billing or my accounting system and auto-reconcile the transaction. And that’s the problem that we solve. So for the supplier, when we look at the value proposition, we take a significant amount of that kind of data entry and that manual reconciliation off and provide the data along with the payment. And what we find is that’s what people will pay for. And that’s why the actual data is actually more important than the cost of the payment. Having said that, you hit on a good thing about new payment types, the FedNow, the RTP-type payments, and how that affects us. What I would say is, generally speaking, in the middle market, the timing of a payment is less relevant because people operate in a batch process. Joe Wilhite, my CFO, is not checking the AvidXchange bank account every day to see, in the morning we got these payments in and in the afternoon, we got these payments in. We operate on an overnight process to know what happened the day before type of thing, right? In a small business, there’s probably more sensitivity to whether I made a payment. Because I have either another supplier payment I have to make or I have payroll I have to fund and I have to make sure I have enough money to fund this Friday. You know, it’s those types of decisions. So what we do is we lean into, and we make those types of payment opportunities available on our network. So, if a supplier needs an immediate payment, they have access to an immediate payment, and there’s a fee related to it.
PR: Right. ACH is still, I imagine, a huge part of what you’re processing, right?
MP: When we think of our different payment methods, we lean into what we call Avid Pay Direct, which we settle through ACH. And what we do, Peter, is we take that standard ACH settlement process, but we wrap it with that data for them, so they get the data with the ACH. There’s a fee structure related to receiving that payment with the data. We do the same thing with different forms of what we call a virtual card, which is a virtual credit card, which is one of the fastest ways of getting paid because the supplier can take the 16 digits that we give them and automatically run it right through their merchant terminal and have the funds immediately. And so, depending on the supplier’s needs and where they’ve automated their business process, that typically dictates which one of the 25 different payment modalities we offer is the best for them.
PR: And are these payment modalities going across borders as well? mean, I imagine lots of your middle market companies are demanding global payments, right? For multiple different countries. Once you start to go cross border, things get more expensive; every country has its own payments network. What do you do there?
MP: Yeah. So, so great question. We do support what we call cross-border payments. However, when you look at the nine different industry verticals we’re in, they’re not verticals that lend themselves to high volumes of international payments. We’re in the real estate vertical, and it’s very geographically localized. It is the same with healthcare facilities, long-term care centers, and things of that nature. So I would say that today, typically, cross borders running is less than 5 % of our overall payment volume. But certainly, as we continue to add new industry verticals, like we recently added hospitality as a new vertical, and they are obviously supporting hotel management companies on a global basis, we’ll see more international-type payment flows.
PR: Gotcha. Of the new payment methods cropping up – blockchain-based payments rails, pay-by-bank, and other things like that – is there anything interesting there that you see has real potential to displace some of the traditional payment methods?
MP: I don’t see things displacing. They’re evolving. And what is the most critical thing, again, for a middle market company, rather than the speed and the form of the payment, the most important thing typically is the remittance data that goes with it. So they know what to do with the payment once they get it. And when you’re in an environment where you’re processing thousands of payments daily, having the data to know exactly how to apply a payment is super important. Otherwise, you end up with stacks of exceptions which then it takes human beings to resolve. So we’re leaning into that intersection of how you combine a payment with all the required data in the most automated way possible. So it’s as close to a non-human touch transaction for the person receiving it.
PR: Right.
MP: That’s what we’re leaning into. I think of ourselves as consumers of these different payment types. And what we do then is what we do best: wrap all the remittance data around whatever payment types those are and deliver it through our integrations directly into ERP billing systems in a very automated way. And so that’s the value. We’re really indifferent to the payment types. We’ll take those payment types and wrap our data around it. We use it to integrate into our suppliers’ billing and collection systems. That’s where we see that we provide the most value.
PR: Right, right. So we’re almost 30 minutes into this interview. We have yet to mention AI, so I do want to touch on it. How are you using AI in your software today?
MP: Yeah, so it’s a great question. It’s interesting because it seems like, you know, two years ago, everyone woke up to AI. They started getting ChatGPT on their phones. And we’re like, holy cow, we’ve been doing this for a while. But we started heavily leaning into it with RPA technology and RPA bots. And now we have upgraded those and replaced most of our RPA technology with AI agents. And so today, there are about 12 different use cases across our business, which we’ve leaned into AI. About half are client-facing, and the other half are more AvidXchange internal efficiency. But to give you an example of a few of them, is one is on the upfront process of receiving an invoice. One of the things that’s challenging about an invoice is they’re non-standard documents. Every accounting system and every supplier has a slightly different form of a document. And so being able to read those at scale is challenging. And so, we’ve invested heavily in terms of OCR-type functionality, machine learning, and now, most recently, AI in order to read those invoices accurately so a human being doesn’t have to enter the data. A paper invoice that’s coming in can be automated right into our system. So that’s certainly one big aspect on the front end of how to get all the data into our system so our software can manage it. And then, another kind of fun one is that we have certain groups of typically large enterprise suppliers, utilities are a good example of this, where they’ll say, “Okay, I’ll take an electronic payment, but you have to call it into our IVR system or log it into our portal.” And so back when we started, you know, many moons ago, we used to have human beings in a large building here in Charlotte calling into supplier or utility IVR systems, or making those payments directly into their portals. We automated those with RPA bots. And now we’ve automated them with AI agents. It’s really interesting to see that trend line of efficiency. There are those types of examples throughout our business. And we’ve really seen it, and how it shows up in the business. And to me, the easiest way to measure it is through gross margin expansion. And at the time of our IPO, our gross margin was about 62%. And today, it’s over 72%. So we’ve seen it grow by ten percentage points, and a good chunk of that growth has been through the efficiencies created by AI.
PR: Right, right. I want to touch on the fact that you’re now a public company. So, you went public in the fall of 2021.
MP: October of 2021.
PR: October of 2021. So it’s three years then you’re coming up on. I’m curious about how that has changed your company. You’ve had this company from idea all the way through to IPO. There’s not many people who do that. I’m curious about, other than the obvious quarterly cadence you have to adhere to based on SEC requirements, how has it changed your company?
MP: So, you know, that’s a really good question because, you know, I get asked that a lot by aspiring entrepreneurs who want to be a public one day. And what I would say is there are two elements. One is the benefit of being a public company. The other one is, you know, maybe the downside of being a public company. The benefit is that it’s made us a better company. The rigor of quarterly reporting processes, our accountability for our results to public company investors, all those types of things. And that rigor has made us a better business. And so that’s one aspect of it. The second aspect of it has certainly been value added in terms of attracting all the talent that we need to run our business and having a liquid security is certainly an advantage over perhaps being a private company. So what’s the downsides? It’s probably incrementally, it’s a little bit more expensive to be a public company because you need lots of SEC reporting, legal, additional audit, internal audit, all those elements to safeguard investors, which you pay for. But what I would say is the other thing, which I think is potentially kind of the biggest negative, is if you let being a public company dictate and drive your strategy and the work you’re doing with customers. That’s where it’s hard. We do our best to say we don’t let the pressure of quarterly results, for example, impact our long-term strategies. We’re approaching half a billion in revenue, and we said from the beginning we see ourselves as a billion-dollar revenue business in five plus years, and we’re not going to let the pressure of short-term quarterly results get in the way of making the best decisions for the business, making the right investments in our innovation for new products, all those types of things. And I think if you develop that mentality and stick to it, you’re okay. But once you start letting the pressure of the quarter, the results change the strategies of what you’re investing in, things like that, then I think it becomes a lot tougher.
PR: Right. Gotcha. Okay, so I want to close with a little bit of a lighter note here. Listeners will notice that your sound quality is excellent, which I appreciate. And, I imagine, it’s because you actually have your own podcast. So let’s just talk about that. I’ll link to it in the show notes, but talk about why you decided to start a podcast, why you hosted it yourself, and also what it’s about.
MP: It’s called The Power of Change and what we try to do, and this goes back to one of your questions about competition or when a customer becomes a new customer, what do they replace, and the answer is about 95 % of our customers are doing this for the first time when they join and adopt our solutions. So when they displace 5 % of other solutions, 95 % are doing the automated business process for the first time. So, our number one competitor is a status quo, paper-based process. One CFO was like, “Well, I’ve been doing it this way for 30 years. Maybe it’s not as efficient as it could be, but it works. You know, I get my suppliers paid.” But what we find is that there’s lots of opportunity to make that process more efficient, especially when you get a digital native professional who comes in to ask, why are we doing it this way? Why do I have a thousand checks every Tuesday and Thursday to sign when I don’t sign any checks in my personal life? And they start questioning the status quo process. So the whole purpose of The Power of Change is to create a podcast and bring in examples of customers of ours, other people from the industry that have navigated this business process change or technology change for their business, and get their real-life experiences of how they did it. What barriers did that overcome? How did they sell it internally regarding how they manage their change management to improve their companies, especially around some legacy paper-based processes? And so that’s the catalyst for it. I’ve had the opportunity now to interview lots of our CEOs of customers, CFOs of customers, and to get their real-life experiences about how this changed their business, and how this actually changed their lives. I just had one of our customers, Sara Grafals, who’s the SVP of Finance for Speedway Motorsports, and she manages a lot of the Speedway NASCAR tracks around the country. And she’s like, “Mike, I’m on the road all the time, going from racetrack to racetrack, managing our finance operations and to be able to manage it remotely and manage our supplier payments, make our payments in a cloud-based environment, I don’t have to be stuck in the office, and I can be on the field with my local teams at all the different racetracks that we own, is game-changing for the leadership of our company.” And so when you hear stories like that, you understand the power of what we’re trying to do. And I use the voice of Sara to try to evangelize that to all the other people and CFOs out there who are still managing paper-based processes.
PR: Mike, we’ll have to leave it there. I really appreciate you coming on the show today. What an achievement to take the company all the way from the start to becoming, in the future, a billion-dollar company. That’s impressive. So thanks for coming on, and best of luck to you.
MP: Thank you, Peter. I appreciate it and am happy to chat anytime.
PR: That last point that Mike made really struck me as so poignant for fintech companies, fighting the status quo. While there’s always been a minority who are early adopters, the vast majority of people like the status quo. This is why I think what AvidXchange has done is so impressive. They have created a new way for companies to manage their accounts payable that replaces an existing system that is currently working. They have basically been able to break that cycle of staying with the status quo. So, it has to be so much better than the status quo to get their customers’ buy-in. Anyway, that’s it for today’s show. If you enjoy these episodes, please go ahead and leave a review on the podcast platform of your choice. And thanks so much for listening. Bye.