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INITIATING COVERAGE is a refreshingly boring tech IPO

An investor yawning.
REUTERS/Brendan McDermid
No complaints here.
By Dave Edwards, Helen Edwards
Published Last updated This article is more than 2 years old. is a unicorn among unicorns. The company’s IPO filing shows no scandals, no excesses, no exaggerated market sizes, no made-up metrics and no founder control. In comparison to recent unicorn IPO filings such as Uber and WeWork, seems pretty unexciting—except that it appears to be a well-run, growing business. In this age when even companies with “Boring” in their name are outlandish, a good, solid, boring business makes stand out.

Founded in 2007, provides small- and medium-size businesses (SMBs) with cloud-based financial software that simplifies the process of paying bills and getting paid. The company’s software uses AI to automate data entry, integrates with major accounting platforms and connects businesses across the world to automate payments between its customers and their customers and vendors. It has raised $347 million in venture capital across eleven funding rounds, the last of which valued the company above $1 billion.

We’d like to see more IPOs from companies that have solid, boring businesses like It has a large, diversified customer base, strong value-add services, attractive customer economics, and an efficient go-to-market strategy. The company could face competitive threats from accounting software providers like Intuit and Xero or from payment companies like PayPal and Stripe but it faces limited direct competition today. Overall, we think is well positioned and is an IPO that, depending on the eventual valuation, investors should seriously consider.

Here are seven things from the company’s IPO filing we think investors should focus on:

Big market. currently focuses on the 6 million SMBs in the US which, given the company’s average revenue per customer of $1,500 per year, represents a $9 billion market opportunity. The company has so far captured only a small amount of this market with 81,000 customers and $108 million in revenue. Longer term, the company plans to expand outside of the US which increases their market opportunity to 20 million companies and $30 billion in potential revenue. Unlike WeWork, which considered its target market to include every square foot of office space in the world, we think’s representation of its potential market opportunity is rational, reasonable, and refreshing.

Value add. provides bill paying and invoicing solutions for small- and medium-size businesses, aka accounts payable and accounts receivables. The company’s service allows businesses to pay bills or to be paid electronically or through paper checks (although the business never has to touch the checks).’s service addresses a key pain point for small businesses: Paperwork is a drag and can be very time consuming. By creating an easy and automated way for small businesses to manage cash inflows and outflows, creates important efficiencies for entrepreneurs. Reviews by customers are generally positive, referencing the time savings and efficiencies the service provides.

Efficient go-to-market strategy. has two low-cost channels for attracting new customers. First, is its partnerships with 4,000 accountants, including 70 of the top 100 accounting firms in the US. The company has created features specifically for accountants to help them manage payables and receivables for many customers at the same time. Customers that join through an accountant represent 54% of the company’s customers and 45% of the company’s revenue.

The second channel is the payment network, representing the companies that are being paid by or are paying a customer. These 1.8 million companies join with no sales and marketing spend from the company and can potentially be converted to paying customers.

Three revenue streams. makes money in three ways—subscriptions, transaction fees, and interest—creating a diverse and well-balanced business.

  •’s subscriptions range from $39-$79 per user per month (with custom pricing for large customers) and the average cost per customer is about $65 per month. Subscription revenue represents about 55% of the company’s total revenue in 2019 which is down from 65% of total revenue in 2018.
  • charges customers a variety of transaction processing fees such as credit card fees, check processing fees and ACH transaction fees. Customers paid an average of $344 in transaction fees in 2019 which was up from $236 paid in 2018. Transaction fees represented 24% of total revenue in 2019 which was up slightly from 23% of total revenue in 2018.
  • also generates income from interest on the funds it holds for customers while payments are waiting to clear (for instance between the time a check is issued and it is cashed). In 2019, the company made 21% of total revenue ($22 million) in interest from the $1.5 billion in funds it held for customers.

Attractive customer economics. Despite the efficient go-to-market strategy we already described, spends twice as much to acquire a customer as it earns from that customer in the first year, leading to net losses of $7 million on $108 million in revenue in the year ending June 2019. The good news for the company, though, is that the average customer relationship turns profitable in the second year. And customers seem to stay with for several years, creating a profitable long-term relationship.

In its S-1, the company claims a customer retention rate of 82%. From that, we estimate that the average customer will stay with the company for 5.5 years. The company’s filing states that the average customer spend on subscriptions and transaction fees increases by 6%-10% per year. Assuming a customer stays for 5.5 years and spending increases each year, we estimate that average total lifetime value (total revenue minus cost to deliver the service) will be more than seven times the initial cost to acquire the customer. While this is just an estimate based on imperfect information and can’t be counted on, an undiscounted lifetime value to cost-to-acquire ratio of seven-to-one is still very attractive.

AI inside. uses AI in two ways: to automate data entry and to provide insights to customers through transaction analytics. Data entry is pretty straightforward—automatically recognizing and interpreting text to understand things like how much is owed on a bill is now standard functionality in financial software. Transaction insights, though, could provide significant value to customers and provide a good competitive barrier over time. is currently processing about 24 million transactions per year, giving it unique insights into its individual customers’ financial flows and those of the SMB market more broadly. Given the power of AI to discover insights through patterns that people can’t see, it’s hard to predict what could discover through this data. But it’s safe to say that its volume of data puts in a unique position.

Risks. has two important risks for investors to consider. The first is that the company’s most important partners—accounting software companies like Intuit, Xero, Netsuite, and Sage Intacct—are also its biggest potential rivals if these companies decide to expand and compete with We haven’t seen any evidence that this will happen but’s competitive position would suffer if one of the company’s partners became a competitor. The second risk is that the company’s revenue from interest carries creates interest-rate and foreign-exchange-rate risk. This interest-based revenue has increased from 12% of total revenue in 2018 to 21% of total revenue in 2019, increasing the company’s overall exposure to federal funds rate currency market fluctuations.

Verdict? We like’s focus on SMBs and the value add it provides, making business easier and more efficient for entrepreneurs. We also like the company’s revenue model, go-to-market strategy, and customer economics. And we are thrilled to review a unicorn IPO filing and not see any of the bad actor problems that have become normal for unicorns this year. We don’t know yet how the IPO will be priced and what the company’s valuation will be which makes it difficult to say whether we’d buy the stock at the IPO. But we think the long-term prospects of the company are positive and give investors good exposure to the ever expanding, cloud-based tech stack serving SMBs.