DB: Welcome to Document Boss, Sid. Perhaps we could start with some background on yourself?
SV: I have been self-employed since 1975 and have always been in the document processing business from the early days of microfilm - the roots of my first business, and then from 1986 onwards, providing document scanning services to deliver more business process led value for our customers.
DB: Were you always interested in technology?
SV: Looking back to the early days of microfilm, I found the computer assisted, fast searching, of blipped microfilmed documents a very positive development. When we went deeper into the document process requirements of organisations and started looking at what was really happening, the only thing I found was that the application of technology needed to change people’s behaviours and outcomes. Going back to my early years at Xerox, with fax technology, document scanning was a logical extension from microfilm as an analogue medium to a more dynamic digital process. My vision was to run at a faster pace than the technology available at the time could provide. Despite this, we always successfully applied technology intelligently for the benefit of our customers and suppliers. I was impatient, and still am, for technology to catch up with what is actually needed in the market.
It is truly wonderful today that you have a lot of youngsters in the FinTech sector who know nothing about the traditional ways of thinking and who simply think about business outcomes; this has been a tremendous boost and shake up across all markets, in addition to the technological, disruptive elements which are driving organisations forward to achieve more positive outcomes.
DB: Looking back on your early career, were your strengths led by sales & marketing, technology or business driven, entrepreneurial characteristics?
SV: I would like to think it was a little bit of each. I have always been a sales person and have always wanted to do the right thing by the customer, but this does not mean you always have to accept the status quo. In the early days of selling copier & printing solutions, I always used to think that there must be a next step in the technology. That was always the key driver for me. Just because you have always done things in a certain way it doesn’t mean it is the right way for today. If you take accounts payable for example, this has been around since time immemorial. People are still processing and scanning invoices today, which makes no sense.
DB: What prompted you to start Invapay and what was the big opportunity you saw in the market that perhaps was not being addressed?
SV: The business at HMSL was very successful in a very niche area - optimising and taking cost out of accounts payable, using digital technology intelligently to drive behavioural change. We provided greater efficiency, cost savings, compliance, control and all such elements. However, it always seemed to me that the missing link we had in our whole process chain was the payments piece.
We could take an invoice received in the post or via email, upload this into an ERP system and do a three way match to make it ready for payment in just 4.25hrs. However, despite this process, the payment time seemed to lag considerably. The opportunity to pay a supplier earlier and improve relationships between buyer and seller, make it frictionless and maximise and optimise the working capital - This was the missing link. For scanning bureaus, what we were all missing was the payments piece. My thought process, as a private individual or business owner, is when I am long in cash, I use cash and when short on cash I use third party credit. It became clear that you could start utilising credit tools intelligently for the benefit of the buying organisation, from a capital optimisation standpoint, to extend their DPO (Days Payable Outstanding) to the supplier who could, in turn, be paid significantly faster. Firstly, this would have an amazing effect for the supplier to better service the buyer. Secondly, this created a much better economy, reduced pricing and/or discount options and the ability to generate enough capital to develop new products & services.
At HMSL, we provided a very methodical, three way process for matching a purchase order with an approved delivery receipt and preparing an invoice for payment. However, we saw that the exception processing we were doing was all about the long term ad hoc “tail end” or “maverick” spend. From a corporate perspective, in many cases, losses of £70-£80M resulted where invoices were coded to the wrong account, VAT was not accounted for or such invoices were pushed into a miscellaneous bucket to be feathered across the enterprise in order to lose the cost. With VAT at 17.5% at the time (and even greater now), if you were unable to reclaim the VAT, revenue leakage was just phenomenal. It seemed clear to me that you could use technology intelligently to work out how to pay people quicker by managing and automating the entire process to minimise such “tail end” spend.
DB: What are the major market drivers creating a need for your solutions over the past 2-3 years?
SV: It seemed illogical to me to simply digitise the status quo. Banks and service providers do that and they think that by digitising invoices they are creating efficiency. We spoke to CFO’s of major organisations and it appeared that their view was that accounts payable was a transactional, non-value added function. It was a recognised cost to the business that actually did not deliver what they considered to be any true value. In the old days, it was the “padlock on the cheque book” but the reality was, as businesses evolved and grew much bigger, they found accounts payable was inhibiting some of the technological changes that were emerging. Further, many of these CFO’s felt the banks didn’t really understand them; they offered credit products but the problem lay in the utilisation of such credit products.
One of the biggest push backs has been the full utilisation of supply chain finance. This was designed specifically to provide liquidity to suppliers - leveraging the buyer’s balance sheet and for the supplier, driving liquidity. However, the on-boarding process to supply chain finance has become so long-winded and so expensive for the banks that they only appeared to be targeting the larger top end suppliers. In many cases, such larger supplier organisations don’t need supply chain finance. It is the middle tier and SME’s where liquidity products are more greatly needed. This has created a huge opportunity.
So, via our platform creation process, irrespective of the size of the supplier, we are able to provide a frictionless process that drives greater liquidity that is of benefit to both suppliers and buyers. This provides a balanced outcome for both ends of the value chain. In addition, the third leg of the stool is that the bank benefits from much better utilisation of its credit products. This enables the buyer not to change their behaviour on how they process their transactions and we let the ERP be the system of record. The supplier also does not need to change their behaviour, whether continuing to send a paper or scanned invoice or a PDF by email.
Let’s not interfere with the dynamics of the relationship between buyer and supplier. Let’s allow them to carry on business as usual. What we can do is to take the net outcome of the process (ie an approved invoice) and drive payment acceleration in a frictionless manner. This was the whole mantra of what we have been able to achieve. For the banks this means maximum credit utilisation. For the buyer, the ability to access all the credit that is available and earn any rebates. For the supplier, they receive payment within 3 days of invoice approval. This is what we are now delivering across the globe
DB: What core products and services does Invapay offer, and what do you consider is your unique value proposition?
SV: What we offer is a platform that delivers Buyer side working capital optimisation, provides 100% supplier acceptance and accelerated payments, along with self-billing and long term management. Self-billing is really very interesting as a true process optimisation capability.
Our value proposition is to enhance the working capital optimisation by driving better utilisation of the credit lines available. The rebates that this generates actually fund change. There is no risk or cost of change to the buyer. So, we move from credit utilisation, maximising the DPO with access to rebates, to create the funding to go to the next stage of self-billing for PO invoices, utilising the three-way match process, mentioned earlier, that pays the supplier automatically. Buyers are still coming to us and asking how we can manage the Long Tail of Spend and we have now enhanced our platform with this capability. This is called InvaBuy, which has been designed specifically to manage the Long Tail challenge
DB: How does your technology work?
SV: This is all provided via a trusted third party, cloud hosted, platform. We use two clouds operating in a failover environment which enables a 24x7 global service. This gives us agility, allowing us to enter new markets very quickly. It also enables us to have data jurisdiction firewalls throughout our whole platform. We could not have delivered what we have developed without a cloud environment. This is an extension of my original vision when we developed our own “WebFlo accounts Payable Workflow” hosted service at HMSL, many years ago. It is now possible to use the cloud in a much more dynamic way.
DB: How much of this is your own IP?
SV: It’s all our own IP. In the early days, we tried using various components, bridging them all together only to find that we had to rely on the third party’s ability, agility and desire to change when we needed it. Everything we do is electronic – invoice and order generation, self-billing, payment processing, etc. However, buyers are coming to us and saying, “You are doing all this stuff for us but we have a bunch of invoices; can you scan them for us?” We have built an addition to the platform that allows that to happen. Either the client uploads the scanned invoice to us or we partner, where necessary, with a third-party scanning service provider. However, we want the cloud to be the delivery mechanism for the complete end-to-end process.
We have three routes into our platform. One is an API, the second, using a secure FTP where the buyer pushes to us the EFT payments file they would normally send to the bank, and the third way is via a portal.
DB: Although it appears your solutions cut across both commercial and public sectors, which specific markets have you had the most success in and why?
SV: We originally thought we could segment by vertical but we quickly realised all verticals had exactly the same problem. We have, for example, a large client in the public sector for the process of payments for the government of Dubai, using a Citibank credit product via our platform. We are working with a construction business in Australia, technology businesses in Singapore, manufacturing businesses in India and with two of the largest government departments by spend in the UK, as well as with one of the biggest pub groups with 850 pubs using our Long Tail platform. The reality is that this is a truly horizontal application.
DB: How do you differentiate your offering versus your competitors?
SV: When I look at all the purchase to payment or order-to-cash hubs that are emerging, they all seem to be still digitising the status quo. We have found our own market niche. Our routes to that market are very unique. We actually partner with cash management banks to deliver our solutions to the CFO. We are not selling to procurement. We are not selling to accounts payable. We are actually going to and through the partner banks across the world to reach the CFO and treasury because the conversations we are having are outcome based, working capital, conversations. When a buyer organisation, using our platform, can immediately switch on $200M worth of credit and get 100% utilisation of that credit in the first month, this has a significant effect on the balance sheet of that particular organisation.
DB: Can you quantify the ROI in any way?
SV: There are, of course, metrics with regard to processing costs and the value of the cash flow. What the buyer is seeking is more spend control, improved visibility and a reduction in the time of the traditional approval process, all of which our platform provides. We have clients who are making payments 80% faster than they have done in the past.
DB: How many customers do you have?
SV: We have 12 but they are all significant in size and brand. They are large multi-nationals as well as central government departments and we are working with them and their suppliers at the “Buyer” level. The suppliers include many smaller mid-size organisations and SME’s. So, effectively we have two types of customer – the large buyers and the broader supplier community. If we can enable the suppliers to get paid faster, that is a huge benefit to them and enables them to significantly reduce the cost of their capital.
We are working with the major card schemes like Visa, American Express, MasterCard and Diners as well such banks as ANZ , NAB,Westpac, Citibank, HSBC, Barclays, RBS, Lloyds, etc. These are the credit providers. We don’t take any credit risk. It is our role to facilitate full utility of credit for both the credit provider and the buyer.
DB: Which geographies are you active in?
SV: We have wholly owned subsidiaries in the UK, USA, UAE, Australia, Singapore and we are currently opening additional offices in NZ and India. We have a core staff of 12 people but will soon be 20. However, given the nature of our technology and our worldwide, hosted service, we do not require a huge staff to deliver our platform.
DB: How do you charge for your platform?
SV: We charge on a percentage of the gross transaction value
DB: How do you handle cross-border and multi-currency transaction processes?
SV: We are just building a foreign exchange component into the platform but, at present, we are using our banking partner’s foreign exchange and cross border capability but we also work with a partner who manages all the cross border transactions for us. Our current process is clearly defined for this and works extremely well and we are locked into our banking network for all our banking partners.
DB: How are you affected by government regulation in the banking sector?
SV: We are business that is regulated by the UK Financial Conduct Authority. We are also an authorised payments institution, governed by all the regulations affecting the banking and supplier community and need to be compliant with areas such as KYC and anti-money laundering, etc. Banks, although now highly regulated, are becoming more realistic in how they can use partners, such as us, to provide greater agility and value to their customers. The new players such as Bitcoin and The Block Chain are interesting and potentially really exciting with their ability to store and deliver value across multiple networks. Of course, the challenge with that is the trust proposition. Can I actually turn this “coin” into physical value outside of the coin network?
Anyway, this is all fascinating technology and we are reviewing this big time. If we can reduce the transmission time of payments across multiple markets, and have the assurance that this can be liquidated into true realisable value, then I think this will be a huge development.
We know that many banks are now investing in Bitcoin business as they go through a phase of building their knowledge base in this area. However, I do not see this as having a dramatic effect for the next 10-15 years.
DB: How much of your business is direct or via partners and what is a typical partner profile?
SV: Initially, we tried going direct but it was difficult to reach the CFO’s of large organisations - and very expensive. So, we refined our value proposition and approached the banks themselves to get through to the buying organisations who had expressed an interest in optimising their working capital and credit utilisation. In essence, the banks provided our route to reaching these larger companies. Now, as we have become more well-known in the market, these larger organisations are starting to come direct to us. Fintechs run at a different speed to banks - no disrespect to the banks - but they are far more agile. Banks are learning from us on what can now be achieved and we are learning from them. So, it is a great, symbiotic relationship.
DB: Have you been able to grow your business organically, or have you had the need for external funding?
SV: In the earlier years, we were just tinkering around the edges and frankly, it was a bit more of a hobby for me than an actual job. But then, around 2013/14, it started to become a bit more serious as we rebuilt the entire platform. However, we have grown everything organically. I funded the business from the successful sale of my previous business at HMSL. Now that we have been driven into multiple country markets, we are considering whether we need PE funding to accelerate and manage our growth, or whether we continue to expand with our own cash flow. Last year, our growth was 500% from a standing start and we are looking at year on year growth between 25-40%. There is such a demand for working capital optimisation in a frictionless manner. It is the frictionless element we believe is the most important thing for the CFO’s. What they don’t want is a project that is going to take 9 months to come to fruition, but a project that is going to deliver value in 2 weeks.
All of our revenues are essentially annuity (recurring) based and annually renewed, purely generated on the transactional value. There is no need for any software maintenance or professional service fees. The key is in providing our customers with the immediate benefits that our service platform provides, without the need for lengthy and costly consultancy or integration fees. One of our most recent projects, involving $170M of flow, from the date of signing the contract with the credit organisation, to going live, was 5 weeks. Our proportion of those 5 weeks was just 3 work days. The rest was related to credit assessment.
DB: What are your key aspirations for your business over the next 2-3 years and what are some of the key challenges in accelerating and managing your further growth?
SV: A number of aspects. From a business perspective, we want to grow it for the benefit of all the stakeholders, as all of our staff are shareholders. I have always been quite explicit that it’s important to have everyone involved to have a skin in the game as a pivotal element of our strategy and philosophy. We have a very active board of non-exec directors, one of whom is the ex-managing director of Barclaycard, Western Europe, and we are now building out our sales delivery model.
DB: What are your key three challenges over the next 2-3 years?
SV: People, further technology investment, continual product enhancement
DB: Having successfully sold a business, what have been the key lessons learned in building another?
SV: I sold my last business at the right peak time for the type of business and model that I had developed. I then started a new business from scratch in a market that was in recession. This was a completely different learning curve, but nonetheless very invigorating and enjoyable. It gave me an opportunity to look at multiple new ways of starting a new business in a rapidly changing market. Youngsters today have it equally tough as we did in the early days; it is just the dynamics that are different. I have learned that if you are tenacious, driven and energetic these are elements that are still as relevant today as they were back in 1975. The last thing I would want to do is hang up my boots and go and retire.