An interview with Craig O'Neill, VersaPay CEO and Director
Q: For the uninitiated, please describe VersaPay and the services it provides.
VersaPay is a software company in the business-to-business integrated payments space. That is, we sell cloud-based software solutions for B2B that provide payments capabilities along with business functionality. In particular, we’re focused on helping companies that provide goods and services to other companies – replacing their manual and email-based invoicing and collections processes with an easy to use online experience. In other words, we’re changing the way companies perform Accounts Receivable – helping them get paid faster and making their customers happier.
Q: What are the advantages of your cloud-based system over the classical way of doing business?
We provide several advantages over a process the really hasn’t changed much in decades. The typical A/R process today involves sending paper or pdf invoices to the buyer and waiting for payment. If the buyer has any issues or questions the buyer and seller have to resort to a cycle of emails or phone calls to address them, and this can create significant delays in receiving payment. Then when everything is resolved and payment is made, A/R personnel must manually match payments to invoices to book payments into their accounting system, a process which drives more time and cost.
We have built an innovative cloud-based platform that re-invents how A/R works between businesses, removing the inefficient paper/PDF-based approach and allowing buyers and sellers to collaborate online in real-time. This not only allows invoicing and payment to be completed in a timely manner, it provides a greater accuracy in payment application and automatically posts reconciled payments directly into the seller’s accounting software. So in a nutshell, we reduce effort and cost, eliminate errors, improve Days Sales Outstanding, and perhaps best of all, increase convenience and overall satisfaction for customers.
Q: Global e-payments revenue is expected to hit $1.0 trillion by 2023 and the B2B segment of that business is showing exponential growth, what is the potential of the B2B space and how will VersaPay fit into that sizable niche?
Most players in the electronic payments space see B2B as the last frontier of exceptionally high growth for electronic payments. Every payments company I talk to is either developing a strategy for B2B or its high on their to-do list. That’s because the market is huge, and much of it is untouched. VersaPay has an early start, and we’ve approached the market by solving a business problem that integrates electronic payments, rather than simply attempt to convince business to transact electronically. We believe our target market – that’s B2B sellers in the US and Canada that range in size from 10 million in annual revenue to 1 billion in annual revenue – represents a market opportunity of well over 4 billion dollars of annual recurring revenue. And that’s a very specific segment of the market. Overall B2B integrated payments is much bigger than that.
Q: VersaPay had made POS merchant business its point of focus in the past, but now, under your leadership, it is pivoting to the SaaS space with its flagship cloud-based accounts receivable platform ARC™, tell us the major challenges you faced in turning this pivot into reality.
First of all, our POS business is still important to us and still healthy and growing. We are very good at this business and the cashflow that we generate there is helping to fund the software growth opportunity. However, like other merchant services businesses, the POS group’s focus was about 90% selling and 10% customer support. So pivoting from that to developing our own software product that would create a new market presented a whole list of challenges. Of course, there’s the obvious challenge of building an industrial strength software product, one that needs to scale to tens of thousands and eventually millions of users while being highly secure. This required advanced software engineering skills that the company did not have at the outset. We needed to create a team that could do that.
And the task of establishing a new market versus selling into a defined market presents challenges. We had to build a great marketing capability that could define this new space and demonstrate our thought leadership. And we had to find early adopters, folks who are open-minded enough to see the opportunity ARC™ presents and adventurous enough to be among the first to use it.
With these challenges in mind, we set a goal this year of winning 30 to 50 customers onto the platform to graduate from the early adopter stage into a high growth stage. We are well along that path now with 17 customers live or going live shortly.
Q: VersaPay is still taking ARC™ from early adoption to mainstream deployment and therefore the books are still showing red, how long do you anticipate it will take to achieve profitability with ARC?
When you look at high-growth tech companies coming out of Silicon Valley, their first priority is growth, not getting to cash flow positive. That’s how successful tech companies drive value and achieve long term profitability. And that’s the way we’re building this business. We’re not spending on superfluous things, we’re spending wisely on achieving growth and gaining market share.
Having said that, like any software-as-a-service (SaaS) company with a strong product offering, as we achieve growth and build momentum, the profitability will follow.
We’re telling investors to pay attention to the metrics we’re reporting in regards to client usage and engagement as these will be a good indicator of future revenues and profits.
Q: Who are the key players on VersaPay’s executive management team and what skills do they bring to the table that will assist the company in achieving its milestones?
I joined the company in September 2013 and set about building a really strong team. I’m pleased with the results of what we have been able to do with our product team, our marketing team and our sales team. I have a very seasoned product manager, Garry Chan, who along with me, carries the vision for the product and sets the road map for where we are going. I have a very strong head of software engineering, Frank Opat, he heads the group that actually builds our industrial strength software platform that is secure, highly scalable and delivers the features that meet the needs of our customers.
In the fall, I hired John McLeod, previously at Desire2Learn, to head up our marketing efforts. John led marketing at D2L through their very substantial growth. And more recently, I hired Geoff Coutts to run our sales organization. Geoff has held senior sales leadership roles at companies like Hewlett Packard, Verizon and Samsung and he brings great sales acumen along with a real entrepreneurial spirit.
At the Board level, we were very lucky to attract Art Mesher, previously CEO of Descartes Systems Group and now serving on a number of boards. Art had a very successful run at Descartes, driving the company to become a leader in global logistics technology. Art joined us last summer and became our Chair in August of last year and he’s very active in this role.
Q: Geographically speaking, what markets is VersaPay focusing on and why?
I think with any Canadian software company that has big growth aspirations, the focus has to be on the United States. My experience is that when you focus on the US and you do that well, you also succeed in the Canadian market. With the roughly 10-to-1 market ratio, we expect American customers to make up approximately 90% of our business. We are restricting our focus on North America for now, simply due to the vast market opportunity. Within that broader context we are focusing on some specific vertical markets to gain traction graduate from early adopters to main stream customers more quickly. Our current target verticals are trucking and logistics, commercial realty, and media, specifically the newspapers. We’ll add more as we get traction in these verticals.
Q: What milestones can investors expect in 2015? Will financing be required to achieve them?
Job one for us is the acquisition of customers. We’re at 17 right now, and we’re aiming for in the neighborhood of 30 to 50 by the end of the year. So that’s the main thing to watch for, announcements of new customer wins and the metrics that demonstrate their growing use of the service.
As far as financing is concerned, we’re well funded to execute on our current business plan. However, there are factors that could trigger a financing: if we identify a complementary business that is a good acquisition opportunity, or if we begin to see demand in the US build dramatically – in either case, we may choose to raise additional capital to accelerate our growth.
What about the B2C market?
Our strategy is to remain focused on the B2B market, but if a good B2C sales opportunity presents itself we may pursue it. These occasionally come up as a side effect of the B2B work we are doing. For instance, newspaper businesses like Metroland Media group work with us to invoice and collect from the businesses that advertise in their papers, but they could also use ARC to bill all of their subscribers.
Why should investors jump on board now?
VersaPay is a rare thing in Canada – a high-tech growth story. In this current climate where resources are out of favour, investors are searching for other opportunities with high growth potential. We’re one of those opportunities. We’ve got great customer testimonials and very large market. We’ve got a great team and a great product. So the potential for growth is very good.
What makes VersaPay even more unique is our POS business, which is healthy, growing and providing about 2M in cashflow. So in short we offer the upside potential of a high tech high growth story and downside protection of a mature business. We think that makes VersaPay a very attractive investment opportunity.
And a very timely opportunity. As we begin announcing customer wins and increased usage the market will begin to respond to our success. While I would be the first to say that investors should think about holding our stock for the long term, getting on board now maximizes the opportunity.
Where do you see VersaPay in five years?
VersaPay’s mission is to change the way A/R is done – a pretty lofty aspiration. So five years from now, our aim is to have created a new category of software and a market environment in which companies recognize there is a new and better way to do A/R. Our plan is to be the market leader in this new space, with our platform becoming the de facto choice for companies to do their A/R. If we can achieve these things we will have established a large ecosystem of buyers and sellers transacting on ARC, and as a result we will enjoy high growth rates, strong recurring revenues and compelling profit margins.
FULL DISCLOSURE: VersaPay is a Stockhouse Publishing client.