(As appeared in Forbes.)
Fintech isn’t rife with female founders; certainly not those that have secured funding time and again, albeit in small conservative rounds.
Karla Friede was first an executive with depth in sales and marketing and a passion for innovating. As the president and CEO of a company who had developed a new offering, a B2B payment technology, she was excited about getting to market. The owner had other irons in the fire.
In many companies constantly innovating, not all product concepts get commercialized. Karla didn’t want to see that happen and decided to get creative…and more comfortable with risk.
Friede, now the CEO along with co-founders, Tana Law and Shaun McAravey, bought the rights to the idea from Zevez Corporation and in 2009 launched Nvoicepay.
When is the market right to launch a business?
Sometimes when opportunities arise—in this case, a technology and a market with a need—the market itself is a mess. Such was the case for the trio in 2009. The economy was a dumpster fire which, to many, hampered the desire to launch a business or seek capital.
Friede admits it wasn’t easy launching and scaling at that time. But, it taught them to be very smart with every penny. And, they had to prove their business case as they went along because investors weren’t throwing money at every shiny object.
When investors are sparse but the market opportunity is ripe
When economic times are tough, the pressure on businesses to manage their cash becomes more critical. Such was the case with Nvoicepay, and one of the reasons Friede felt the wind was at their back for a launch.
While many businesses work to find new sources of capital to cover their outstanding payables, they haven’t considered how inefficiency in accounting methods worsens their cash crunch.
For at least 20 years, if you wanted to pay someone electronically, your bank pointed you to their card products or told you how to set up an ACH transfer. Many B2B organizations don’t accept credit cards. And, managing ACH transfers require a lot of manual processes and the collection of sensitive financial data.
Those manual processes result in human errors that are time-consuming to correct and create more than just financial problems. Payment errors create service issues that can strain customer and supplier relationships.
The blue ocean solution Friede saw
Friede says she was a little naïve in tackling the launch because the B2B payments space was so large. It’s one thing tackling Billion Dollar industries, it’s another thing dipping your toe into a market in the tens of Trillions.
Mercator Advisory Group’s Ken Paterson closely watches the space issuing regular Payments Outlook studies. In an article earlier in 2017 from PYMNTS.COM, there was much discussion about the sweeping size of the opportunity and continued need for innovation in the space. Changes in regulations have made this a complicated nut to crack which is why the slow, steady and consistent growth of Nvoicepay may resonate with their investors.
Nvoicepay, a cloud-based payment solution, enables companies to pay suppliers securely and electronically, moving billions between buyer and supplier. While they offer technology, they view themselves as a services business improving the efficiency, accuracy, and security of payments.
One of the reasons Friede says the market is gaining significant traction now is that the cost of the cloud has come down. Not unlike video applications in their time, before broadband had caught up, many cloud-enabled solutions launched a decade ago were initially cost-prohibitive or ahead of their time. The cloud today is more affordable, less scary, supposedly more secure and more readily integrated with the other systems a company is running.
Co-Founders—two of them female—with very different talents
A common thread in most successful businesses is a complement between the co-founders. In the case of Nvoicepay, they had a triumvirate.
Friede, the CEO, brought executive experience to the table in the technology and marketing space. Co-founder Tana Law, the SVP of Sales, had deep domain expertise in the Payments space. Co-founder Shaun McAravey, the CTO, knew how to understand complex and emerging technologies yet make the simple and workable.
Friede encourages founders to partner with people that think differently but complement your skills.
How in the world do you get to a Series F round?
In 2009, it was a hard time to raise money. They took every dime of what little money they had and put it into their product and proving the business case. That was long before they spoke to any venture capitalists. And it made the team very capital efficient.
To make the case for investors—then and now—you had to have measurable customer success and demonstrate you could hit key milestones.
As Friede puts it, investors are looking for reasons not to invest in you…rather than reasons to invest in you. Don’t give them those reasons, give them a proven business model and secure set of customers.
Is it different for a female founder raising capital in fintech?
It’s the obvious question because it’s covered so frequently. As a woman raising money—Friede points out she was never a man so she doesn’t have a comparison— she never faced any outward bias. However, the bias is ingrained.
People are comfortable with people that look and feel like them. It gives them a shorthand in communicating and doing business. Only 9% of VC-backed companies have woman CEOs so you won’t ‘look and feel like them.’ Instead, look and feel like someone who knows what they are doing and has proven it. That’s a shorthand all investors respond to.
If you are a female founder and you’re concerned about bias, she has this advice:
- Target women-lead VCs or those with a woman partner. There is a greater likelihood you will look and feel like your investor or share some of the same short-hand.
- Make it easy for the VC to relate to you. Find VCs that already understand your space. If you are in a sea of testosterone with a group of VCs not familiar with your space, there are just too many leaps for them to make. Either the gender bias or the lack of market shorthand will stand in your way. Friede says if she could locate a VC that understood not only payments, but B2B payments, and they had a woman in the building, the chances of success went way up.
- Talk like the men around you. Friede says it is clear that men and woman communicate differently. Women often speak more tentatively or couch statements. Be direct, be confident, be brief and be prepared. She highly recommends pitching in front of people you trust first so you can learn to pitch more aggressively.
At the end of the day, Friede says Nvoicepay didn’t do anything the traditional way. They closed small rounds along the way as they made money. She considers it a point of pride that they’ve raised $25M and it’s taken them to Series F to do it.
They have grown in a way that enabled them to be selective rather than opportunistic about their vision, their growth, their investors and the terms by which they raised money.
That may be about to change a bit. With the market, customer adoption and investor interest accelerating, the organization also must be prepared to scale more quickly. The numbers are getting bigger and the timeframes are getting smaller.
The foundation is there, now it’s a matter of continuing to innovate and execute. No more slow and steady. It’s fast and steady now.