’s Bland Name Belies Its Dazzling KPIs

A few years I was asked to fill out some forms from a place called in order to get paid. Never heard of it. I figured maybe I’d be asked to fill out something from Paychex, or Gusto, or maybe something owned by Intuit. But 

So in this context, this article in Forbes naturally caught my attention. What I learned from reading it is that isn’t some longtail garage band start-up. Hardly.

Boring Name, Big Vision 

First, let’s pull some context out of the Forbes article. founder and CEO René Lacerte is no stranger to the VC scene. Almost 17 years ago, Lacerte was trying to salvage his last company, PayCycle from the jaws of his VCs. The VCs prevailed and asked him to step down. Half a decade later the company was sold to Intuit for a cool $170 million.

While Intuit was trying to integrate PayCycle into its organization (who knows how that went) Lacerte was on to launching his next company. Nothing flashy about the name he chose. Almost as exciting as the word “paper”. enables small businesses to pay their bills and keep their books in the cloud. 

So in 2007, he coughed up $200,000 for that boring domain name Well ahead of the SMB SaaS market, Lacerte realized quickly that selling his cloud software to small businesses was a tall order. So he began looking for accountants who could then leverage on behalf of their downstream small business customers. By 2012, Lacerte and team had sold it to some 1,500 accountants. 

Off the Charts Retention

Fast forward to the company’s Q1 2021 investor deck and it is very revealing. Here are some stats:

  • 103,000 customers
  • 121% net retention revenue. For SaaS companies selling to small and medium businesses (SMBs), 90% is a good Net Retention Rate.
  • 2.5 million in its network. This represents accountants and their clients.

These are some very compelling metrics. Its net retention is 35% better than a good SMB SaaS net retention rate.

So let’s explore a few more interesting metrics in the investor deck.’s business model is comprised of three buckets. Subscription (53%), transactions (33%), and float (13%).

What is telling about these buckets is that only about half of its revenue is tied to a monthly fixed price. These are the costs felt by the small business owners. Instead, is generating revenue as a function of the activities their customers are doing. Transactions drive 33% while float – essentially an arbitrage game — drives the remaining 13%. While we are pretty sure many of their downstream customers have probably been processing fewer payments, once the pandemic has abated, those payment activities should swell again. 

Scratching the Surface makes a point that a ton of market opportunity remains ahead for the company. Using its ARPU of $1,500 – this includes subscription and transaction – and an available market of 6 million SMBs, they see a $9 billion domestic opportunity inside of a $30 billion global opportunity. That suggests a very big opportunity is waiting for them. 

Much of their success is via partnerships. Slide 13 (pasted below) in the deck points to its success in signing up some of the largest brand names. In addition to their direct channel – they work with three groups – accounting software, financial institutions, and accounting firms. Working in concert with these three partner categories has helped the company surpass the 100,000 customer threshold. 

Noran Eid, an analyst at Kayne Anderson Rudnick, an asset management firm holding a $700 million stake in, said this in the Forbes article. “Eighty percent to ninety percent of businesses still rely on paper checks as a primary form of payment.” And the market is applauding what Lacerte and the team are doing. When the company when public last year it was valued at $1.6 billion. As we write this, the company’s valuation has increased 6.6 times to $10.6 billion. 

Moat Potential

Can they keep it up? Like other great two-sided models like PayPal, where the buyer and the seller are on the same platform, the company has the potential to build a very nice moat. Imagine if the local restaurant uses and their local food supplier uses and the local accountant does the books for both the restaurant and food supplier – then that is compelling. 

Beyond that, we think has some great opportunities to find other groups of partners. What about those SaaS companies helping small businesses build their digital presence or manage their human capital or their digital marketing? We shall see.

No Rest for Fierce Competitors isn’t lacking for competitors. One of its better-known rivals, FreshBooks, has launched a new accounts payable feature that gives its SMB customers an “easy way to record and track all your Bills for different Vendors in one place. This makes it easier to manage your cash flow, by tracking how much money you owe at any given time.”

More evidence that in a competitive space like small business cloud accounting, companies cannot rest. Products must continuously improve. Otherwise, that revenue retention rate is likely to fall below that 90% threshold.

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