VersaPay president and CEO Craig O’Neill appeared on Business News Network this morning to discuss the transition of the legacy accounting services sector and his own company into a software-as-a-service model.
Headquartered in Toronto, VersaPay (TSXV:VPY) is a cloud-based accounts receivable and payments processing provider.
O’Neill, who joined VersaPay 20 months ago, has overseen the company’s expansion from primarily offering a point-of-sale Merchant Services solution through to the introduction of ARC, now its flagship product, which is being financed by the still profitable POS arm of the business.
With customers ranging from $10 million to $750 million in annual revenue, VersaPay now has 16 customers with several more in the pipeline.
“It’s at least a $4 billion market opportunity,” says O’Neill to host Frances Horodelski, “and we want to grab as much of that as we can as quickly as we can, so we need to grow very quickly.”
O’Neill also points out that despite the public’s impression that all of reality is now digital, most of life, including business, remains stubbornly analog.
“Most people don’t realize it, but in business-to-business companies, companies that sell to other companies, the world is very different,” he says. “Most business is still operating on paper invoices, or perhaps PDF invoices, and receiving paper cheques in return.”
Reacting to a question from Horodelski about why no one else has brought to market what VersaPay is now doing, O’Neill responds, “That’s the $1 million question. In fact, we think that’s the $4 billion question because that’s how big we think the market is, conservatively.”
Explaining the reasoning behind why business has been so slow to adapt to the changing landscape, O’Neill explains, “Businesses have systems, and those systems need to be integrated, so the integration is very hard,” before adding, “The biggest reason we found is simple. It’s not a burning issue.”
For businesses, the idea of changing their accounting procedures when what they’ve got now is “good enough” remains on the back burner until the pain of remaining the same becomes greater than the pain of changing. Basically, if it ain’t broke, don’t fix it.
The only way for VersaPay to disrupt that market is to demonstrate the value of switching to a pain-free online solution, and offering it on a pay-as-you-go basis with no upfront payment.
VersaPay’s growth strategy involves starting small and getting it right before moving to scale while perfecting their SaaS offering, with the pressure of burning through capital in the short-term mitigated by the company’s more mature POS offering.
“We believe this will become viral to an extent,” says O’Neill, noting that VersaPay is poised to grow as their direct customers conduct transactions with other customers and so on. “We’re getting anecdotal calls from some of these customers saying, ‘We love this new system.'”
Earlier this month, VersaPay announced the addition of Metroland Media Group to ARC’s client roster. With Metroland boasting ownership of over 90 community newspapers, all of whom conduct business with local advertisers via VersaPay’s invoicing system, the likelihood of more companies signing on simply through exposure is considerable.
Meanwhile, as Horodelski points out, VersaPay is burning through cash and has yet to become profitable. But given that VersaPay is being supported by its very profitable Merchant Services sibling, O’Neill’s priority right now is growth.
“We’re investing wisely in building this pipeline, building this demand, hiring great people, building a world-class software development organization here in Toronto. And as we get that flywheel turning, and customers signing up and building that annuity, the profits will come, but that’s still down the road.”
Disclosure: VersaPay is an annual sponsor of Cantech Letter.