Sramana: I like it when companies tightly segment the market; it is much easier to qualify leads and messages to that customer base. My next question is, how do you charge? What is your business model?
Vince Thomas: There are three ways we charge. The first is a licensing fee to use the software. That is typical in most SaaS businesses where you have a recurring licensing fee. What drives most of our revenue is a per-transaction fee on the revenue that we help our clients process. That works both online and offline.
Sramana: So, you give them a system where they can collect donations and tie them into their accounting systems?
Vince Thomas: Yes, and we do that electronically as well as offline. If their donors or members want to mail in checks or pay over the phone, we will support those payment methods in addition to online and mobile payment methods.
Sramana: What is the justification of a nonprofit that receives donations by check paying your transaction charge?
Vince Thomas: We find unique things in our clients’ worlds that are specific to the nonprofit business. They have a lot of manpower in backrooms opening envelopes, taking data off forms and checks, and entering them into a spreadsheet or system. That is manually intensive, and it takes a lot of time. We completely automate how those offline checks flow through Billhighway in near real time.
Sramana: Instead of mailing the checks to the nonprofit, it will mail them to you?
Vince Thomas: Exactly. We have a facility where we scan and scrape the information. We do that way more efficiently and parse that data into their systems.
Sramana: You are essentially doing full outsourcing of donation management.
Vince Thomas: Exactly.
Sramana: When you started the company, how much of this process did you have a handle on?
Vince Thomas: We started very small. I was alone for the first three and a half years. During the day I was playing a customer support role and managing customer needs, and then at night I was doing this manual work all night long. I took in piles of checks, opened them up, and credited to the appropriate client accounts and did the data input into our client systems. As we got larger, we started automating that process. I was very close to all of this when it started.
The business was built piecemeal. I had a client who all of a sudden would want to process transactions a different way, which resulted in my finding a way to meet their needs. One day you wake up and realize that you are doing all of these things in an automated fashion.
Sramana: During the three and a half years that you did this as a solo entrepreneur, what did the revenue progression look like?
Vince Thomas: In my third year I did $90,000 of revenue. I probably made $5,000 off that. I was only 24 at the time, and I was so happy that I had a business that actually made money. It was not a lot of money, but it was money.
From there I landed my first really big organization. They were a $30 million organization with 13,000 members. It was a $300,000 a year contract with a three-year performance period. It was the first contract that gave me substantial revenues to start reinvesting back into the business. I was able to hire some people, bring all of the technologies being used in-house, and hire someone to manage that technology suite.