SM: Whom do you view as your competition?
PG: If you disaggregate Rearden Commerce into all of its parts, we theoretically compete with everyone. Nobody has pulled it together as a composite application besides us.
SM: The one company that I have seen that is the closest to what you have been describing on the travel side is Concur.
PG: Sure. They have been around for 10 years, and I give them high points for surviving the downturn. They went through the painful transition of hosting their own product and did an amazing job of that. All of the other companies died off. In the enterprise space, Concur does not have a direct competitor in expense. Oracle and SAP have expense modules but it is an afterthought. Technically we compete in flight, hotel and car expense and enterprise, but we go far beyond that.
SM: Can you talk more about the revenue model?
PG: In the enterprise and higher end mid-market B2B, we charge a subscription amount based upon the amount of spend a company puts through our system and how much they save. We try to deliver roughly a 10x cash-on-cash annual return. If we are going to save you $20 million, we would like to get a couple of million dollars a year from you.
On the backend we receive transaction revenue from the merchants and suppliers where there is not an existing relationship. If a new customer has an existing relationship with FedEx, then we do not get involved.
When you get to the small business market, things change. Small businesses do not have the same buying power as larger businesses. We negotiate significant discounts that you will never get on your own, pass most of that on to you and also take a piece for ourselves.
We are going live in the consumer space in a couple of months with Chase and their consumer card members. It will be the Chase brand powered by Rearden Commerce, just like we power American Express and other brands. That will be a combination of contextual advertising revenue and transaction revenue share. Partners such as American Express and Chase pay us for the right to distribute our product.
SM: Talk more about your architecture. How do you accomplish all of these different combinations?
PG: We believe in open architectures. In the small business market, 90% of those companies do not use Concur or similar applications to manage expenses. It was not built for them. They use Excel to roll up their expenses. There is an opportunity to optimize that process and integrate it into everything that is purchased.
We spent two years looking at companies in that space and thought about building an application on our own. We then found a little company called ExpenseWire which was a native SaaS company. We bought it and we are plugging it into our network. Immediately upon acquiring that company, we announced that we were letting two of our direct competitors, Orbitz in travel and TRX in flight/hotel/car, into strategic partnerships to distribute ExpenseWire.
SM: What metrics can you share that indicate how your company is performing?
PG: If you go back nine quarters, we had 12 customers and tens of thousands of users. Today we have well over 4,000 corporations; more than half of that is from American Express. We now have 2.5 million prosumer knowledge workers on the network, and that is before we go live with Chase. In 2007, your blog rightfully pointed out there was a significant market for us in SME. We will soon be making very significant strategic distribution announcements around half a dozen of the most important distribution companies.
When we go live with Chase, I believe we can say that Rearden Commerce will the only web company, not counting software companies like Microsoft, that is simultaneously serving the enterprise, mid market, small business and consumer segments from a single platform. I have the utmost respect for Amazon and the other consumer sites, but they are not B2B. I respect what Marc [Benioff] has done at Salesforce.com but they are not B2C.
SM: This has been a very interesting interview; thank you.