Sramana Mitra: How long did it take you to be able to know that you could actually save money and for you to make money on that gain share model? How long was that process of fully validating the business model?
Nilay Banker: Typically, it takes from 6 to 12 months by the time the customers start seeing benefits. The benefits are multi-fold. There are soft benefits which are in terms of process efficiency and just reduction in head count. We consider those as soft benefits. Then there are the hard benefits which is the draw dollar cost savings through discount management.
It also takes some time for the hard dollar savings to ramp up adoption not only by our customers but, more importantly, by their suppliers who get on to the discount management program and slowly start taking advantage of early payment discounts. In most cases, they start realizing about 75% of the benefits within 12 months.
Sramana Mitra: Once a customer is rolled out, what does the average deal size or average revenue volume from that customer look like? What is the scale of customers you’re talking about?
Nilay Banker: Our average deal size is about half a million dollars.
Sramana Mitra: Per year?
Nilay Banker: I’ll break this down for you. Initially, the cost is our software license and the implementation. That runs anywhere from $400,000 to $500,000. Then year over year, the discount gain share model brings us about 10% to 15% of the discount savings that we get for the customer. Some customers save $1 million a year. Some customers save $5 million a year. Depending on the amount of discount savings they get, we get a percentage of that. That percentage is icing on the cake for us.
Sramana Mitra: Awesome. Great business model. You said you worked the first couple of years with just a couple of anchor customers. That brings us to 2014 when you started increasing the number of customers and broadening your footprint?
Nilay Banker: That is correct. A great advantage that we have received around 2014 was a partnership with Oracle. Oracle Corporation is a big player in the ERP market. They have multiple applications. They got wind of what we were doing. One of the reasons for our claim to fame is how deeply we are integrated with these ERP systems.
We are probably the only company in the market that provides real-time integration and, more importantly, multi-ERP integration. What that means is, large companies who have multiple ERP systems can continue to have multiple ERP systems. Our system has the ability to connect to all of these multiple ERP systems within a single instance of our application, thereby, providing a consolidated user experience, a consistent business process, and a consolidated view of data and analytics across AP operations.
When Oracle caught wind of what we were doing, we had some very interesting conversations with them. That’s when things started taking off where they partnered with us to go to their premium customers. We, literally, accelerated like a rocket in 2015 and 2016. We now have over 50 customers. Again, very large customers. While we’d like to expand to all sizes of the market, we are seeing tremendous adoption in the medium and the large enterprises.
Sramana Mitra: I don’t believe you should expand to every segment of the customer base. There are specific requirements of different scales of customers. You build a more robust company if you stay within a certain segment and build for a certain segment. In your case, the best thing you would do is to cater to the very large customers and the high-end of the mid-market. That’s probably the best place for what you’re doing.
Nilay Banker: You are absolutely right. We consider ourselves an enterprise B2B play. If you think about the future of the company, we’re going to make more money on discount management and gain share than we could ever make on the licensing. It’s going to be tenfold money.
Sramana Mitra: No question about it.
Nilay Banker: The very large companies have annual spend in the billions of dollars. If we can help them save even 0.1% of those billions of dollars, which is generally the metric we use, that’s a tremendous revenue stream.