AvidXchange Sees $20 Billion Bill Funding Need
Accounts Payable (AP) automation is only part of the equation in the quest to modernize B2B.
To that end, AvidXchange, focused on middle-market businesses — specifically, how they send, receive, and manage payments — said in its S-1 filing that tens of billions of dollars of potential revenue resides in B2B payments still tied to paper checks. In the meantime, suppliers are finding value in supplier invoice financing activities.
In terms of mechanics, the company said that in its core business of B2B payments, suppliers submit invoices to the bilateral platform, buyers approve invoices, there is integration with accounting systems, buyers approve payouts and payouts are executed through the network, using vendor preferred methods.
At the end of fiscal 2020, the company said there were more than 7,000 buyers on the platform, with more than 700,000 suppliers paid, cumulatively, from 2015 to 2020. Approximately 53 million transactions were processed during fiscal year 2020.
“The B2B payments market is rapidly evolving and represents a significant opportunity for digital transformation,” the company said in its filing, where paper checks account for about 42% of the $25 trillion spent annually on B2B payments. The filing cited PYMNTS’ own data that 46% of hotspot professionals would like to implement digital hotspot automation solutions.
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“We believe, based on our analysis, that our current addressable market comprises approximately 435,000 mid-market US companies and represents a significant and under-tapped revenue opportunity for future growth,” AvidXchange said. These companies are defined as companies with annual sales between $5 million and $1 billion. The company has estimated that there are over $20 billion in addressable revenue opportunities on an annual basis across AP automation solutions and B2B payment transactions.
But beyond these essential B2B functions, the company believes it can become a strategic partner for suppliers looking for better cash flow management.
Financing supplier invoices
“We believe there is a significant unmet need for supplier invoice financing, with nearly half of the market underserved,” AvidXchange said.
The company highlighted its solutions, in particular its Invoice Accelerator offer, which allows invoices to be paid in parallel with factoring activities before their due date. The market for these solutions represents an additional $20 billion in exploitable opportunities. As vendors use this solution, the company said, revenue is generated per transaction for each advanced payment. Invoice purchases are financed from the company’s balance sheet.
Consolidated revenue jumped 33% year over year for the six months ended June 2021 to just under $114 million. Operating losses fell slightly to $31.8 million from $35 million in the same period a year ago.