Michael Noble, Cofounder & CEO, Apruve
Last week, Minnesota fintech startup Apruve announced $2.25m in funding from Atlanta-based TTV Capital and San Franciscso headquartered Allegis Capital. This week, we connect with Noble for all the details around that milestone:
When did you launch Apruve and how much have you raised to date now?
We launched Apruve in 2014 and raised just under a million in convertible debt prior to this A round for a total of about $3.1m
How has Apruve changed between then and now?
The first product we had was simply for purchase approval, which is an interesting idea but it didn’t solve enough pain and have a tangible ROI attached to it. We’re still focused in the B2B commerce space, but with the buyer/ seller relationship, there’s this concept of ‘corporate account’ where buyers get payment terms from a seller – net 30, end of month net 15, etc – but the problem is that becomes an accounts receivable nightmare for the seller to manage this process. Our software helps with this collection process and consolidates all the invoices for the buyer.
We always knew there was real pain, although it took us a lot of pivots and time to get here.
Why is that a nightmare?
It’s a traditional process of paper, humans, fax machines, handling credit approval, credit management, invoicing, collections — a very manual labor intensive processes. The seller is essentially acting like a bank in this dynamic, extending credit on cash not yet collected.
We’ve heard it from so many who are tired of this…they’re there to sell their widgets, not act like a finance company.
The real turning point for us was merging this corporate account situation with a financing solution. We have underwriters, 2 banks at this point, who underwrite the invoices and pay the seller off for the amount of the invoice minus a financing fee within 24 hours. Now, the seller has zero A/R to manage and significantly reduced risk.
Does this require the buyer to do anything differently or pay more?
The buyer pays nothing as they go through a co-branded credit application and can approve up to $50k right away and a few million within a few business days. When they checkout, they go through Apruve in a standard checkout flow. We’re then managing that payment on the backend. It’s like when Macy’s issues a branded credit card to their customers that’s powered by VISA with a US Bank logo on the back. It’s similar but for B2B inside the virtual world of commerce, we’re like VISA in this analogy.
Buyer’s want terms and are often going through this process already; our big picture vision is to become the single solution for this process across the board. It’s a classic software eats an old world problem.
And how do you get paid in the process?
A percentage of the invoice and a SaaS fee associated with the number of buyers or locations.
And how is Apruve being received in the market now, what kind of results are you seeing?
We just signed our largest customer to date (under NDA) and we’ve had 4-5 new customers in the past few weeks say yes. We’re growing and it’s still early with the pivot.
And how did you know when you were really onto something?
When all our sales calls started sounding the same: “I’m tired of being a bank” or “AR is a cost center” or “I just want to sell better faster, cheaper.”
Now it’s about greasing the sales & marketing machine to begin scaling.
Where are you getting your leads from and what does your sales process look like?
We get inbounds based on some paid and organic marketing, and will be testing & refining more over the next few months. The sales process varies depending on what e-commerce platform the seller is on and the size of their business. Smaller merchants of course we can move quicker, or longer in a typical ERP sales cycle.
Do you bump up against competition?
We really haven’t seen anyone do what we do how we do in B2B. Paypal of course does this, but for consumers. There are a number of factoring firms that can front money for an invoice, but they lack the corporate account and ecommerce capabilities.
On to the funding, why $2.5m?
We looked at our burn rate and considered the appropriate length of runway — at least 18 months — combined with market comparables, previous capital, and other influences — gets us to an approximation.
And what did that do to your valuation?
We’re not disclosing that.
How did you meet TTV Capital and Allegis and why did you partner with them?
We met them through a mutual acquaintance in Atlanta, which as I’ve come to learn is where a huge amount of credit card processing happens in this country. Their limited partners include very relevant people and companies. In terms of the breadth of knowledge and network, they are well positioned to help guide us.
Allegis also came through a referral and have made a number of investments in and around aspects of e-commerce. They’re also in Silicon Valley, which gives us a foothold out there. Both firms are full of great people with high integrity and we’re fortunate to have both of them.
It feels good to receive money from those who are outside the Minnesota market without having to move, despite the forces.
Why so adamant about staying in Minnesota if it may have made your fundraising easier?
Because I’m a homer and our capital expenditures are much less here. The cost of living combined with availability of quality people who have integrity is much stronger here compared to the coasts. There’s some real strategic advantages to being an entrepreneur in Minnesota right now. Also, we’re in the B2B ecommerce space, merely a few blocks away from SPS Commerce, Digital River, Four51, Insite Software — companies of size with resources tangential to our cause.
Are you working with any of them right now?
We have no formal relationships right now with any of those above.
Did you angel round include local investors?
What did you learn making the jump from angel to A?
Persistence, never quit. Solve a real problem that customers will pay for before trying to raise money. Target investors that you really want, those who understand the problem you’re solving better than yourself.
How many employees do you have now and what’s your ideal projection for a year from now?
Next week we will have 8 or 9, within 12 months in a perfect world we’d like to be 20-25.
How do you intend to achieve that given the talent climate here?
Well every recruiter and their brother called us after we announced the round. Recruiters are very expensive and they can be a necessary evil, so I wouldn’t rule it out eventually, but for now we’re going with a strong product and a culture where people want to work because they are solving a real challenge and improving their skills while enjoying the process.
As a startup founder, we spend so much time thinking about product and sales, but what I’m learning is the value of employee development, leading a company that people want to be a part of. If we execute well, we’ll find the right people.
Is your cofounder still involved?
Who is on your board of directors now?
Myself, Tom Smith from TTV Capital, and a third member TBA.
Is there anything else you would like to add?
Never underestimate the power of a sale…sales solves startup problems.