As explained below, AvidXchange software solutions are tailor-made for each customer to enable them to automate each stage across the account payable lifecycle: raising purchase orders, invoicing, and making payments. The ability to tailor-make their system with the customer needs is evidenced by the fact that Avid can integrate with more than 150 accounting systems used by customers in all areas from invoice receipt to payment execution (including Sage Intact, QuickBooks, Oracle NetSuite, Microsoft Dynamics GP and more).

AvidXchange engages with business customers around their B2B accounts payable and invoice management needs. Unlimited custom enforceable invoice approval workflows can be created to route invoices to specific departments or users, and account codes can be automatically assigned, including allocation codes. Payment approval workflows can also be customized, with options for multiple approvers and step-level approvals. Payment and approval statuses can be viewed at any time.

AvidXchange has established itself as one of the leading service providers in finance, serving more than 5500 customers across the United States and 400000 suppliers nationwide. AvidXchange is reported to generate $124.9M in estimated revenue annually (2019). Key competitors include Bill.com, Billtrust, and Tipalti that appear to offer similar services.

In January 2020, the leading provider of AP and payment automation solutions, have raised $260 million in equity capital as part of the company’s latest financing round. The new capital will increase the company investment in its solutions for both buyers and suppliers while reaching more customers in the middle market.

AvidXchange was founded in 2000 by Michael Praeger (CEO). Before establishing AvidXchange, Michael was CEO of InfoLink Partners, a software company specializing in automating the tax billing and collection functions for municipalities. AvidXchange started out offering accounts payable software services directly to companies in finance and real estate.

In 2017, AvidXchange partnered with Mastercard to power Mastercard’s label B2B accounts payable software solution for SMEs. In September 2019, the company acquired BankTEL Systems, a firm based in Columbus, Mississippi who provides accounting services to more than 20% of U.S. banks.

There have been 4 formal rounds of funding: Series B in 2002 raising $2m, a private equity round in 2015 raising $225m, Series E round in 2016 raising $18m, and another private equity round in 2017 raising $300m. There are 13 key investors, including Temasek Holdings and MasterCard as the most recent funding (Crunchbase, 2019). In 2020, AvidXchange has raised $260 million in equity capital as part of the company’s latest financing round, adding to the more than $525 million it has raised prior.

AvidXchange has one main customer group: mid-sized companies willing to automate their payments process from beginning to end. The company creates value for customers through its various corporate partners who use AvidXchange’s software to power their accounts payable platforms, such as Mastercard, ClickPay, and GCPay.com.

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A dyadic relationship where your physical good or service can only be designed and delivered after prior interactions with the customer.

Engagement  — Value Creation Proposition
AvidXchange creates value automating and optimizing processes that involve the purchase and payments department of the company and carry all necessary activities from placing an order to suppliers, purchasing goods, and making final payments to the suppliers. This is beneficial to maintaining good relationships with vendors, having an accurate view of cash flow, being efficient, and making it easier for mid-sized businesses to scale.

AvidXchange’s software integrates with many other accounting software programs, so there is not a formal network effect in that it makes sense for others to be paid to also use AvidXchange’s software. But, by witnessing the improved efficiencies (visible through communications about upcoming payment schedules, etc.), recipient companies may be tempted to sign up.

Delivery — Value Chain
How AvidXchange works for mid-sized companies: AvidXchange provides software applications for each stage across the account payable lifecycle: raising purchase orders, invoicing, and making payments. The fintech company processes invoices faster deliver financial value to companies because it helps them avoid late fees and utilize early payment discounts. Moreover, informing vendors about payment schedules, AvidXchange helps businesses maintaining good relationships with their third parties.

Monetisation — Value Capture
AvidXchange makes money by charging license fees for its software. Quotes are only available on request, and fee structures are not available to review. Also, the company is either licensing the use of its solutions with an agreed upfront fee, or (also) taking transactional fees. Fee structures may be different by industry and complexity of accounts payable needs.

Disclaimer — Written by Rebecca Frankel and revised by Francesca Hueller under the direction of Prof Charles Baden-Fuller, Cass Business School. This case is designed to illustrate a business model category. It leverages public sources and is written to further management understanding, and it is not meant to suggest individuals made either correct or incorrect decisions. The information contained here should not be used for investment advice and is simply indicates the individual’s understanding of the company’s business models as of April 2020. © 2020 This work is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.