Editor’s note: Charlotte Beat is a regular feature on Wednesdays in Local Tech Wire. If you had to name the most difficult business to be in right now, it’d probably be a draw between dot-com and commercial real estate.
AvidXchange is in both of them — yet is not only seeing revenues grow by leaps and bounds, but has attracted $3.5 million in venture funding since its founding in 2000.
The company sells an Internet-based bid management and purchasing system to commercial and multifamily real estate firms, enabling clients to buy products and services online from suppliers and contractors.
First quarter revenues were greater than they were for all of last year, says co-founder and CEO Mike Praeger, with the second quarter following that trend.
What’s AvidXchange’s secret formula? One ingredient is timing.
“The real estate slump has actually been a catalyst for clients to buy our software,” Praeger says. “A few years ago, we’d meet with a prospect, and all they’d want to know was how our product could generate another dollar of revenue for them. Now they want to know how our product can generate a dollar of savings for them.
“Our software maximizes control of operating expenses and streamlines the back office of real estate firms,” Praeger adds. “On the average, a client makes up the licensing fees within six months — that’s a pretty rapid return on investment. And we’ve added features and flexibility to create a suite of products.”
AvidXchange currently has about 25 clients, most of them located along the East Coast. Several of them are big names from Charlotte, including the Crosland Group, The Bissell Companies, Southern Real Estate and Washington, DC-based Mills Corp, owners of Concord Mills in adjacent Cabarrus County.
Although the company does have its own sales force focusing on Atlanta, Chicago, Philadelphia, New York, Boston and Washington, DC, it has also developed a partnership with Management Reports International (MRI). The sales staff for MRI, the leading accounting system for the real estate industry, sells AvidXchange’s software as an additional module, and the products are fully integrated. “That has contributed a good percentage of our growth,” Praeger says.
Attracting Venture Capital
But even given this success, investors these days aren’t willing to loosen the purse strings much. As Praeger says, “It’s harder to raise $500,000 today than it was to raise $5 million in 2000.” Nevertheless, he and co-founder David Miller, who serves as president, have attracted $3.5 million — $1million of it coming this past May. More than half of that came from Concord-based CT Communications; other investors include individuals and GE Capital.
So how has AvidXchange managed to get funding when others have not? “A very focused strategy that investors can see being implemented every month,” Praeger says. “We’re customer-focused and growing the infrastructure as we add clients and being stingy and careful where we spend money so we minimize what we need.”
Praeger says he expects to close on another round of funding later this month that will enable the company to reach the break-even point. “Then we can be opportunistic and use the venture capital for further growth,” he says.
Entrepreneurial experience helps
Another reason AvidXchange has gotten funding, Praeger says, is that both he and Miller are serial entrepreneurs. “Early on in a business, it’s more about people than the product. I believe a major reason for our success is our people,” says Praeger, himself an angel investor. “I’d rather see a good management team with a mediocre product than a mediocre team with a good product.”
Praeger, 34, has been an entrepreneur for the last 10 years. He founded two companies with his wife in Boston, InfoLink Partners and InfoVentures, before coming to Charlotte, where he began PlanetResume.com. After it merged with CareerShop.com and CareerTV.net in November 1999, he started looking at the concept of online reverse auctions. Todd Gorelick, president of another Charlotte Internet-based company, Atlantic Assurance, introduced him to Miller, who, after five years operating and consulting dot-coms, had already identified the real estate industry as one to target for online procurement services.
Given Praeger’s history of starting and selling companies, it’s not surprising he already has an exit strategy for AvidXchange. “I firmly believe we will have some very interesting opportunities to sell the company before an IPO within a three-to-five year timeframe,” he says.