By Glenn Hodgeman on 22nd June 2015
A new dedicated invoice financing platform called InvoiceX is operating out of Hobart in Tasmania. A long way from the market noise of Sydney or Melbourne with government and corporate funded incubators and banks desperately stepping all over one another trying to be seen as leading the fintech race in Australia, but as always oblivious to where the real creativity is happening. Earlier this week Dermot Crean and I spoke about InvoiceX, the growth in their business, his views on the market and more importantly why did he set up a platform in Tasmania?
For those readers outside Australia, Hobart is located some 1600 kms or 32 hours by car from the central financial district of Sydney. Dermot moved to Australia in 2011 with his Australian wife and children and based himself in Tasmania. As we both agreed the cost of living for developing a small business platform down there couldn’t be better, a first class university of IT graduates and not to forget a climate a lot closer to the UK than it is Sydney.
As Dermot says “Hobart is also a great ‘lab’ for getting a business like this off the ground. It’s easier to get buy-in from bank managers and investors plus referrals.”
Nevertheless it is essential to recognise that InvoiceX is operating right across Australia.
- One of their largest clients is in Brisbane and is scaling up to do about $650k a month in trades
- They have another client in the pipeline in Victoria that is likely to be over $1m a month
- Another very happy client in the CBD in Sydney around the corner from Stone & Chalk (Fintech Hub).
Dermot founded the company with Steve Yannarakis some 18 months ago, and at the beginning of 2015 they opened the platform for business. Dermot has over 30 years of experience in financial services. Growing up in Ireland where his father was a bank manager. He qualified as a Chartered Accountant with Price Waterhouse in London, then worked for banks such as HSBC and NatWest in senior positions. In 2001, Dermot co-founded his own business which over a 10 year period became a market leader in raising investment funds focused on small-medium sized businesses. During this time, he was always struck by the lack of funding sources available for growing businesses, especially those with high quality customers and long payment delays. Along the way, he became involved in confidential invoice discounting in the UK as an investor which prompted some creative ideas on how to apply this in Australia.
It’s clear to me that Dermot is really focused on the central theme that growing a company is all about managing working capital and recognises the stress and anxiety that this can cause business owners. How do you make payroll this week, when most of your blue chip clients take on average of 51 days to pay their bills? You cannot rely on the Australian Banks as they continue to direct about 95% of their lending into mortgages, small business is not their focus.
This is the problem that Dermot and Steve are addressing here in Australia with InvoiceX, their on-line marketplace for working capital finance. The process is straight forward:
- Invoice is sold to IX Investors online.
- Invoice is paid and IX settles the trade. Settlement is totally automated through to batch file preparation using their User and Management Platform called IX Trade. While BDO the international accounting firm continuously audits the process.
One of the reservations that many small businesses have who are considering using invoice financing is they don’t want their premier customers to know that they need short term funds and are selling off their invoices. So Dermot and Steve have spent a lot of time working through the creation of robust legal documents to ensure confidentiality is maintained. A combination of confidentiality and pay-as-you go, sets the platform apart from its competitors.
Finally, they have just hired a leading strategic marketing agency in Sydney (they’ve worked with CommSec, Sony, Tyroetc). A lot of work to be done on brand positioning etc, but another reason you will likely to seeing more of InvoiceX. Unlike many of the newer platforms that have recently opened, business for InvoiceX remains solid and growing. In light of that, I asked Dermot what his exit plan was for InvoiceX, he laughed and said “to be carried out in a coffin”. A little drastic I suggest, but this is a business clearly he and Steve believe in and are looking to build into the future. Cleverly addressing a pressing problem for Australian small businesses and it’s all about working capital. I like their model very much.