Strengthening the SMB: Why We Invested in Autobooks

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There’s been a battle brewing to serve SMBs better with commerce enablement and financial services. Companies like Square, Intuit and Brex have attacked the opportunity directly by providing solutions across these product areas, while several startups (e.g. Mercury, Novo, Relay) are aiming to win over the commercial DDA and expand into other product areas.

But millions of SMBs bank with local, regional and national banking institutions already. These banks are hungry for new solutions that they can provide to SMBs to help deepen engagement and capture more share of wallet. Examples include solutions that enable SMBs to better manage cash flow, collect on invoices and resolve payables.

Our investment in Bill.com taught us the importance of core systems of record to SMBs. We also learned that earning SMBs’ trust allows you the opportunity to cross sell or bundle other products and services alongside your core system of record.

What we have seen in Autobooks is a full SMB accounting and bookkeeping solution (inclusive of invoicing and payments) which is designed to be delivered through commercial banks. Most small business owners recognize that you can’t get started without a bank account. If an SMB starts there, it seems natural to also offer other, core solutions that SMBs need to run their business — like accounting and bookkeeping. Imagine if your commercial bank offered embedded payrolll ( Zeal), bill pay (Bill.com), point of sale terminals (Clover/Fiserv), commercial insurance (Sidewalk), retirement savings (Vestwell).

Historically, there was very little integration between the bank account and the core systems that SMBs use. This limited the opportunity for banks to engage these clients and offer them related financial services. Autobooks’ platform helps modernize this relationship by unifying banking with core accounting and bookkeeping.This enables banks to deepen their relationship and provide far greater value to the small business client. It also enables banks to bundle additional financial products as part of a holistic experience, such as invoice financing and credit.

Meeting the Autobooks Team

We were fortunate to be introduced to Autobooks in late 2018 by Dan Holt, the CEO of one of our other payments portfolio companies, BillGO — thanks Dan! Dan has known several members of the Autobooks leadership team for a long time and spoke highly of them, which was a strong positive signal as we learned more about the company.

As sometimes is the case, we didn’t complete an investment immediately after being introduced. Instead, we tracked what the company was doing and how we might be able to pitch in. As it became clearer that our network and focus overlapped meaningfully with that of the company, we decided to engage more deeply and, ultimately, completed an investment in the company’s Series C round. We’re grateful for the opportunity to work with the Autobooks team and continue our investment in enabling a better, more prosperous future for American small and medium-sized businesses!

Our Market POV

1. SMBs represent a big and growing market: Intuit reports that 2022 will be a record year for small businesses, with a record of 17 million small new businesses projected to be formed.
2. SMBs want fewer solutions that meet more of their needs: It’s difficult starting and running a small business. Business owners want to grow their businesses, not manage multiple solutions to meet their core financial needs. This is especially the case with payment acceptance, bookkeeping, and accounting reconciliation. Rather than using multiple vendors — and dealing with friction across platforms — there is an opportunity to provide an integrated experience that is centered on the core business bank account.
3. Banks recognize the opportunity and need help to deliver the experience: Banks recognize this opportunity and understand it requires connecting different solutions into a truly integrated experience. At the same time, many banks face increasing pressure from non-bank digital players such as Square and Brex. Autobooks enables banks to go to market faster, with a highly competitive value proposition and digital-first experience that addresses different financial needs with the business bank account at the core.

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