AvidXchange Inc. is a Charlotte success story. In two decades, the firm has grown from a few dreamers to a local financial-technology powerhouse.
Years ago, it reached unicorn status, referring to a private company valued at $1 billion or more. AvidXchange, an automated payments provider, has about 6,000 clients and can process more than $140 billion in transactions in a year. There is plenty of opportunity for more growth — about 60% of U.S. businesses still make payments with paper checks, CEO Mike Praeger has said.
Its next step is reportedly an initial public offering later this year, with an estimated value between $5 billion and $10 billion. AvidXchange has not confirmed its IPO intention and declined to comment earlier this week.
"This is the natural evolution of our fintech and entrepreneurial and tech ecosystem in Charlotte. This is the end product, in a way, when companies get big enough to be acquired or go public," said Dan Roselli, co-founder of QC Fintech, Packard Place and CFV Ventures.
Roselli said these company milestones create more wealth for early-stage entrepreneurs. Founders keep innovating and support others doing the same. He referenced the Dellionaires in Texas or the PayPal Mafia in California. PayPal co-founder Peter Thiel is an investor in AvidXchange, for example.
Success stories like AvidXchange also make it easier for startup founders to see themselves here, Roselli said. Silicon Valley may no longer be the best option for tech innovation. Startups are starting to put down roots in other, often less expensive areas, including in Charlotte.
Strategic acquisitions have been preferable to IPOs, Roselli said, but that has started to shift back in the last couple of years.
Tariq Bokhari, Charlotte city councilman and founder of Carolina Fintech Hub, said there are pros and cons to going public. Being a public company brings more complexities, costs and risks. Leaders have to be ready for the financial reporting and monitor shareholders' reactions. He said public companies are also more likely to pursue shorter-term growth, which could be challenging for founders with long-term visions.
Going public is, however, a good fit for companies looking to cut costs and acquire a lot of market share. It's a more efficient way to go about it, Bokhari said.
AvidXchange has often pursued acquisitions and partnerships. As of 2019, it had closed five acquisitions within the last decade — BankTEL Systems, EnergySolve, Piracle, Strongroom and Ariett. Late last year, AvidXchange also acquired Core Associates to expand its footprint in the construction industry. The firm's big-name partners include KeyBank and Mastercard Inc. (NYSE: MA), among other relationships.
The IPO process is a highly regulated, intense process, said Dan Cohen, Whitaker executive director of the Center for Entrepreneurship at Wake Forest University. He said the main process generally takes three to six months, although it varies between companies. C-suite executives may also need time away from the company when securing investors.
Charlotte's strong banking industry has, as expected, created a good environment for fintechs to grow, Cohen said. Founders often view changes to industries and regulations as opportunities for new business. He noted AvidXchange's ability to accelerate growth during pandemic-related uncertainty. The pandemic has largely been positive for the firm's business, as more companies look for digital payment options to use remotely.
Cohen said communities need a mix of smaller startups and larger institutions to make a good economic impact.
Companies like AvidXchange also draw more capital to a region. Equity funding has played an extensive role in the firm's success. It has raised more than $600 million in funding in the last year and a half.
Joe Alala, CEO of Charlotte-based Capitala Group, said investors look for a solid management team and companies in high-growth industries. His firm works with small and middle-market businesses. Alala said larger companies' success, especially in the financial space, lead to more success among his smaller clients.
They also draw more talent and different skill sets to an area, another win for all companies, Alala said.
Bokhari and Roselli are eyeing other Charlotte businesses for future unicorn status, including mobile payments firm Passport and data analytics company Stratifyd, to name a couple.
Bokhari said having a visionary leader like Praeger is good for the local ecosystem.
"For entrepreneurs out there, pay attention to the Mike story," he said. "Pay attention to this guy who has made the right choices and does the right things. He chose Charlotte because he wanted to be here."
More planning is underway for a second building at AvidXchange's headquarters just north of uptown. That project is part of a $41 million expansion expected to create more than 1,200 jobs. The building — named The Foundry 2 — will mirror the existing one at the headquarters. Leaders are hoping for a 2023 opening date. Praeger has said AvidXchange employees will likely have options for in-office and/or remote work moving ahead.
