St. Louis Arch Angels, the local angel investing group, has backed a Columbus, Ohio-based fintech startup that provides software digitizing paper-laden invoicing for middle-market construction companies.
PaperTrl Inc. raised a seed round from Arch Angels to speed its expansion. The amount was not disclosed.
"When they did the demonstration for us, it really came alive – we could really see what it could do," said Brian Kinman, chairman of the Arch Angels.
"We could really imagine why the construction industry would be very, very interested," Kinman said in an interview. "There’s quite a few different kinds of businesses in different industries that could be interested in utilizing this kind of technology."
PaperTrl was tracking for $1 million in revenue last year, with plans to exceed $25 million in coming years. Its funding comes as it recently inked a partnership with U.S. Bank to embed the bank's digital payments in its software.
The startup spent the past several months rebuilding the software it spun out of a Baltimore construction company, working with about a dozen test customers. The seed round will go toward growing this year to about 70 clients, co-owner and COO Shilpa Marano said.
"This funding helps us execute on all the work we've done over the last six months," Marano told Columbus Inno, a sister publication of St. Louis Inno.
CEO Steve Weber and Marano acquired PaperTrl in fall in a seller-financed deal from Baltimore-based Tidewater Inc., a construction company rapidly growing through federal contracts. Tidewater first built the software because solutions on the market either lacked needed functions or cost millions of dollars.
The U.S. Bank partnership complements an existing partnership with Visa Inc., which introduced PaperTrl to large customers whose commercial banking software does not handle external purchase orders and invoicing for suppliers and subcontractors.
Likewise, "U.S. Bank can put us in front of their customers," Weber said.
"We're a brand new company most folks have never heard of. What U.S. Bank bring to the table is trust," Weber said. "The payments are being handled by U.S. Bank; there is a lot of integrity and security."
The startup needs banking partners because it is not a bank, unlike most payments competitors. Those companies hold electronic payments for three to five days for "processing," earning interest during that time, Weber said, when the payment could clear in a day.
Instead, PaperTrl charges a flat software subscription fee and allows for faster transactions.
"That is a bit of a distinction in the space," Weber said.
PaperTrl seeks to digitize all aspects of a construction company's procurement and invoicing.
U.S. Bank creates an online spending "card," which can be set up for particular uses and spending limits – such as only for hotel and airfare, or for use by employees to buy lumber at big-box retailers.
"It gets companies out of the requirement to chase down receipts at the end of the month," Weber said.
The company has 24 employees including an 18-person engineering team in Sri Lanka.
Success after 150 pitches
The seed round comes at a time when venture funding is at one of the slowest paces in several years. PaperTrl sent out some 150 pitch decks, Weber said.
"We are individuals – we don't have a fund," Kinman said of the Arch Angels. "Big venture capital is backing away from investing in a lot of these (seed-stage) deals. ... They're focusing cash on those (existing portfolio) companies to help them through the tough time."
Arch Angels backed 16 new deals and five repeat investments last year, he said, and seven of 10 opportunities so far this year.
"PaperTrl has ended up pretty close to the top of the list," he said. "Columbus is a wonderful city with great opportunities and great support (for startups)."
About 14 Arch Angels members have signed on so far, Kinman said.
PaperTrl has not yet filed a Form D on the round with the U.S. Securities and Exchange Commission. Founders are not commenting on the amount to avoid the appearance of publicly fundraising.
This January the St. Louis group celebrated a return with the acquisition of Ryvit, another construction fintech. Many members in that deal are "excited" about PaperTrl, Kinman said.
"That industry is very much behind in the use of technology," Kinman said.
Investment group members met several times with Weber and Marano, he said, and were impressed by their experience and transparency.
"We like them," he said. "We shared this with a lot of our network buddies across the Midwest."
This is the third startup and fourth stint as co-workers for Weber and Marano. Before asking them to buy it outright, Tidewater had hired the consulting firm they started, Silver Kite, for branding help.
In 2011 Weber founded e-commerce startup nChannel Inc., where Marano was in the C-suite, and which he later sold to a partner. The two had been co-workers at the former Sterling Commerce Inc.
