UPDATE: Oct. 14, 2021: When AvidXchange followed through with its offering on Tuesday, it was bigger than previously planned. The company ended up selling 26.4 million shares in the offering, instead of 22 million, and priced the stock at the upper end of its prior potential range, listing them at $25 per share, according to a report from Bloomberg. The changes resulted in a $660 million overall offering value.

Dive Brief:

• In a regulatory filing Monday, AvidXchange, which provides software to automate accounts payable processes, said it aims to raise at least $445 million in net proceeds from an upcoming initial public offering valued at as much as $582 million. A $23-per-share price could still change as it progresses toward the sale of 22 million shares.
• The Charlotte-based company's annual revenue rose 24% last year to $185.9 million over 2019 as the number of transactions it processed for customers climbed. Still, it reported net losses of $101.2 million last year and $93.5 million in 2019.
• AvidXchange's software currently digitizes accounts payable and payment processing for some 7,000 businesses in the real estate, homeowner association, construction, financial services, healthcare, education and media industries, among others, according to the filing. The company also partners with banks, including Fifth Third, Bank of America and KeyBank, for indirect sales of its services.

Dive Insight:

AvidXchange is one of dozens of fintechs seeking to carve out a niche in the trillion-dollar business-to-business (B2B) market for payments services. The North American B2B market alone totals about $25 trillion in payments annually, the filing with the Securities and Exchange Commission said, citing a 2018 report from card giant Mastercard.

The B2B opportunity is especially large in the U.S., where the digitizing of B2B payments has lagged other countries, as well as digitization of consumer payments. Some 42% of B2B payments volume in the U.S. is still handled with a paper check, resulting in increased costs and inefficiencies for those businesses, the filing explained. Those paper-based processes often also include other outdated manual methods.

The COVID-19 pandemic, with its work-from-home requirements, led more businesses to consider shifting to digital payment vendors as the notion of continuing paper-based processing from home became unwieldy.

AvidXchange targets its software services at the the middle-market segment of that vast B2B market, with a target sweet spot of about 435,000 companies with between $5 million and $1 billion in annual revenue, the company said in the SEC filing amendment, which added details to an initial filing for the offering last month. 

The company said it believes there is a $20 billion annual revenue opportunity in enabling businesses to digitize the accounts payable and payments processes, and another $20 billion opportunity in enabling their suppliers on the other side of transactions to better manage their expenses and cash flow.

Other software providers are focused on meeting the demands of large businesses and smaller ones, but the middle market is underserved, according to AvidXchange.

"We built our business to solve this gap for the middle market and believe we have become a uniquely strategic platform for our customers’ CFOs, treasurers and finance teams by digitally transforming how they receive, manage and pay their bills," it said in the filing.

AvidXchange expects to spend the proceeds of the offering, which could be as much as $512 million, to redeem about $170 million in preferred stock and for general corporate purposes, which it expects will include hiring; more investment in sales and marketing; product development; working capital; and potentially acquisitions.

Chairman and CEO Michael Praeger, 53, a career entrepreneur, co-founded the company in 2000. Prior to launching AvidXchange, he co-founded career and recruiting web site PlanetResume.com, which merged with CareerShop in 1999. Before that, he co-founded the tax billing and collections software company InfoLink Partners, which catered to municipalities. 

Competitors in the space include Paymerang, Veem and Melio, among others, but the companies are zeroing in on various, often different slices of the large market, reducing the places where they compete head-to-head.

A "history of operating losses" topped the company's list of risk factors identified in the filing, and it noted that it operates in "highly competitive and fragmented markets" in an industry that is "rapidly evolving."

The offering would value AvidXchange at about $4.4 billion, Reuters reported; earlier this year, it cited unnamed sources for a report saying the upcoming IPO might value the company at more than $7 billion.

The company has attracted funding from some noteworthy venture capitalists over the years. Among them was PayPal co-founder and billionaire Peter Thiel and FT Partners Managing Partner Steve McLaughlin, but they no longer rank among the company's biggest backers. 

Bain Capital Ventures is AvidXchange's largest stakeholder, which will remain true after the offering, with a 12.2% stake. The second-largest stake will be held by Praeger, who will own 7.4% of the company after the offering. Mastercard is also an investor and will have a 6.5% stake.