A Q&A with MineralTree founder and CEO BC Krishna. The Cambridge, Massachusetts–based company was founded in 2010 and closed a $6.3 million venture funding round in late June. Investors included Fidelity Growth Partners and .406 Ventures.
SUB: Please describe MineralTree and your value proposition.
Krishna: MineralTree is a software company that has created a cloud-based payments solution that helps small-and-medium businesses make and manage payments more effectively.
Payments are a chore for most businesses: manual, paper-based, ad hoc, fraught with risks of internal fraud, and more recently, online fraud. According to a recent payments study done by the Federal Reserve Bank, businesses issue about nine billion paper checks every year. For a variety of reasons, that number is not shrinking—it’s actually growing by about two percent per year.
The cost to issue business checks—and subsequently deposit those checks—can run anywhere from $20 billion to $50 billion annually. And that does not include the cost of fraud, USPS subsidies, errors and returns, and check imaging and processing costs.
As these businesses grow, even a modest increase in payment volume, modest variation in payment types—check, ACH, wire, credit and debit card—and some additional rigor in payments processes, e.g., basic controls like dual approval and segregation of duties, can tax them badly, especially since they often cannot afford to add more headcount to their accounting departments.
With MineralTree, SMB payments are simple, secure, mobile, and automated. And we do that for roughly the same cost as what they spend today on making their payments, while also allowing them to grow without adding more personnel.
We deliver our solution in partnership with banks—the banks that serve small and medium-sized businesses. To banks, the MineralTree value prop is about delighting customers, driving additional revenue, defending against disintermediation from third party payment processors, competing more effectively against other banks, as well as helping protect their customers from the threat of fraud. We take our bank-partnership approach as a core operating principle—we describe our solution and our go-to-market approach as being ‘built for banks’.
SUB: Who are your target markets and users?
Krishna: There’s a huge segment of underserved small-and-medium sized businesses—roughly 26 million businesses with revenue less than $50 million per year. Accounting personnel in these businesses—bookkeepers, controllers, CFOs and business owners—these are the folks that can really benefit from our solution. That’s an awfully large number of businesses, and we think we can reach them effectively through their trusted bank relationships.
SUB: Who do you consider to be your competition?
Krishna: Our biggest competitor is inertia. This is a very big market and a very big market opportunity. And for all of that, it’s a bit surprising that SMB payments remain an unsolved problem, and the market greatly underserved. However, we’re seeing change.
Over the past 18 months we’ve seen a significant up-tick in the number of banks that recognize the opportunity in small business payments—hopefully this new awareness and understanding of the opportunity will help drive change.
There are some legacy solutions in the market that have chosen to go after the SMB market directly, and dis-intermediate banks in the process. We think this approach is a bit short-sighted, but the existence of these solutions serves as an effective everyday reminder to the banks about the need to protect and evolve their core payments franchise.
SUB: What differentiates MineralTree from the competition?
Krishna: We talk a lot about MineralTree being ‘built for banks’—and there are several important, differentiating elements that the term represents. From solution architecture—scalable, cloud-based, easy to adopt; business model—revenue share with banks; go-to-market approach—no direct sales to business customers; security—payment protection insurance; and razor-sharp focus on features and functions to drive customer satisfaction and bank fee income.
I don’t believe you can build a payments solution without fundamentally addressing security. And we understand payments and banking security better than any player out there. My last company, Memento, focused exclusively on helping banks defend against significant, unsolved fraud threats. MineralTree solutions are specifically built to protect businesses against the most insidious forms of employee fraud, and the creeping threat of costly, online fraud. In fact, we now offer guaranteed fraud protection. Businesses that make payments via MineralTree are protected—to the tune of $100,000 per account per year, and up to five accounts.
SUB: When was the company founded and what were the first steps you took in establishing it?
Krishna: I’ve been engaged in banking, payments, and fraud detection for many years now. At my last company, Memento, we addressed costly, unsolved fraud challenges and I became aware of the significant challenges that SMBs face around payments—around security but also simplicity and efficiency. As we dug into the opportunity, we were truly surprised at both the depth of the problem, and the total lack of solutions. Small-and-medium businesses have payment needs that are not being met.
We started the company in 2010 and partnered with Silicon Valley Bank to create, pilot and eventually launch the platform.
SUB: What was the inspiration behind the idea for MineralTree? Was there an ‘aha’ moment, or was the idea more gradual in developing?
Krishna: When I realized just how underserved SMBs are in this area, and how banks have struggled to meet the needs of this segment, launching MineralTree was a no-brainer.
SUB: How did you come up with the name? What is the story behind it?
Krishna: Ah. I lost one of my great heroes a couple of years ago—my dad. And then shortly thereafter my father-in-law, who I loved deeply. My dad was a geologist, and my father-in-law a nuclear chemist. Both were into minerals, and the thought was to come up with a name that commemorated them. We used some word combinations to come up something that sounded interesting, but more importantly, for which a domain name was available.
SUB: What have the most significant obstacles been so far to building the company?
Krishna: Some of it is fairly common to all entrepreneurial efforts—finding the right people, building a great team, meeting the mark with the first version of the product, signing the first customer. And then, focus, focus, focus. The opportunities are many, and it is pretty easy to get distracted.
SUB: You raised $6.3 million in a second round of funding over the summer. What are your plans for the funds?
Krishna: That was our A round, and we’re investing the resources to further enhance the product and build out our exceptional team.
SUB: Why was this a particularly good time to raise more outside funding?
Krishna: The iron is hot, as they say, in payments in general, and SMB payments in particular. Banks, entrepreneurs and investors recognize this fact and there’s a lot of activity.
SUB: How does the company generate revenue or plan to generate revenue?
Krishna: Our business model is about being in a revenue share agreement with our bank partners. We generate revenue when the bank’s customers use and pay for our solution.
SUB: What are your goals for MineralTree over the next year or so?
Krishna: We have an exciting and growing list of banks planning to deploy MineralTree powered solutions over the next 12 months. We’re focused on delivering exceptional products and services to these partners, and to facilitating the ‘sell-thru’—the delivery of our solutions to the end-customer. We also have some important, I’d even say game-changing, product releases planned over the next two quarters.
MineralTree – www.mineraltree.com
