This morning, Seattle-based Doxo (www.doxo.com) announced the launch of its firm, which is focused on solving that gap between all those people who pay their bills electronically, but still are getting paper statements. We spoke with Steve Shivers, CEO the firm, to learn more about the company, its team, and what it's hoping to do for the market.
Steve, thanks for sitting down with us. What's the story behind the company?
Steve Shivers: We started Doxo in late 2008. There are three co-founders--myself, Mark Goris, and Roger Parks. All three of us came together initially at Qpass, another Seattle company, a mobile commerce play here which had grown real successfully. We come from a common background around transaction processing at scale. Between 2001 and when we sold Qpass to Amdocs, we had processed a couple of billion payments. We left in 2008 and founded Doxo. We initially raised some angel money, both from the founders, as well as a small group of angels, we developed the concept, and just raised a Series A recently with Mohr Davidow Ventures and Bezos Expeditions in Seattle. Our total Series A was worth $5.25M from all of our investors.
The company was founded to really focus on a massive market problem, and because we were passionate about starting something new, and providing a new approach to a problem that isn't getting solved very well in the market. We wanted to build an organization and culture, that brings together the best things you've seen--and maybe haven't seen--in the best startups. We wanted to be able to scale that approach to the market. The other thing for us, was that the idea had to be important, and it had to be an idea we believed the market was ready for. We wanted something that moved the ball forward, and does something worthwhile. Even if you have a team, and know how to go about it, you have to have the right idea and the right market--you can't force it. That all came together for us in 2008, when we lined it up and started up.
So what is this massive market problem you saw?
Steve Shivers: How businesses interact today with consumers, is much of that interaction is still on paper. The epiphany moment for me, that catalyzed the aspects of Doxo and got me started, was I had worked for year with large enterprises--mostly telecom companies--sending out tens of millions of documents a month to consumers. I noticed that with my mailbox--if I hadn't checked it for three or four days because I was out on business, there might be four pounds of mail in that mailbox. How colossal of a waste that was using all that paper, and 80 percent of it was junk mail. I was thinking, why do I have to be held hostage by my mailbox? Why do I have to go deal with my mailbox, where I don't control who has access to it, and I have to filter out what I don't want? I walk between my mailbox and the house, and immediately 80 percent of it goes into recycling. That's a huge waste for society. It occurred to me, the only reason I do this is because, buried in all that stuff, are a few things I do need, coming from businesses that serve me. When you open those envelopes, you see notices about going paperless. You open your documents, and they ask you to go paperless. If anyone were to go paperless, I would have done it--I've been paying my bills electronically for over a decade. I do everything online, but I still hadn't moved over to paperless billing. Do you know it costs 75 cents a document to mail transactional mail? That is a total of 35 billion dollars in spending by corporate America, on delivering all those documents. That's ecological waste, millions of tons of greenhouse gases, and inconvenience to the customer. It's something I dread most, spending 4-5 hours a week on average managing important mail, paying bills, filing those bills, and that whole process. Business has a huge incentive here to go paperless, and it's a huge headache, but none of their current approaches are working. The natural average across all business types--cell phones, financial services, etc.--is 12 percent paperless. Again, this is 2010, and we're 20 years into the revolution of the Internet, and there's a lot of highly scaled web models, and we only have 12 percent adoption. What we said we need to do, is to solve the adoption gap. About 50 percent of households pay their bills electronically, more than 50 percent of households visit their bank online, and 65 percent or more have broadband access--but only 12 percent are paperless. That's a big disconnect.
So what exactly are you doing that addresses that issue?
Steve Shivers: There have been some businesses which have allowed people to mail their mail to a warehouse, which scans them and sends them via email. But, we know that people definitely don't want to change their mailing address. We also know that email is not a good inbox for managing critical stuff. What if you miss it, or if it gets mixed in with junk mail, or your spam filter catches it? Businesses know this--not to mention, SMTP is not a secure protocol. There are many businesses and started focused on how to make email secure. The most I can say right now, is we're introducing a web-based service which allows them to do this in a much more, efficient way. Most businesses have lots of investment in paperless. For the biggest businesses, you can go to their web site to sign in, and you're presented options which ask you to turn off paper, and give you the ability to find documents in an archive. That's already pretty ubiquitous. But, even with that, you find that companies are still sending bills, and that half of the transactional mail volume is bills. They might use another channel for bill payment-ie paying through Quicken or their bank--but the vast majority of those people who pay through those never turn off paper bills. That's a problem for the billers. You're still getting a stack of mail and paper. There's three key reasons for why people have not yet gone paperless. That's the problem Doxo solves.
The first one, is on average, a household has twenty two providers who are sending transactional mail, not counting the catalogs. That might be auto insurance, phone bills, etc., whatever. You can't go log into twenty-two sites a month, and not all of those providers support paperless through their web site. Second, consumers want to keep their records, such as phone records, for peace of mind, in their file cabinet. We've seen this recently, when local banks failed and went out of business, and what happened is people have lost their archive of statements, because those websites are no longer available. To be safe about this happening in the future, people are getting paper documents and throwing them in a file cabinet. I have a ton of those "Explanation of Benefits" statements from health insurance, because I have two kids, and between all of those--3 or 4 a month--I don't know why or if I'll need them, so I just throw them in the file cabinet. I don't do this because I necessarily need it, it's just for piece of mind. I file it, so I don't have to fail if I need it later. The third reason, is to make sure I don't miss a payment due date. I can get an email notice that a bill is due, but if I miss it, who get the penalty? Me, not the business. I'm not going to do things that do not work with my personal workflow. I might be traveling over the next couple of weeks, or might be out of town with the family for the weekend. The only way to make sure I didn't miss a bill, is to keep paper.
Doxo offers a new approach, and brings that solution to consumers. How we're approaching Doxo, is in conjunction with businesses who are adding this to their existing paperless channel. The nice thing for businesses today, is because, even though there is only 12 percent adoption of paperless, many of them are already supporting a couple of different channels. The benefit for Doxo is it's a web-based service, and there's no software to install or buy. Businesses can use it on an on-demand basis, and they'll save over 85 percent of what it costs to mail their documents, and drive much higher paperless adoption. We provide lightweight integration which makes it possible to use us in a matter of weeks. The ROI is very high, because it's leveraging an existing investment rather than requiring a new investment to drive higher adoption. We're in beta with commercial partners, who we have not at this point yet announced, but will introduce later in conjunction with our partners. Paperless adoption is a 35 billion U.S. problem for business. That 12 percent adoption total should be four to five times higher, and it's astoundingly low compared to the metrics. We have a breakthrough, which we believe will drive a much higher level of adoption, and savings for companies, as a result, and will provide much more convenience and simplify things for consumers.
Finally, we often talks with startups about their experience fundraising--how tough was it connect with your investors?
Steve Shivers: Our fundraising closed in the later end of last year. I don't know if there has been a tougher year on record for raising venture money. Lots of people were on a holding pattern. When we talked to people, the key was it's never been more important to have a very clear business model. That hasn't always been important, depending on the funding cycle and market cycle. There are always these phases of the investment cycle, where, if you can get lots of traffic, you can worry about a business model later. It's been very important for us to say, up front, that we have a business model here. The great thing about this, is it saves businesses a ton of money. We're funded by the enterprise side, and as a result, we can provide a much better experience for customers. That resonated very well, especially in the desert landscape that was 2009. It's not to say it didn't take a massive amount of work, and the other aspect, is you have to be doing something that is big, and has a profound impact. To scale something, you not only obviously have to have a big market impact, but something where you can build large scale and a durable business. The other thing investors were looking for, and what was important with the nature of this business, is could we run a system and create a system for moving critical transactions with scale. We had the people with the background in building a company successfully, repeatedly, and also had the expertise of what to get to, to problem solve, which was a huge help. That de-risks the investment, and make it much more just executing on market adoption, which was big for investors right now. But, I will tell you in no uncertain terms, it all comes down to hustle in the end. There's a lot more time going into the funding cycle, and you just have to be persistent, and have to believe in what you're doing, and be told no a lot of times until you find people who get it. Plus, you have to keep proof points as you go. The key for us was finding industry references who saw that this is big and transformative. Getting that validation was critical to getting investors to understand the potential of what we're trying to do.