Private Equity Pep Talk: Monetizing Payments to Attract Your Next Investment
In the tenth episode of PayFAQ: The Embedded Payments Podcast brought to you by Payrix, host Bob Butler interviews Demi Horvat, VP of Growth at Serent Capital about their views of integrated payments in the vertical SaaS space.
Serent Capital is a lower middle-market private equity firm that invests primarily in vertically-focused, bootstrapped technology and software businesses – typically with ARR between $5MM and $100MM. They are uniquely focused on business building. As VP of Growth, Demi and her team work closely with their portfolio companies to drive initiatives like sales, marketing org building, and payments.
Demi started her career in consulting then managed a category across Jet.com and Walmart.com before going to business school at Stanford and joining Serent Capital a little over a year ago.
Serent Capital is focused on investing in vertical SaaS businesses and system of record software companies that have strong fundamentals like high retention, growth, great products, happy customers and employees, competitive differentiation and room to grow their business. Serent looks at a potential investment and identifies 3-5 key initiatives where their Growth Team is going to engage with management to drive the business forward.
Demi explained two important aspects SaaS companies must consider when embedding payments: first is understanding what the value proposition is to their customer. Secondly, they must ensure the embedded payments initiative is made a corporate priority by bringing in payments leadership or expertise.
“Payments can be a really big revenue stream and payments companies command very high exit multiples,” according to Demi. Just as important to the SaaS company is the value that embedded payments bring to their end customers. This includes the automation of workflows, reconciliation, pricing transparency and more.
Lastly, when a software company embeds payments, it becomes a value add to a trusted solution they provide to their customers, so the price is often less of a concern.