March 23, 2016

Disrupting and democratising the recurring payments market

Notion Capital leads $13m Series C investment into GoCardless

At Notion we are great believers in disrupting and democratising massive markets that have long been neglected by ongoing technological innovation. Over the years we have invested in companies taking markets by storm such as procure-to-pay (Tradeshift), cross border payments (Currency Cloud), talent mobility (MoveGuides) and contract processing (Dealflo), to name a few.

Continuing to build on that belief, today we are excited to announce that Notion has led a $13M Series C investment in GoCardless, a financial services company building a global network for recurring payments. We are joined in this round by existing investors Balderton Capital, Accel Partners and Passion Capital.

Tackling a massive existing market and expanding it!

Although called by different names in different countries (Direct Debit in the UK, Autogiro in Sweden etc), the multi-billion dollar global bank-to-bank cash transfer market that GoCardless addresses has long been established as a payment mechanism. Direct Debit is a much more efficient way to accept recurring payments, but over the years it has mainly been the privilege of larger, nationally-focused organisations (such as utilities, national agencies, mobile operators) due to compliance requirements and the difficulty of accessing legacy banking systems; and since each geography had its own local schemes, it was kept within national borders. GoCardless is breaking down all such barriers.

It’s also an exciting time to be bringing technological advances to the recurring payments market. Given macro trends towards everything-as-a-service for both consumers (music/video streaming, newspapers, magazines etc) and businesses (software, facilities, storage, processing etc) the market opportunity is exploding. This is a theme close to our hearts at Notion, with our exclusive focus on recurring SaaS models.

GoCardless not only serves the existing market that has been using Direct Debit over the years, but is also expanding the market opportunity up by enabling SMBs and newer generation global companies that today don’t have access to the infrastructure, compliance requirements and pricing structures to process Direct Debit payments. Today, SMBs are often chasing their customers for manual payments via cheque or bank transfer with over £250bn overdue to UK SMBs alone; or they are using expensive debit and credit card mechanisms, with failure rates of 5-15% each month resulting in lost revenues and customers. Enter GoCardless…reducing failure rates by up to 80% each month and delivering significant cost savings to boot.

To effectively disrupt such a massive, growing market you need a number of key ingredients, which we believe GoCardless has….

Simple to integrate, easy to use

Here, we come across another one of our big passions; the power of the API economy. The team at GoCardless has built a simple to integrate, scalable and secure Direct Debit API platform. A platform that delivers “low friction adoption”: easy to setup and maintain, no hardware or software requirements, excellent usability and speed.

They’ve built this with global network availability in mind, adding European Direct Debit schemes support in their platform, allowing multinational companies to collect payments across Europe.

Exceptional customer experience

To complement their strong product focus, the team has operated a customer-first culture, a critical dimension in getting customers to migrate from incumbent solutions. Before investing we always talk to customers and every customer call we made stressed the relentless focus from the team to support their customers on the journey and give them the best possible service. Both small and large customers have had similar amazing treatment.

Impressive execution

The team started penetrating the market by enabling smaller companies to take advantage of Direct Debit. Their self-service product and the exceptional support noted above established GoCardless as the go-to platform for Direct Debit functionality. Their simple, transparent pricing fuels strong inbound interest and rapid growth. They have also been showing very encouraging early signs in penetrating and proving their model within the enterprise, larger clients and expanding in international markets. We are excited by the opportunity in this space, where our expertise in building big businesses and growing within the enterprise space should come in handy.

The company has strong metrics end-to-end. Having already processed north of $1B, it is experiencing amazing growth with low churn and impressive revenue retention and expansion.

World-class founder and amazing team culture

Last, but by no means least, we have been impressed in our interactions with the team as a whole and in particular with Hiroki Takeuchi, GoCardless’ CEO from day one. He combines exceptional strategic vision, leadership style and analytical capabilities. He and his management team have build great product and engineering teams, that have a strong reputation in the UK as one of the most admired and hardest to join teams, given their high bar in recruiting. They are on their way to building an equally impressive commercial team, one that can tackle their ongoing venture into larger customers and new markets.

We have followed GoCardless’ progress over the years, from a very small company maturing into a product and customer focused team executing with real commercial bravado. They are one of a small number of break-out FinTech plays in the UK and we are extremely excited to be supporting them in this next chapter of their growth!

Posted by Stephen Chandler, Managing Partner at Notion Capital.

In other news, Notion invests $9m into the rocket driving the Direct Booking Movement.

Keep Updated

Join our network of 1000+ subscribers to keep updated with our new investments, partner insights and portfolio news.

Leave a Comment