There’s no doubt that 2020 will be remembered for a lot of things, most of which are painful. But Bain Capital Ventures‘ partner Matt Harris tells Karen Webster that this year has also marked the tipping point for commercial payments.
“If you ask investors, I would say the recognition that the next big value creation opportunity in payments is B2B payments [has] happened,” Harris said. “I think in terms of market recognition, 2020 was the breakout year — [and] in terms of commercial adoption, 2021 will be more like it.”
Harris said he didn’t always feel so optimistic. Just a few months ago, he and almost every other investor was staring into an abyss of uncertainty and turmoil as the pandemic hit.
But seven months into the crisis, Harris said he has a completely different outlook.
“Sitting here in October, I can say that the companies [in our portfolio] were much more resilient than I expected,” he said.
While industries like restaurants and travel still face “some level of peril,” other sectors like healthcare have enjoyed a V-shaped snapback, Harris said.
Wanted: Companies On ‘The Right Side of History’
Harris said winners are starting to emerge from COVID-19’s huge economic displacements.
For instance, he said that the work-from-home phenomenon “really shook a lot of loose fruit out of the tree in terms of analog processes that simply stopped working. So, for many of our companies that are on the right side of history, in terms of moving processes from analog to digital, the demand has actually accelerated.”
Whether that meant merging back-office functions like accounts payable (AP) and accounts receivable (AR) or updating other financial functions, Harris said 2020 has been the year where digital transformation became a top priority.
“Literally, envelopes with checks in them were piling up in an empty office,” he said. “That sort of thing really does get the attention of the treasurer or CFO.”
He said COVID-19 “lit a fire under digital implementations” — even for huge enterprise-level operations.
Business Is About The Survival Of The Richest Right Now
Harris said lots of companies have already failed or will eventually succumb to pandemic-related woes, and millions of individual workers have or will lose their jobs. But he said firms that will survive all have one thing in common: money.
“You can be as gritty as you want, but if you don’t have cash on the balance sheet, you’re in a lot of trouble,” he said. “[But] if you do, you’re going to be OK usually.”
Harris added that many of the firms in Bain’s own portfolio were lucky to have been raising funds for years before the virus took the world by storm.
The Only Thing To Fear Is Fear Itself
Another important survival characteristic that Harris said he has found has to do with the relationship in recent months between company founders and their investors. He said the tendency of certain investors to bring their fears and insecurities to the table during a crisis only makes a bad situation worse.
“I think founders have so much fear already, but they often don’t show it because they’re trying to be stoic for their partners and their employees and their customers,” Harris said. “For an investor to add to the woes is really malpractice in my view.”
He also said the stock market can have a unique psychological effect on companies and individuals.
“The virus was still raging [in the spring], but the market was telling us everything was OK,” he said. “I think [that] had a meaningful impact certainly in technology, where those companies in particular were thriving.”
The Next Big Thing
Harris said the economy is currently seeing a fairly solid reabsorption of displaced employees, although the jury is still out on the long-term pros and cons of working from home.
That has Bain trying to figure out what second- and third-derivative investments on the pandemic will succeed; just Zoom Technology was the big winner of the first round. The firm is trying to sort companies into COVID-positive, COVID-negative and COVID-neutral baskets, attempting to determine where the long-term opportunities lie.
“Like probably every firm, [we] are tilting towards those companies that are on the right side of this new version of history that we’re all living through,” Harris said.
Watch The Commercial Payments Space In 2021
He’s also continuing to focus on the merchant payment space, one of the areas that Harris knows best. While we were already in the late innings of disruptive innovation on FinTech’s consumer, the other side of the industry was just starting to take off pre-pandemic.
Harris said he predicts 2021 will be a big year for the adoption of new systems on the commercial side.
“[Investor] attention in terms of where there’s still white space … has turned to commercial payments,” he said.