After three rounds of funding in its first three years of existence, bill-paying startup Doxo was faltering and investor enthusiasm was waning. Rather than sign an unfavorable term sheet to move forward, CEO Steve Shivers chose to turn down venture capital entirely until he could rebuild the business.
The Seattle-based company announced Wednesday that it has raised $18.5 million in Series C funding led by Jackson Square Ventures, its first new round in 11 years. As of this writing, it’s a small size for a funding round — perhaps reflecting the venture vibe when it last arose than in 2022 — but a decade of bootstrapping has taught Shivers to be conservative with capital. He says he intentionally took less venture capital so that a smaller portion of the company would be diluted to outside investors. Instead, he’s banking on his company to be self-sustaining if VC money ever runs dry again. Doxo became profitable in 2020 and is now generating over $40 million in annual sales, he says forbes. “We believe we will hit over $100 million within about 24 months.”
Doxo’s valuation after the new round is more than five times higher than the previous brand, Shivers says, although he declined to give details on the number. PitchBook lists the new valuation as $119 million, but Shivers thinks that number is too low. In any case, Doxo doesn’t appear to be trading at 10 or more times its sales, as is often the case for hot tech startups at this funding stage. “When there are irrational valuations in the market, you see companies that benefit,” says Shivers. “Some of these companies then get bought or go public and now they have very frustrated investors because they end up having to do a second leg.”
VC-backed CEOs, says Shivers, can either “try to grow the business to catch up on funding,” or they can take the opposite approach, as he believes Doxo has done. He said he has turned down opportunities to raise new venture capital twice in the past four years because the terms were too one-sided to benefit the investor. “By waiting, we’ve raised as much or more capital with much less dilution,” he says. Meanwhile, a newer business segment of Doxo, which the company launched during its business transition, began to grow, helping the company’s revenues surpass the $29 million in venture capital it had raised in its lifetime.
Founded in 2008, Doxo started out as an all-in-one bill management platform for consumers that charges a per-bill fee or a monthly subscription for unlimited service. Business growth was slower than expected, so after its Series B round in 2011, the company scaled back hires and experimented with new products. “Our choice was to be lean and capital efficient, or to increase and take a lot of dilution at a valuation that we didn’t think reflected potential,” says Shivers. In 2015, Doxo added a business-to-business software offering geared toward billers (e.g., utility companies or healthcare providers) rather than bill payers.
Shivers says the biller business picked up steam in 2018 and has contributed to 10x revenue growth since then. More than 120,000 billers now work with Doxo. Especially for small businesses, which make up the majority of customers, Doxo’s software can streamline a process that would otherwise be done via paper invoices. According to Shivers, most of the Series C will go towards growing this business segment. He plans to double the headcount to at least 200 – some to onboard more billers, others to improve the software, such as
While Doxo will now prioritize growth over profitability, Shivers believes it can return to break-even cash flows if necessary. For new hires at a startup receiving a common stock option grant, this should be an important consideration, he claims. If a startup raises big bucks but then implodes — Shivers points to Better.com as a prominent example — venture capitalists who own preferred stock will get financial returns before common shareholders get their share. “You get a company that becomes like the walking dead because common stock really isn’t an incentive anymore,” says Shivers. “The fact that we have strong earnings means employees have a lot of confidence that the common stock is worth as much as the preferred stock.”