Corey Gross is setting out to become part of the "plumbing" of the banking business.
He's the CEO of Sensibill Inc., a Toronto-based startup that enables bank customers to access their receipts from a smart phone connected with their bank accounts. Receipts get into the system in two different ways: customers can take photos of them or retailers can send them directly to customers through a digital interface that Sensibill provides.
Because many customers have accounts in multiple banks, the company's technology cannot be exclusive to any one bank. Therefore Mr. Gross has to convince banks to sign on even though the platform doesn't give them an exclusive advantage. How can he persuade investors to back him despite the potentially lengthy sales cycles?
In 2010, Mr. Gross was a law school graduate who realized that he didn't want to be a lawyer. When he started thinking about possible startup ideas, he remembered a frustrating incident from his university days. He had bought a universal controller and wanted to return it, but couldn't because he no longer had the receipt. To eliminate this hassle, he started a company that produced digital receipts for large retailers.
Although the company eventually wound down – the target market was difficult to grow – his activity in this area had not gone unnoticed by the banks and investors he had been talking with. "I became known as the digital receipts guy," he recalls. In early 2013 he was contacted by a Canadian bank that was interested in receipts as part of their digital wallet strategy and he decided to start another company that targeted banks rather than retailers.
The first thing Mr. Gross did was hire a chief technology officer. "I knew that I needed a true CTO," he states. "Rather than hiring a coder, I needed to have technological leadership and someone who understood technological requirements from a banker's perspective."
He convinced Jamie Alexander to join him. Mr. Alexander had managed huge client-facing projects at IBM. He had been deeply involved in the first e-commerce boom and was enthusiastic about the possibilities of developing a mobile platform.
Recognizing that machine learning was going to be important for the platform, the two executives pulled together the development team they needed. "It's a little like collecting trading cards," says Mr. Gross. "You have to get the right person for each job." But building a team is expensive, and so Mr. Gross needed to persuade investors to come on board. How would he do this?
Mr. Gross believes there are two important aspects of attracting the investors he needs. The first is building a product that the bankers want. He has spent a year working on pilot projects with several major banks. "The banks have to buy into it," he says. "We have spent a lot of time understanding their needs. Bank customers are already accustomed to online banking, and our platform has to fit what they're used to. The user interface has to look really good.
Frequent meetings also give bank executives lots of time to ask questions about me, the company and where we want to go with the product." The result of this process has been a mock-up of what the system looks like on a consumer's smart phone. This provides something tangible to show investors and other banks, and signals to investors that the company is attuned to bank needs.
Second, Mr. Gross targets investors who will be most interested in Sensibill. "Raising capital is very time-consuming," explains Mr. Gross, "and so you need to understand what is the right pitch for the right person at the right time." Mr. Gross looks for investors who have themselves been successful entrepreneurs in the financial services industry. "They get what we're doing. They understand how to work with banks and what their product requirements are." In addition, investors with deep links to financial services provide more than money. Mr. Gross states, "Not only have I acquired needed financial resources, I have also gained access to their Rolodex, their personal brand and their experience. This provides enormous validation for what I'm doing."
Mr. Gross reports that Sensibill has received $2-million of investment capital and is working now with several major Canadian banks to integrate the digital receipts platform into their online banking application. Bankers in the U.S. and Europe are starting to contact them. "There's a club. All of the insiders in banking know each other and bankers are telling other bankers that they should come and talk with us."
Mr. Gross has learned that when you're developing a product that is important to savvy customers who have a lot at stake in signing on with you, the information and networks that investors can provide are as important as their money, and so it's important to attract those with rich experience in your industry.
Becky Reuber is a professor of strategic management in the Rotman School of Management of the University of Toronto.
This is the latest in a regular series of case studies by a rotating group of business professors from across the country. They now appear every Tuesday on the Report on Small Business website.