How a Scrappy Startup Is Using the Pandemic to Take on a Big Competitor in the Valley
Los Angeles in general — and the San Fernando Valley specifically — are not exactly known for being hotbeds of enterprise software competition, but two of the world's leading providers of a niche type of accounting software are duking it out for market share and the competition is escalating during the coronavirus pandemic.
One is a startup that has raised $90 million in venture funding and the other is a publicly traded corporation with a market capitalization of $3.4 billion. Their headquarters are about five miles apart, the incumbent in Woodland Hills and the startup in Sherman Oaks.
"This is nuts to me," said Mike Whitmire, co-founder and CEO of FloQast. "It's the weirdest battle that you would never expect L.A. to have, with just the 405 between us."
FloQast, with 150 employees, closed a $40 million Series C round led by Norwest Venture Partners earlier this year at a $250 million valuation, according to Pitchbook. It is trying to nip away market share from Blackline, which was founded in 2001, and has 1,005 employees. They compete in an esoteric realm only accountants would know about: close management software. It helps companies automate the normally tedious process of closing their books every month to be able to generate more timely and accurate financial statements.
Blackline declined to make anyone available for this story.
A screencast of FloQast close management software's interface.
While many companies are hunkering down just trying to make it through to the other side of the pandemic, FloQast is using the crisis as an opportunity to raise the stakes against Blackline. Starting Wednesday, FloQast is giving the implementation of its software away for free to any Blackline customer through July, promising that once they sample FloQast they will never go back to Blackline.
"It's definitely an opportunity that has presented itself because of COVID-19," said Whitmire. "During good times people are happy to reimplement and will spend more money. Now that budgets are getting tighter people are looking more closely at what better options are being deployed."
Whitmire started FloQast in 2015 with $50,000 in pre-seed funding from the Amplify.LA accelerator after seeing the limitations of accounting software when he was an early employee at Cornerstone OnDemand, joining a year before it went public in 2011. He spoke to dot.LA this week on Zoom call with a virtual background of Kirk Gibson celebrating after his famous walk-off homerun the last time the Los Angeles Dodgers won the World Series in 1988. Whitmire loves sports and relishes playing a scrappy David to Blackline's slow-footed Goliath.
"I'm super competitive," he said. "We poach clients from them, we've taken 25 to date."
FloQast has had considerable success selling its services to sports teams, who he says often have relatively complicated accounting practices. An early contract with the Golden State Warriors led to deals with the Los Angeles Lakers, Boston Celtics, Milwaukee Bucks, Washington Wizards, San Francisco 49ers, Philadelphia Eagles, and Chicago Cubs.
The company also has deals with around 900 other companies, including well-known names like Zoom, Yelp, Zillow, Grubhub, and Lyft.
A screenshot of Blackline's enterprise software.
FloQast charges anywhere from $10,000 to $100,000 a year for a subscription, not an insignificant amount for companies trying to trim expenses in an uncertain environment. Whitmire makes the argument that his software saves substantial amounts of money in the long run. If that is not enough of a selling point, he is willing to offer struggling clients discounts or deferred payment until the crisis is over, which he says he can afford to do thanks to January's $40 million cash infusion.
"At times like these you need to be accommodating," said Whitmire. "We're in a position to do that. If a client needs a break in their billing, we can make that happen because of our balance sheet."
Of course, Blackline has a much bigger balance sheet, with $607 million cash on hand at the end of last year, but if Whitmire is nervous about so aggressively taking on such a bigger foe, he does not show it.
"It's been a lot of fun competing with them." said Whitmire. "They have a bullseye on us internally and I don't expect much to change."
Whitmire hopes that the competitor across the 405 will decide to set its sights more on big companies who employ hundreds or even thousands of accountants. "We are good at mid market," he said. "They are good at enterprise. They have bigger fish to fry."
- Startups - dot.LA ›
- FloQast Takes on Close Management Software Firm Blackline - dot.LA ›
- Cornerstone OnDemand's CEO Adam Miller Steps Down - dot.LA ›
Subscribe to our newsletter to catch every headline.
Santa Monica-based Bird could benefit from a post COVID-19 world where fewer people are using public transportation, especially in urban areas in Europe and Asia where car ownership is more expensive, according to an optimistic new research note published by Pitchbook.
"We believe the thesis for shared mobility remains intact, and expect public aversion to mass transit to drive a $15 billion addressable market expansion for the industry," Asad Hussain, an emerging technology analyst at Pitchbook, wrote late Wednesday . "Anecdotally, we are hearing of an uptick in interest in mobility among investors seeing the light at the end of the tunnel."
As of earlier this month, public transportation ridership was down approximately 70% in the U,S and 80% in Italy and France. Metro ridership in Los Angeles has fallen from about 1.2 million average weekday boardings to 360,000.
Scooters have often been billed as a compliment to public transportation, helping riders reach the "last mile." However, Bird is already seeing evidence riders are replacing buses and trains with scooters, a habit the company is optimistic will stick. Bird also hopes that the closing of city streets during the pandemic could make using scooters more appealing since they have always struggled with being too fast for sidewalks and too slow for weaving in and out of vehicle traffic.
"Over the past month, we've seen sustained increases in trip duration of more than 50%," wrote Ryan Fujiu, chief product officer at Bird in a blog post. "Initially we attributed this to a desire to be back outdoors experiencing fresh air and open space, but we're seeing strong indications that it may be a much longer-term trend related to things like public transit concerns nearly a thousand miles of new open streets and a spike in the construction of protected cycling infrastructure."
Last month, cash-strapped Lime raised emergency funding at a steep 80% discount, with Uber as the lead investor. Bird had the good fortune to raise new financing this year before the coronavirus slashed valuations but still has tried to preserve cash, laying off 40% of its workforce in a widely criticized Zoom call at the end of March. More deals and consolidation could likely be ahead.
"The pandemic will exacerbate a trend that we were already starting to see early signs of, which is consolidation in the industry," said Daniel Hoffer, managing director of Autotech Ventures.Meanwhile, Bird unveiled its latest new feature Wednesday called Quick Start, which allows riders to activate a nearby scooter via bluetooth on their mobile phone simply by walking towards it instead of scanning a QR code. Bird says early testing shows the new process, which is gradually being rolled out to markets, cuts the time it takes to unlock a scooter in half.
- Lime Temporarily Shuts Down in California Due to Coronavirus - dot ... ›
- Bird Acquires European e-Scooter Company Circ, Raises $75 ... ›
- Here's How Bird Laid Off 406 People in Two Minutes - dot.LA ›
- Bird Pay Will Let Scooter Users Purchase From Local Vendors - dot.LA ›
We are very excited to host our next startup pitch showcase at 11:00 am PST on Thursday, June 4th. Submissions are now open for company nominations to present at the live event. We are looking for Southern California startups in real estate technology. Submissions will be evaluated on a rolling basis.
Brad Inman, founder of Inman, the leading real estate news source along with Spencer Rascoff, co-founder, executive chairman at dot.LA will be leading the discussion as the two leading active investors and experts in this space.
Brad Inman, founder at Inman
Brad Inman, Founder at Inman<p>Award-winning journalist and publisher, Brad Inman is the founder and owner of Inman, real estate's leading name in news, information and innovation since 1983. In addition, his Inman-branded real estate business and technology conferences bring thousands of thought leaders together each year to share best practices and promote innovation. Countless new products and companies have been launched at Inman conferences.</p><p>A native of Carlinville, Illinois, and a graduate of Boston University, Inman began his career as a housing policy analyst and community advocate who parlayed a weekly real estate column in the San Francisco Examiner at the dawn of the Internet era into a series of entrepreneurial ventures. In 1999, Inman founded HomeGain.com, an early provider of online marketing programs. HomeGain was sold to Classified Ventures, LLC, in 2005. That same year, Inman founded TurnHere, an online commercial video platform and, in 2008, founded Vook, an online e-publishing platform. He also was an early investor in Curbed.com and served as chairman of the board before it was sold to Vox Media. A compelling speaker, he is a regular at real estate events around the nation and has been a visiting lecturer in the School of Journalism at the University of California, Berkeley.</p>
Spencer Rascoff, Co-Founder, Executive Chairman
Spencer Rascoff, Co-Founder, Executive Chairman<p>Spencer Rascoff is an entrepreneur and company leader who co-founded Zillow, Hotwire and dot.LA, and who served as Zillow's CEO for a decade. He is currently executive chairman of dot.LA and a board member at Zillow and TripAdvisor. In fall 2019 Spencer was a Visiting Executive Professor at Harvard Business School where he co-taught the "Managing Tech Ventures" course. In 2015, Spencer co-wrote and published his first book, the New York Times' Best Seller "Zillow Talk: Rewriting the Rules of Real Estate." Spencer is the host of "Office Hours," a monthly podcast on dot.LA featuring candid conversations between prominent executives on leadership, diversity and inclusion, and startups. </p>
Coronavirus Updates: Disney Pitches Florida Re-Open; Valence's Push for Interns; Snap, LAUSD and Celebs Partner on Reading
Here are the latest headlines regarding how the novel coronavirus is impacting the Los Angeles startup and tech communities. Sign up for our newsletter and follow dot.LA on Twitter for the latest updates.
- With internships cancelled, Valence tries to fill the void for young black professionals
- Florida is poised to open Disney World and SeaWorld. Will California be far behind?
- Snap and LAUSD promotes reading during COVID, with an assist from celebs like Alicia Keys