- Who are your competitors?
- What does the financial stack of a crypto company look like (b2b products for crypto companies) & where do you differentiate?
- How are companies managing this flow today?
- Can you share more about your product?
- How will you be indispensable? What’s your moat?
- What’s the roadmap?
- What if Bill or other web2 incumbents build this?
- How will you make money?
- What’s your TAM?
- Why crypto native companies first?
- Why now?
- What’s your go-to-market and target audience focus?
- Why AP/AR as the part of the stack to go after?
- Why not start with a protocol first and make payments on-chain?
- Parallax: Memo + Deck
- Vision: Bring the power of crypto to all businesses!
- Need: Web3 businesses need to & increasingly prefer to use crypto for b2b pay
- Problem: But infrastructure for b2b payments hasn’t kept up
- Solution: Streamlined invoicing (AR) & bill pay (AP) in crypto
- Traction: Web3 businesses needed this yesterday
- Distribution: Viral product reinforced with accounting & ecosystem champions
- Team: Strong in product & eng; deep in crypto; experienced problem ourselves
Who are your competitors?
While we understand the need to be aware of competition, we do want to note that we prioritize laser focus on solving customer problems.
In addition, we believe that the bigger opportunity is to grow the overall market by growing b2b crypto transaction volume, rather than growing just our share of the existing market.
There are two alternatives we hear about the most from our existing customers which do not meet their needs:
- Spreadsheets, scripts, copy/pastes. Our biggest competitor today.
- Coinbase Commerce
- Built for b2c merchant (e.g. ecommerce) use case.
- Lacks basic b2b functionality such as persistent customer history.
- b2b invoicing is far from their core focus, so it lacks investment and is not high priority.
- Request Finance
- Built with sole prop or freelancer use case as the focus
- They don’t support team accounts.
- They don’t have the proper bill pay approval workflows (very important to Magic Eden, for example).
- Protocol/token play
- Splits their attention and slows product velocity due to additional complexity of developing on-chain.
- Customers are either indifferent or actively averse to the protocol implementation. Figment explicitly said they don’t want to put their business finances at risk by running payments through Request’s smart contract.
- Token does not seem to have great distribution benefits.
There are other companies that come up in investor conversations as potential competitors. However, we (and customers) don’t consider them mutually exclusive or in the same category.
We position ourselves today to be very focused on web3 flows and tokens and b2b workflows.
What does the financial stack of a crypto company look like (b2b products for crypto companies) & where do you differentiate?
Where we differentiate
Focus on AP/AR end to end → gives us the opportunity to expand given strong, viral growth and owning the vendor/buyer relationship & flow of funds
- Parallax focuses on the core AP/AR (invoicing/bill pay) use case in crypto across tokens, chains, wallets, etc. Laser focus in this core use case will allow us to amass a network of buyers and vendors that is defensible over the long term and lets us grow into infrastructure opportunities.
- “All in one” → spread too thin too fast. It’s very tempting for companies to say that they’ll be “the all-in-one stack” for all payments of a company from payroll to invoice to expenses to equity management etc. But this is very complicated in practice. Even in the web2 world, there are whole billion dollar businesses focused on just one function. Companies underestimate the power of focus.
- Some of our customers have evaluated all-in-one options for vendor payments and passed because the functionality did not work well enough for their needs (e.g. Gilded Finance, Request). They still have to cobble together spreadsheets and other products to make their workflows work.
- Strong wedge → viral growth. By focusing in this wedge that allows us to grow virally, with low CAC, we then get the opportunity & permission to expand to other such functions.
Focus on crypto-native mid-market
- No one has focused enough on the crypto-native mid-market for AP/AR, and hence can’t address the unique needs of Magic Eden, Figment, Triton (our customers). Why? It’s typically easier to address the freelancer or long-tail first.
B2B Payments (not B2C, not payroll)
- Payments is a big space — we focus on b2b payments and billing. Historically B2B payments lags behind and not widely thought of because it’s not as prominent as checkout flows, payroll and b2c flows. But the b2b payments world is massive and involves different experiences and workflows than B2C (given higher transaction volumes hence the need for approvals, more protections, etc.)
Where we sit today
There are parallels with the web2 stack today. There’s the equivalent of banks where treasuries and money sit, then verticals that integrate into banks for all types of inflows and outflows, and effectively everything needing to flow into the general ledger for accounting.
(Note: we chose US startup-centric examples for familiarity. The variation and opportunity is HUGE, especially when looking internationally and across business verticals).
The b2b payments function alone in AP/AR is a whopping $125T global opportunity.
We believe the web3 company stack will have parallel companies in a similar structure with the addition of the concept of a “crypto subledger” layer.
How are companies managing this flow today?
- He has a giant spreadsheet with a dump of customer activity
- Every month he has a script that sends an email to clients to pay
- Each wallet for each client is unique so clients are not switching wallets every time and funds are kept semi-private.
- He waits for clients to email him back their payment transaction hashes
- Often, reminder emails must be sent so that payments are not late
- He verifies it manually with the spreadsheet, making sure certain things are correct:
- Date (so it’s not a duplicate or previous payment)
- Wallet address
- He forwards the details to the accounting / finance team
- The team creates a new “bank” or account for the wallet
- The team copies each line item over to their client accounts in Xero to reconcile each transaction
- …Repeat 150 times
Bill Pay (AP)
- He asks department heads to tell vendors to email invoice PDFs to ap@magiceden.
- Sometimes he uses Asana to track and visualize it across teammates in the company, but it’s too many extra steps.
- Types of payments include:
- one-off or recurring NFT campaigns or agreements
- blockchain infra services (e.g. triton)
- agency needs (marketing, design, etc.)
- freelancers/content creators
- (soon) sponsorships need for invoices)
- He receives the PDF invoice & pulls info from the invoice to his giant spreadsheet, specifically putting in
- The amount due
- The vendor details
- Wallet address
- Official Name
- Point of Contact
- He emails the right people in the company to get approval for the payments. Most transactions need at least one approval, if not more.
- Once approved, he then pulls out the official wallet of MagicEden from FTX and sends the payment to the vendor wallet address
- He adds it to their masterlist of all customer activity on a spreadsheet
- He goes back to the email, attaches the transaction hash, and sends it to the vendor for confirmation.
- He marks the email as “paid” via a status or archive as well so it’s out of his inbox.
- He coordinates with accountants for proper bookkeeping
- Accountants will log everything manually on Quickbooks
Can you share more about your product?
- May was focused on customer validation. We intentionally did NOT want to write any line of code until we got sufficient customer validation.
- Towards the end of May, we started building a prototype specifically for one of our design partners. Within 1.5w of usage, they’ve onboarded multiple clients and processed six figures’ worth of invoices. We’ve gotten great feedback and continuing to work with them to improve the product.
- We’re currently focused on the fundraise (so we can move and build faster) while trying to make progress on our product as much we can.
Ask us for a working demo during a call.
At a high-level, here’s the workflow.
How will you be indispensable? What’s your moat?
- Strong network effects. As we’ve seen with incumbents like Bill.com that moved companies from paper checks to digital, network effects are very strong. Despite a relatively clunky product, Bill.com remains the market lead in AP/AR software. We want to be in a position where we also create a strong moat with network effects between buyers and vendors in the crypto world.
- Winning crypto accountants and finance teams. Accountants are key for distribution and retention. Similar to Bill.com, Quickbooks, etc. we’ll incentivize distribution via accountants and, over time, they’ll be key to keeping their own clients on the platform. They’ll be first users of the product and over time, we’ll create partner & referral programs and even an accountant facing dashboard.
- Switching costs. Deep integrations with customers’ systems will make it harder and less worth it to switch. In addition to accounting and back office software, customers have expressed interest in integrating with other parts of their internal stack. For example, companies with dynamic pricing want APIs that allow management of invoices based on events within their systems.
What’s the roadmap?
We want to work closely with our design partners (we meet with them biweekly) to design out the right types of products and will prioritize features accordingly.
- Customer need. What do customers want — as we work closely with them?
- Moat / strengthened retention. What gives us the stronger, long-term moat and keeps customers on the platform?
- Short-term: Acquire users & grow strong network of vendors & buyers.
- Invoicing (AR) core functionalities
- Bill pay (AP) core functionalities
- Accounting integrations. Seamless crypto integrations, with the right price tracking into Quickbooks/Xero
- Support for various tokens. We’ll start with USDC-SPL and USDC-ETH while laying foundations to expand to more chains and token types.
- Mid-term: Expand given our strong user base.
- Wallet options. Easily generate wallets for users to send or receive payments from. Some customers are already hacking at “privacy” solutions by generating various “randomized” wallets per vendor.
- API Integrations to automate the full process, with internal systems, and build deeper switching costs
- Financial & Cash Flow Management. Done for the crypto use case.
- Swaps & Exchanges. We enable the convenience of swaps or exchange if one party wants to receive one token over the other.
- Risk & Compliance products. Given we have the history of vendors and buyers, and can build on top of these vendor and buyer relationships.
- Revenue Recognition, Accounting & Tax Products. We’ve heard from customers that automating this entire process
- Long-term: Make ubiquitous.
Handle workflows for invoicing, bill pay, and accounting integrations. The goal is to build a user base quickly (network effect) while getting exposure to the flow of funds.
Build additional products, infra and monetization opportunities on top of this strong user base. Directions include traditional financial products such as loans/credit as well as more crypto-native products like integration with yield. This allows us to reinforce the network effects, grow switching costs and start to monetize more heavily on transaction/withdrawal volume. In current proposed order:
Offer our infrastructure as a service for all types of b2b payments.
What if Bill or other web2 incumbents build this?
Bill.com is the biggest player in this space. Stripe (while often brought up) sits in the B2C space and will likely prioritize B2C crypto use cases if they ever get to building their crypto products out. B2C is very different from B2B.
- We don’t think incumbents will enter in the short/mid-term.
- They have bigger and more predictable growth by focusing dedicated resources on web2 markets.
- Web3 and crypto currently have some risk from a brand + user backlash perspective. We expect this to change in the coming years, but for now the risk/reward isn’t there for them.
- Real-time payments cannibalizes existing revenue. Today the bill.com’s of the world charge a % transaction specifically for offsetting the slowness of ACH and wires.
- It’s more complex than face value.
- Web3 moves extremely fast and there is a cambrian explosion of new chains, tokens, and technologies which will be hard to manage alongside their existing offerings.
- The gap will be especially challenging (if not impossible) for more sales-driven orgs like bill.com who are not already strong on software + product.
- Lots of regulation (accounting & crypto) to keep track of.
- From a positioning perspective, crypto native co’s will empathize and work more with other more crypto native co’s.
- Long-term play: We position ourselves to sell to these orgs.
- By investing in product and infra up front, we actually position ourselves long term to potentially sell to this type of org (a la the Melio playbook).
(We’ve confirmed this informally with folks at Bill and Ramp, btw)
How will you make money?
- SaaS Subscription Fees, tiered according to sophistication of features. A common model today (a la Bill.com) is charging per seat.
- % Transaction (alternate today = Coinbase Commerce taking 1% for withdrawals)
We win by creating this strong network of vendors and buyers on the platform.
We then will also be able to add monetization opportunities after we’ve built the core relationship between vendors and buyers.
- Cashflow Management (e.g. invoice financing, deferred payments, credit)
- Crypto <> Fiat Swaps (charging % transactions as third party swapper)
- Swap Fees or Yield Growth (e.g. 0.3% in swap fees)
- And more…
What’s your TAM?
In the long-term, we tackle the larger trillion dollar (120T global, 20T U.S.) b2b payments market.
In the short-term:
- We know we can service roughly ~15k businesses given # of crypto institutional accounts (Coinbase, FTX, Binance and more emerging).
- To get to 1M ARR with a blended (conservative) rate of $50/user/month (Bill charges up to $80-100), we only need to capture ~14% of this market, assuming no growth.
- Txn volumes per business is high. With our current LOIs and customers, volumes range from 500 - 50k per invoice.
- To get to 1M ARR, if we charge 1% (Coinbase Commerce does this today) we need just 30 companies transacting an average of 15,000/invoice (lower end of the average given current LOIs), 20x per month (LOIs at 30+/month).
In the mid/long term, we can:
- Grow and expand on top of our vendor/buyer network and also expand on our monetization opportunities
- Increase the TAM with our infrastructure:
- We’ll grow the % of crypto transactions that are happening per company
- We’ll grow the % of businesses that are transacting in crypto
Our companies have told us “if you build this, we want to nudge all of our vendors and buyers to pay in crypto, for the promises it holds” and believe we’re on our way to realizing that future.
Why crypto native companies first?
- Pain point is acute, opportunity is apparent. We know there’s opportunity here already and needed to be solved yesterday for crypto companies (given the speed at which they signed LOIs despite longer sales cycles). This allows us to build our infrastructure for a core group that needs less convincing & knows how a good solution should look like.
- First principles: start with early, loyal adopters. Our strategy, from first principles: start with a wedge of early adopters, build a loyal customer base and expand from there, instead of forcing the solution on others. Over time, we don't only compound on our tech but also gather strong data points (e.g how much more efficient it is to transact, etc.), proof points and case studies to make a more compelling case to expand.
- Harder sell if we made the immediate jump to web2. Conversely, if we tried to sell to traditional enterprise (e.g. Coca Cola) or other web2 companies first, without existing support infra, concrete case studies or data, it would be a steep uphill battle. (Not to mention the additional education about crypto that still has to get done). We would be stuck in implementation hell & longer sales cycles with high uncertainty of success.
- Growth + maturity of crypto businesses. The number of crypto users and consequently number of crypto businesses are at an inflection point.
- Businesses are now BIG enough in size and also MATURE enough in process so need infrastructure to help them scale.
- b2b lags b2c but is a bigger opportunity. In general, the first wave of crypto companies AND payments solutions is typically focused on the consumer (more apparent, easier to understand) BUT b2b payments volume is 2.5x that of b2c.
What’s your go-to-market and target audience focus?
Distribution and go-to-market motions here.
- Crypto-native focus. We want to focus on the crypto-native user because they feel the pain point most acutely, are already hacking at these solutions today (cobbling up all types of tools to make ends meet) and needed a better solution yesterday. See this FAQ for more info.
- Mid-market focus. We intentionally decided to focus on the mid-market segment in crypto for these reasons:
- Higher txns and WTP. Mid-market has higher 10x volumes per transaction vs. sole props.
- Capture sophisticated product requirements. Working closely with mid-market will enable us to bake in design and product requirements important for this segment. Our current competitors have mostly focused on the individual/sole prop use case, so they don’t meet the needs of more mature companies.
- Forward-looking to enterprise market. Mid-market allows us to grow alongside the MagicEden’s of the world and stay forward looking around how we can enter the enterprise market.
- Still capture long-tail. Designed well, will still allow us to capture the long-tail and not preclude any contractors, sole props, etc. to use the product. Eventually they will grow into the product as they grow as businesses too.
FYI: This is a similar approach and strategy that Ramp has taken.
Why AP/AR as the part of the stack to go after?
- Opportunity is HUGE!
- B2B payments is a $125 trillion market globally
- Fundamentally believe in power of crypto, but it hasn’t been unlocked today.
- That future combined with the opportunity of a large space is huge!
- Felt the problem firsthand.
- Did our fair share of invoicing via content sponsorships, contracting .
- Companies and founders close to us were sharing this as well.
- Rapid GTM + network effects. We can go to market quickly with a product that is easy to adopt (real problem) and has strong network effects. This is important for several reasons:
- Existing b2b players such as bill.com have shown that network effects can be strong in driving retention and stickiness.
- Owning the customer relationship and having exposure to flow of funds will position us to grow with additional products and services.
Why not start with a protocol first and make payments on-chain?
In short: focus and speed. Customers haven’t asked for a protocol and we’ve found they are agnostic to whether a solution is on-chain. Some customers, such as Figment, have even actively avoided on-chain solutions: they don’t want their core business transactions running through an external smart contract.
Thus, developing on-chain does not provide proportional customer benefit in exchange for the additional complexity and cost. We believe that solving the immediate problems and building the customer base first is a better play than doing a protocol upfront.
That said, we are open to protocol solutions and progressively decentralizing over the long term so long as we’ve met our customers’ core needs.
How did you decide to focus on this idea?
- Organic conversations and observations in web3 communities. We started and are involved in various web3 communities (SPC, OnDeck, Odyssey DAO, NFT Playbook, Pear VC, Kleiner Perkins). The organic convos that came about there were all around the back office tooling products they needed but didn’t have great web3 equivalents for: paying vendors, accounting in crypto, token management, etc.
- Experience the problem firsthand. Alex was contracting, and Mika was creating content and contracting as well in crypto. She, for example, got sponsored by a protocol or 2, and went through the tedious process. Turns out it’s even more a pain point for businesses. Alex has also worked closely with ops teams at previous startups and knows how complex AR/AP can be even when the tools are there.
- We also combined this with top-down analysis. We are here to build a massive, billion dollar business and wanted to pair our observations with sound business models and principles. See this FAQ for more detail on our thinking.
(Longer, in-depth story, if you want to have a long 1:1 with us after you’ve invested. 🙂)
Parallax: Memo + Deck
Starting with seamless crypto invoicing, vendor or bill pay and accounting
Vision: Bring the power of crypto to all businesses!
Today we start with streamlining this process for crypto native and crypto forward businesses. We believe that if we make this infrastructure really good:
- We’ll grow the % of crypto transactions that are happening per company
- We’ll grow the % of businesses that are transacting in crypto
In the long-term, we will expand to take on the trillion dollar b2b payments space.
Need: Web3 businesses need to & increasingly prefer to use crypto for b2b pay
- Why do they prefer this? All the promise crypto has to offer.
- 96% faster settlements, 24/7 and not tied to banking hours
- More convenient especially for global transfers
- Unlock the possibilities of programmable money such as earning yield on coins and diversifying treasuries
- Businesses receiving revenue, grants, and funds in crypto prefer not to have to deal with complexities of on/off ramps every single time to pay vendors
Problem: But infrastructure for b2b payments hasn’t kept up
Unfortunately infrastructure for b2b payments in crypto just hasn’t kept up. At first glance it seems straightforward: get address, paste address, hit send. But in reality it’s more complex than that, especially for businesses.
- Crypto makes accounting complex.
- Regulation is nascent but still needs to be considered for compliance. For example: tracking cost basis across invoice lifecycle for volatile native currencies.
- Doesn’t integrate properly with existing accounting software like Quickbooks and Xero.
- Super fragmented and not user-friendly. There are many chains, tokens, and addresses to keep track of. Low level tools like Etherscan are just not built for this use case.
- Different businesses have different “payment methods” or wallet types they prefer to use (e.g. Gnosis vs. non-custodial solutions vs. FTX/Coinbase Institutional products, etc.) and different preferences for tokens & chains.
- Test transactions are frequently used, given high payment values and large room for error.
- Manual & labor-intensive workflows. As a result of the above, invoices & payments are currently handled with spreadsheets, emails, and hacky scripts.
Solution: Streamlined invoicing (AR) & bill pay (AP) in crypto
- Parallax is solving b2b payments in crypto starting with the invoicing and bill pay process. We start by rapidly growing a network of vendors and buyers with a product that is easy to adopt and solves the core pain points around invoicing and bill pay workflows.
- From there, we will expand and layer on more products and services until we eventually make crypto ubiquitous for b2b payments of all kinds.
Traction: Web3 businesses needed this yesterday
In just four weeks (May) we signed multiple “mid-market” design partners while pre-product, despite supposedly longer sales cycles for that target audience.
- Buyer target: mid-market i.e. 100+ employees or have finance teams
- Vendor target: 30-100+ monthly clients
(To respect our customer’s privacy, ask us for our list of LOIs privately!)
For these partnerships, we care most about working closely with these partners to design the right workflows alongside them, running a pilot in their systems & charging commercial rates then.
We have ~4 more in the pipeline, but prefer to keep our cohort small and have quality of product & conversations vs. quality. At the point of integration, distribution is viral.
Distribution: Viral product reinforced with accounting & ecosystem champions
Core: Viral Product. The product is inherently viral since each transaction involves multiple parties. We’ll build workflows such that 1) it’s frictionless to pay but 2) the counter-party has incentives to sign up
We’ll reinforce this loop in two ways:
- Accounting Champions
- Niche tightknit community with strong word of mouth
- Accounting firms will be one of the first users of our product (they’re already invoicing folks in crypto)
- Ecosystem Champions, where they’re incentivized to be promoting payment-like products to their ecosystem
We’re currently working closely with Solana (Pay), Circle (USDC), and six crypto accounting firms
Team: Strong in product & eng; deep in crypto; experienced problem ourselves
Alex has particularly worked on the AP/AR solutions and infrastructure at Homebound, already knowing and understanding the complexities of AP/AR even outside of web3, and integrating with accounting software for growing startups.
Our founding team has shared history working at LinkedIn, are product & engineering leads at startups, and have tinkered on various web3 projects. Examples:
- project that won at the Solana payments hackathon
- the NFT Playbook, an e-book about NFTs as an NFT
- OdysseyDAO, a community that’s 10k strong.
We’ve even dealt with these problems, invoicing and business payments, first hand, as contractors, web3 content creators and contributors, and have heard these problems time and again from builders in communities we’re a part of and started.
Have more questions? Don’t assume; ask us directly at email@example.com 😊