Tale of a client: Making pay-per-use possible for leasing companies and manufacturers
My colleagues at BDO Financial Services have been blogging quite a lot in the last weeks and months.
Now, I’m pleased to say it’s my turn to have a chat with our readers. In this article, I have decided to take a somewhat unconventional approach to the blog and tell the story of one of my favorite startups, which happens to be one of my clients. It is a software provider that helps companies bill with a pay-per-use model for the products they lease or make.
The company is called Semlabs, and I helped the team there with contractual matters as they made the journey from idea, to business model, to funding, and now to revenues. Semlabs’ story is important and can be interesting and instructive to others who have a great idea and are burning to see it come alive.
That’s why I’ll start from the top: What is Semlabs and how did the company get started?
Two young men, Svend Erik Wendt und Marius Merle, were working at a technology management and leasing company when they were asked to determine specifications of software for their employer.
The company wanted software to charge clients by the printed page for use of the printers it provided -- and remain the only point of contact to the customer.
In the printing business, pay per use, or rather pay per page, isn’t a new business model. What was different, though, is that the rate per page would vary, and that made billing matters complicated. Wendt and Merle spent months visiting customers and talking to lots of people about their billing/invoicing needs.
One leasing company that was a client had its own internal software for the billing. Due to complicated and manual processes, it was overwhelmed. Sometimes it was serving customers with 20,000 assets.
Wendt and Merle determined the specifications for the software and passed that along to their employer’s IT department to be programmed in-house. But this was only for one product that the company provided. In the end, a leasing company’s core business is financing, not providing software and connecting different assets to their systems.
All these points did not go unnoticed to Wendt and Merle, and they found themselves discussing the situation one day when driving back together from a client: Wouldn’t it make more sense to separate the billing from the internal systems? Doesn’t every company have these same problems for a large variety of products, including heavy equipment like forklifts and other machinery that are to be billed pay-per-use?
At that time in 2015, the so-called “share economy” was getting attention, and systems were being created to make pay-per-use billing easier, for instance for car sharing companies.
Wendt and Merle knew their idea had promise so they used a private contact to get an appointment at Grenke AG, a leasing company that in 2016 had profits of 103 million euros. The two young men went in and pitched directly to the CIO, who was immediately interested in the idea of simplifying and enabling pay-per-use billing.
The CIO indicated Grenke would consider becoming a client and shortly after the meeting with Grenke, in July 2015, Wendt and Merle founded their startup, Semlabs. The name comes from S for Wendt’s first name, Svend, and E for his middle name, Erik. The M stands for Marius, Merle’s first name. “When we presented to Grenke for the first time, we didn’t even have a company name yet. After that, we had to go fast,” Wendt told me recently.
Moving fast also meant getting programming talent on board as soon as possible. Wendt and Merle thought of a colleague and programmer named Daniel Schniepp who had experience at a startup. They began sharing the concept with Schniepp, and he was convinced. Schniepp became the third co-founder, and in a matter of months, the Semlabs trio was on the road to entrepreneurship.
Polishing their pitch
Next came the search for venture investors who wanted to get a piece of the action in Semlabs’ business model as a provider of software that lets companies bill on a pay-per-use model for the products they provide. Semlabs is the link between financial services and manufacturers, with its software as a service that simplifies and makes pay-per-use billing possible for leasing companies and makers of almost any good.
Semlabs does this with a billing solution and an interface to machines and other software platforms. The interface with machines may come directly from the manufacturer or from a Semlabs partner that has developed the hardware necessary to extract usage data from machines. Once extracted, Semlabs’ software formats, analyzes and prepares the data to go into an enterprise’s regular billing system to be billed per use. In essence, Semlabs takes over the digitization bridge between a machine manufacturer and the financier of that machine, reading out and aggregating the usage data so that companies can become service-driven.
The Semlabs founders polished their pitch and began knocking on doors. After many emotional ups and downs, the young company got seed funding from Germany’s High-Tech Gruenderfond (High-tech Startup Fund), as well as MBG Mittelständische Beteiligungsgesellschaft Baden-Württemberg GmbH, an investment fund.
Looking back, Wendt has told me it was a great feeling to raise the funds for his young company and get acknowledgement for his idea. But it was also a lot of back and forth, waiting and uncertainty.
For me, it is a great feeling to support the Semlabs team -- and to be witness to their entrepreneurial spirit in action.