B2B is Back: The Marketplace Evolution, Oxygen Finance and an…
A few years ago, I met a big man who, at the time, was running a company in search of a customer: Oxygen Finance. David Brown also had a big idea. Unlike other e-invoicing and supply chain finance solutions available in 2008-2009, David's concept and challenge involved much more than just selling a piece of software -- it required collaboration between finance, AP, accounting and procurement (not to mention external accounting firms and banks, in certain cases). While I won't describe the Oxygen offering in detail now, the context is important because David was eventually able to win that critical first customer, the believer, who bought into the truly new invoicing and payables business process, discounting, revenue recognition and benefits capture program that Oxygen requires and enables.
Prior to David putting his heart and capital into Oxygen, he was involved in a bunch of early-stage and more mature start-ups, the best known of which was Commerce One, where he ran the vendor's Middle East operation. During his time at Commerce One, he got to know the company's founder and CEO, Mark Hoffman, who along with Keith Krach (Ariba), Greg Brady (I2), Glen Meakem (FreeMarkets) and others during the B2B heyday of 1999-2001, all became known as much for the insane market capitalization of their firms as the procurement, marketplace, sourcing, supply chain and related software and services they sold (Hoffman previously co-founded Sybase, incidentally). In any event, flash-forward just over a decade and many of these folks are largely "done" commercially, at least on an execution level. For example, Glen, my former boss, runs an intellectual conservative talk show in addition to managing a venture fund (with an awesome exit in Kiva Systems, recently, mind you) and other investments. But since Commerce One, Mark chose to stay closer to the software market, actively participating in ventures versus just funding them.
Recently, David was able to convince his former boss to take the active role of Chairman of Oxygen's US Operations and to join the firm's parent company (Oxygen Finance Holdings Limited) board of directors. In his new role, according to the announcement, Mark "will be responsible for overseeing and guiding the development of Oxygen's business in the Americas". Upon first reading this announcement, I was surprised because it's rare to see a former founder of sizeable companies take an active role in a more targeted environment within an existing start-up rather than start something anew from scratch.
So I pinged David and his team immediately and asked if I could have a no-holds-barred (i.e., no PR folks) interview to which they quickly agreed. Throughout the week and into next, we'll share the more insightful snippets of this interview to include a tracing of Mark's views on the evolution of the B2B sector into what it's become today with purchase-to-pay and supply chain finance components. But first, there's a significant amount of context that is critical to appreciate the interview.
From my perspective, the entire process of interviewing Mark and consulting my previous career notes excites me like a geeky B2B kid in a trading partner candy store. Since running FreeMarkets competitive strategy efforts in 1999-2000 and having been on the other side of the marketplace deals, I knew that getting Mark's perspective on the evolution of the space (and history) would be fascinating. Ironically -- while living in Pittsburgh at the time -- my first real date with my now wife happened because I canceled a leg of a trip from Chicago to Detroit, and decided to stay in Chicago for the night.
I was visiting the person in question for an earlier meeting in Chicago where she was heading research for the marketplace group at Andersen and I wanted to borrow her ideas for our own competitive strategy development. It was just before my Detroit flight that afternoon for a meeting with GM and others when the automotive powers that be went against FreeMarkets in favor of Commerce One, cancelling my need to visit the Motor City. As further context on what transpired and why my invitation to meet GM and Ford was revoked, FreeMarkets would not budge on granting equity in our company relative to Commece One who would, in exchange for powering a marketplace that would become Covisint.
At the time, GM kicked FreeMarkets out (despite the massive sourcing value we delivered to them) in exchange for equity in Commerce One and a new venture. This happened in part because Harold Kutner, GM's purchasing chief, wanted to make a name for himself beyond saving hundreds of millions through better sourcing. As a result, when GM went public with Covisint and fired FreeMarkets, as I recall, our stock price tanked $70 in one day. I personally had Mark Hoffman to thank for my personal loss of a million bucks in paper wealth -- none of it was real, mind you, as the lock-up and insider period was still in effect -- evaporating into thin air in a matter of hours. But finding my life partner was worth it. With further irony, what goes around comes around, and years later, before being acquired by Ariba, FreeMarkets ended up buying some of the pieces of Covisint when the entire thing fell apart. But that's another story for another day.
Now you see why the opportunity to engage Mark was like interviewing a former opposing General. Most important for this write-up, it's quite clear from my interview notes with Mark that he not only learned from the early B2B and marketplace experience, but the potential he sees for Oxygen-like models to truly transform not just the invoicing and payments space, but broader market opportunities for buyer/supplier collaboration, working capital management and financing as well.
Stay with us as we end the history lesson and get started. And thank you for the opportunity to get this off my chest. It's more than just cathartic for me personally, because the context of the earlier B2B marketplace challenges is all the more valuable as we examine the future for integrated procurement, invoicing, payment, financing and working capital models, like Oxygen. Indeed, it would be a mistake to separate history from the future in this case. What we all learned from our challenges over a decade ago will be critical to disrupt the ecosystem that is ripe for change today. All of which comes through loud and clear in what Mark shared with me.