Ignition Charges Accountants $150 for Software and $250 for Moving Their Money

Guy Pearson describes his company to his mother as Shopify for services. The more useful description is the one his pricing gives: Ignition charges accounting firms about $150 a month for software, and about $250 a month for moving their money.

That split is the whole business. A software subscription grows when you sell more seats; a payments line grows when your customers do more business, without you selling anything. Pearson only put a number on one of the two halves.

Payments expands at about 130 per cent a year, every year, and then software is sort of industry standard.

Guy Pearson, founder and CEO, Ignition

Blended, he put net dollar retention at 140 to 150 per cent across both product lines.

A take rate that falls on purpose

Ignition processes both ACH and card in five countries — the US, Canada, the UK, Australia and New Zealand — with, at the time, a couple of billion dollars of revenue under management and over a billion running through it annually.

The headline card rate in the US is about 270 basis points. The blended rate Ignition actually earns is about 50. The gap is deliberate, and it is the ACH flat fee that does it.

blended take rate = total fees ÷ total volume processedA $1 cap on ACH pulls the blend down as B2B volume rises.

“If you’re processing B2B payments… they’re paying a fixed fee of maximum one dollar,” Pearson said. “So obviously you get a blended rate, that take rate comes right down.” He is not defensive about wanting it higher: “We’re looking to push that up through getting the volume up there and negotiating on our cost side.” What he wants from it is narrower than margin. “We’re just interested in being in the flow of commerce between two B2B parties, and getting rid of cheques.”

Where the $24 million comes from

Latka did the arithmetic on air: 5,000 customers at $400 a month is $2 million a month, or a $24 million run rate. Pearson’s answer was “yep, it’s pretty close” — an endorsement of the method rather than a disclosure of the number, which is why the GetLatka profile now carries the November 2021 figure as an estimate.

The customers are narrow by design. Ignition sells to accountants and bookkeepers — 95 per cent of the base — with a scattering of ISPs, education providers, lawyers, agencies and marketers around the edges. The logic for that focus is a distribution bet: “every professional services business has a CPA or has a bookkeeper… solve their problem and then they can recommend it to their clients in the long run.”

Asked for a customer name, Pearson gave one of the largest CPA firms in the world, then thought better of it mid-answer and asked to stop using it. The example he was happier with was a Canadian firm that fits the ideal profile rather than dwarfs it.

Five years to a million, on two million raised

Ignition had an MVP in 2012 and launched in 2013. It broke $1 million in revenue in 2017 — five years of slog on roughly $2 million of capital, most of it from people who knew him.

• 2012–2015 · Angel and seed Family and friends first — his brother, his best mate, his old CPA-firm partners — then angels anchored by Craig Winkler, whom Pearson calls “effectively our Intuit founder, but just in Australia”. Real Ventures in Canada wrote the first venture cheque.
• May 2017 · Series A A$5 million (about US$3.6M) from four VC funds and two billionaires, at an $11 million valuation — and roughly 30 per cent of the company.
• 2019 · Break-even Reached profitability, then chose to raise anyway.
• Sep 2019 · Series B Led by Tiger Global at a $70 million valuation.
• Nov 2021 · Series C $50 million from JMI Equity at $330 million, closed days before this interview.

The Series A is the one he still winces at. Australian investors, he says, “like to see efficiency and capital deployment as a mindset… when you’ve got something that’s not profitable but growing quickly, people sort of struggle.” The price came in low, and he was out of patience: “we were also sick of raising, so this is going to be our last round — that obviously played into the price as well.” Thirty per cent for $3.6 million was painful at the time. He is careful to add that those investors then helped him get to the B.

Ten million of the fifty went to people, not the company

The most transferable part of the interview is what Pearson did with the Series C. Of the $50 million, about $10 million was secondary — $6 million buying out an investor whose fund was winding up, and about $4 million to the team.

His reasoning is cultural rather than financial, and specific to where he is building.

Being from Australia, having stock options and valuing them at more than paper is not really a thing. So the biggest education for us was: let’s put a price on these, let some of the team sell some, so that they place a value on options.

Existing employees with vested options were allowed to cash some out; former option holders could sell entirely and clear off the table. Pearson and his co-founder took, in his phrase, a few chips off the table — and he answers the signalling question directly, as a CPA would.

“If I don’t have to worry about making a mortgage payment at home — and banks hate entrepreneurs, particularly in this country — then I don’t have the sort of pressures at home like I did in the early days, where you’ve got personal credit card debt because you’re paying yourself 20 grand, flying around the world sleeping on couches.”

The investors, he says, were supportive rather than suspicious: “You’ve been on a ten-year journey, we don’t want you to burn out.” The advice he draws is the one he leads with when asked whether he would manage it differently.

Hiring at a pace that changes weekly

At the time of the conversation Ignition was north of 150 people and expected to finish the year at 170, having started it around 100. The marketing team had gone from four to twenty in four months.

Growth had run at more than 70 per cent for two years running, which Pearson calls “not terrible” and clearly regards as short of what he wanted. Covid was both accelerator and headwind: accountants were suddenly doing forecasting work for clients they had never done before, and simultaneously needed to get paid without a physical office.

One early lesson has stayed with him. Ignition tried freemium around 2014 or 2015, and killing it produced the opposite of the expected reaction. “As soon as we turned pricing on and charged everyone for the software, we had a whole bunch of emails going, oh great, now I’ll start using it.”

Asked what he wished he had known at twenty, the founder who spent five years getting to his first million answered in two words: “More patience.”

Sources — Guy Pearson interviewed by Nathan Latka, recorded 19 November 2021. Revenue, customer, headcount, funding and valuation figures from the Ignition profile on GetLatka, with dates as recorded; the November 2021 revenue figure is carried as an estimate because it is the interviewer’s arithmetic, which Pearson called “pretty close”.