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- Growth here in the fall is still a theme, but it's growth in the rate of inflation.

It's growth in uncertainty, it's growth in a risk of recession.

I'm Chris William, and welcome again, to the most widely watched and longest running program, on Carolina Business Policy and Public Affairs, seen each and every week across North and South Carolina, and not to be hyperbolic, but growth of inflation is a real challenge.

How are we going to unpack these uncertainties, and is it really as bad as that?

Well, that is a good place to start, we will with our panelists, and later on, it is a company that's been called a unicorn, 20 years as a private company, now went public about a year ago.

AvidXchange based in Charlotte, is a brand new publicly traded company.

We welcome back to the program, the Chief Executive Officer, Michael Praeger, but we start right now.

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On this edition of Carolina Business Review, Karen Riordan of the Myrtle Beach Area Chamber of Commerce, Thom Ruhe from NC IDEA Foundation, and special guest, Michael Praeger, co-founder and CEO of AvidXchange.

(bright music) - Happy fall, welcome again to our program.

Karen, nice to see you again.

Thom, welcome back to the dialogue, and almost happy holidays, but, Karen, I'm gonna start with you just very quickly.

I'm assuming a couple weeks ago when Hurricane Ian, came barreling through the Southeast corridor, of the United States, it did hit Myrtle Beach.

I hope the damage was minimal.

I mean, saw some pictures of North Myrtle, as well as Garden City but what about, what about the core of the Grand Strand?

- We are aware, safe and secure, and fortunately it was very minimal damage, so we're just really doing a very, very impressive job, of clearing away debris and taking a look, at the damages that our businesses have, but overall we feel like we were saved, from the horrible devastation of Florida, and we're very, very grateful for that.

So, a lot of preparation, a lot of hard work paid off, and we're back better than ever and rebounding, and we'll build back our beaches and our dunes, as soon as we're able.

- Karen, I'd like you to weight in, and Thom gonna ask you to follow up with her.

North Carolina Secretary of State, Elaine Marshall, recently said a comment when someone asked her, about the pace of new business creation.

She called it, and I'm gonna use her term, torrid.

She said it and she said it almost as if it was a challenge.

Karen, do you see a torrid development of small businesses, in either the Grand Strand or South Carolina?

- I think we could use that word easily for South Carolina.

I think in the Grand Strand, again, we are still so dominated by tourism, that we haven't reached our full potential, in terms of diversification, so I wouldn't use that word to describe the Grand Strand, but it has been impressive, and it certainly has been growing since COVID, so in the last year, 21 and 22, we are seeing a lot more entrepreneurs, start their businesses in the Grand Strand, and so that's really encouraging to see.

- Central to small business creation Thom, as you well know, is innovation entrepreneurialism, would you call it torrid?

- Yeah, I mean we've had four consecutive years, of record breaking years or the subsequent year, we had more startups in the year prior, and at 2022, if it doesn't break 2021's record, it's gonna be darn close, so I think the headline there, is we've had over 500,000 startups over the last four years, in the state of North Carolina, and when you consider the economic impact, of that many people going out and starting companies, and in the vast majority by the way, from the secretary's office, stated it was an opportunity they were pursuing, not out of desperation, right?

Like our factory close so I had to go start something.

They're actually seeing opportunity in the market, going and pursuing that, and we know from data from places like the Coffin Foundation that in North Carolina, the Nielsen firm was five years older or younger, well, on average create almost five jobs.

So, Chris, think about that.

Take the math, right?

A half million startups over the last five years, creating an average five jobs each.

That's a lot of jobs.

- That almost sounds like a national number?

I mean, was that surprising to you, when you were tallying that up?

- There are several states.

There was about 10 that had per census and commerce data, had record what they call high propensity firm filings, and we were, North Carolina was one of about, like I said, about 10, and so I think what we're seeing is in the states, that have more robust ecosystems, and have figured out all the components, to support the startups, they're performing better, and the states that have neglected their ecosystems, they're not performing as well.

- I'd also like to add, Chris, I just feel like we're seeing so many women, we're seeing so many minority businesses, take part in this entrepreneurship, and one of the other things that I think is really exciting is, as we just discussed, it's people running towards opportunity, not part of this so-called great resignation, which I don't buy into.

It really is people who have been dreaming about this, and now the opportunity is right for them, and so they're pursuing it.

So, I think that's really important, for people to understand.

- If you both can weight in on this as we talk about this, and, Thom, that number is pretty astounding.

Five jobs for 500,000.

It's quite a big number but my point is this, two years ago we were all very concerned, about hospitality and tourism, of course, rightly so, but has that been now supplanted plus plus, given the new growth?

And I mean for North Carolina and South Carolina, would you both weight in on that?

- Well, I think for North Carolina, where I'm more familiar with the data, the hospitality industry certainly took a hit, like it did nationally, but we have just such a diverse ecosystem in tech, biopharma, life sciences, textile, ag.

There's really no one sector, that is historically significantly outperforming others.

We just have that luxury and that blessing, to have such a diverse base, so if there is a particular challenge, to hospitality for instance, we have other sectors that are making up in the aggregate.

Of course we prefer all sectors to be hit on all cylinders, but when there is a slowdown in one, it doesn't adversely tilt all the data.

- Yeah, and I think South Carolina mirrors, that quite a bit too.

I mean obviously ag and manufacturing, and tech are very big as well as tourism.

Here on the coast tourism has been king, but I mean, again, the notice the tourism was dead in 2020, was, again, really incorrect.

We actually have defied all of the odds, and all of the national pundits, who said that one in 10 hotels, were gonna go out of business.

We are stronger now.

2021 was a record year in tourism, and right now coming through 22, we had the best summer we've ever had.

We actually beat 2021 figures, so it's just remarkable to show again, and see the resiliency, of the business community in South Carolina.

- And, Karen, I know you don't, and we've got about 30 seconds, but Karen, I wanna unfold, unpack this, just a little bit in about 30 seconds or so.

As you talk about those revenues, and as you talk about the expansionary nature, and the lack that it wasn't quite as dark, as everyone thought around tourism and hospitality, it still stands in contrast to a lot of these firms, whether they're in tourism or not, can't find workers, but so does that, do those cries of not being able to find workers, kind of falls on deaf ears if revenue is growing, and it's expansionary, and I don't wanna put words in your mouth, but those things seem to stand in contrast.

- They are but I would say the workforce issue, is still the number one issue that the chamber, and other chambers across the state are facing, 'cause, again, that's talent, that's our future, and we wanna continue to grow our entrepreneurial ecosystem, so we need to have that great talent, coming out of our universities and staying.

So, it does seem like it might be a bit of a contradiction.

People certainly appreciate that, and the business community that we had less workers, we may have even had a few less people, but our occupancy, our ADR and our rev bar, was higher than ever before so profits were strong, but long term and that's the mindset we need to have, we need to start growing more of our workforce.

- Okay, Thom, in 30 seconds, literally, can you do that same thing?

Is that when these things contrast revenue's going up, firms still expanding, record numbers, but everyone's staying jobs is still the biggest barrier?

- Yeah, for the sector that we serve jobs and talent, remain the number one priority, and this is kind of the underbelly of the great news, in North Carolina with every big company, like Apple or Google that moves yet another facility here.

Not only does the existing corporate base, but it's the startup base, has yet another significant competitor, to compete with define the talent, so it is, you know, even though things are growing, and we are seeing the capital stack coming in, there is still a number one demand for talent, and, like I said, with every big new company that comes in, it just makes it a little more competitive.

- For people that are unfamiliar with the term unicorn, in entrepreneurial world and venture capital, it is usually a private company, worth about at least $1 billion in valuation.

Well, our guest, our returning guest's company, is at least worth that, at the beginning of their IPO last year.

Now a year later, they are the publicly traded AvidXchange.

We welcome back to the program, the co-founder and the Chief Executive Officer, of AvidXchange, Michael Praeger.

Michael, congratulations on an IPO, and now you're a publicly traded CEO.

- Exactly, now I appreciate it, Chris, and actually I was reminded yesterday, it was our one year anniversary of our IPO, so October 13th of last year, and it was certainly been an eventful, and interesting first year being a public company.

That's for sure.

- Mike, before we drill down into the nuances, of what it's like now, not just publicly traded company, but a payment platform and tech and FinTech, you see a lot of the headlines that we all talk about.

Inflation, the cost of energy, this kind of this wall of worry when it comes to hiring.

What do you worry about?

I mean, what's right in front of you?

What's your biggest challenge?

- Yeah, that's a great question.

I get asked that a lot, especially now, as new public company and the kind of the three big factors, that I talk about are the macroeconomic environment, and is there recession and how's a recession impacting, the middle market, which is our customer set.

Second one is inflation and the third is interest rates.

What it's interesting is from a business perspective, all three of those are actually helpful to us, in terms of driving our business.

You know, in terms of dicier economic environment, where companies are focused on automating key processes.

How do you do more with less?

And inflation helps to average transaction sizes increase.

So, that's all positive.

In terms of the what I worry about, is maybe that inflationary factor, and how it impacts teammates, right?

You know, everything's getting more expensive for teammates.

I kind of did a town hall recently, and I talked about my personal surprise, at the price of blueberries escalating over the summer, and I'm like why is the price of blueberries increasing?

My wife's like, "Well, there's this thing, called inflation going on."

And so things are getting more expensive, and what that means for us where talent is so critical, being a technology software company competing worldwide, and especially in the U.S. with competitors in Silicon Valley and other tech markets, and how we're attracting the best and brightest talent, is really make sure that we're staying aligned, with rising salaries and comp structures, to make sure that we really lean in, and are in the forefront of making sure, we retain the talent and attract the talent we need, to continue our dynamic and robust growth.

- Thom, I'm gonna let you weight in.

- Yeah, I was wondering as you started off by saying, this the one year anniversary, happy anniversary, and what a year it's been, and I had a different question prep, but you kind of peaked my interest here.

Like, could you imagine had you not IPO'ed last year, could you imagine doing it in the current environment?

- Yeah, well, first of all, we wouldn't have in the current environment, right?

Because there's literally been no IPOs, and there's no kind of that interest level, for new issuances probably in an all time low right now, but in hindsight we couldn't have timed it any better, and our IPO was 20 times plus oversubscribed, and we raised over 600 million for the business, and so we're going into now the current, whether you wanna call it a recession or not, or dicier economic times, with this war chest of a balance sheet, that allows us to do some really unique things, that a lot of other companies can't do, in the current environment, and so continue to lead on our investments, and innovation and growth, and really I think be opportunistic related, to the potential acquisition candidates, as they come along in the coming year.

- Sure.

- So, you mentioned talent.

I would love to know besides looking at staying competitive, in terms of salaries and benefits, is there something in particular that you're doing, that you think is pretty innovative, that's really helping you get the best of the best, to come to your company?

- Yes, and that is around culture.

I've been talking about it for years how culture, can really be a competitive advantage for companies, and it's really those things that's hard to measure, right?

And I think in the current environment now, it is a actually able to be measured, in terms of those companies, that are actually able to retain their talent, and especially let's focus on technology talent.

There's far more jobs and opportunities for the talent base, and so unfortunately there's not enough talent to go around, and there's some really great companies, that have great products where maybe their culture, they haven't leaned into developing the culture, and today they're struggling, to attract and retain the talent they need.

I think here in Charlotte we have a very unique culture, related to, we call it a set of core values, combined with mindsets, and the number one mindset that we want, is a growth mindset across all teammates, and that means two things.

One is we want teammates, that wanna be part of a growth business.

At Avid exchange we've on average grown, at 30% plus for 10 years in a row, and that's, I'll call it a chaotic environment, and there's people that excel in that environment, and there's also people who like opt out of that environment or don't excel because there's so much change going on, on a consistent basis, and we also look for teammates that wanna grow personally.

If there's somebody that wants a particular role, and they're happy being in that role for the next 10 years, that's not a good candidate for AvidXchange.

We want somebody that wants to be in that role for two years but then wants to grow into a different role, and so the combination of personal growth, combined with operating in a growth business, is the number one thing, that we try to foster to AvidXchange, and that's kind of what drives, begins to drive the culture, along with that entrepreneurial mindset, and so I would say, number one, it's the culture.

We spend a lot of time teaching culture, intentional building the culture.

Our AvidXchange Foundation has a lot to support, kind of the foundation side of the culture, in terms of how we interact in the communities, that we have offices in.

You know, here in Charlotte, especially during the last three years, and with COVID really lend into our tech rising initiative, where we're saying, listen, for the youth of our communities, the number one thing that we can do, to create an equal playing field, of opportunity for the youth, is to create an equal playing field on technology, and so making sure that every high school student, regardless of their economic background, has a laptop, has internet access, goes a long way, especially in the last couple of years of COVID, to be able to equal that playing opportunity of development, and give them access to the same opportunities, that everybody else has, and so those are the things that we're leaning into, that all go to being the leading, and largest software company in the Charlotte market.

- Michael, let me seize on this idea of growth, and you're talking about professional, cultural, developmental growth within the company, but let me go back to something.

So, as the private company, AvidXchange, and now the public company of AvidXchange, the co-founder CEO is under some pressure to pivot, and pivot what I mean from being go, go, growth.

Early stage you've got VC money, you've got people that want growth for an exit, and maybe the IPO is the exit, maybe it isn't, but you pivot from growth to now value, and not just the value proposition, for you as a payment processor, and that's a general thing, but how do you make sure that the company's value, when you look at the financials is right, and is in the right place for three, five, 10 years?

- Yeah, so I mean it's a great question.

One of the things that's probably, I'll say the most frustrating thing, about being a public company is that you have, like a daily scoreboard of value for the business, and when you go to sports event and you watch a game unfold, the scoreboard kind of matches, what's happening on the field, right?

Or on the court.

As a public company you see the scoreboard, but it's like disconnected to what's happening, actually happening in the business, right?

And so that's one of the things, that's probably been the most frustrating, but one of the things you hit the nail in the head, kind of the pivots and I think what's interesting, is you look at any successful growth company one, any company has been doing for a long period of time, and every company's had to go through many pivots, in their kind of corporate journey, and the same is true for us.

We went through plenty of product related pivots, early in our existence and in the last year, our first year being a public company, really had to understand, kind of that financial pivot around.

It's not just about growth, and taking advantage of the market opportunity.

It's let's...

I think of the markets at AvidXchange, prove that your business model, is actually a profitable business model, and could achieve the type of margins and everything else, that we expect out of a company, that has AvidXchange's profile and we've been doing that.

If you listen to my earnings releases every quarter, we've been continuing to pull forward, our path to profitability and articulate that, and we pulled it forward significantly, from what we articulated at the time of our IPO, and we'll continue to lean into that path, to profitability combined with growth, and the term that we've kind of coined forward, is kind of the efficient growth model, which really combines that focus, equal focus on the margin profile, profitability profile, along with continue to achieve our growth objectives.

- Thom.

- So, you said culture so many times and I agree, and of course you're in that battle for talent, and that's important to a lot of the people, you're trying to hire.

Little more broadly, when I think culture, I think it's also kind of a product of the ecosystem, and you born and raised in the Charlotte ecosystem.

You predate me.

I've only been in the market for about seven years, so Avid was already just such a highly considered company, by the time I joined, and of course we have invested a lot statewide, to have support an entrepreneurial ecosystem.

What, if any role, was the ecosystem in the early days, and follow on to that question, is could another Avid be born in the Charlotte market today?

- So, I'll start at the end first, and that is absolutely could another annual AvidXchange, be born and developed and I think today, it's actually, you know, it's not easy, but it's actually easier, probably in terms of the infrastructure, to support a company like AvidXchange in early years, more so today than it was 20 years ago, or 22 years ago when we got started.

To go back to your kind of beginning of your question, I was in Boston and running a software company, that we sold in the mid nineties, and I love the summers in Boston, not so much the winters, and we said we, my wife and I, we're probably gonna start another software company, but where in the country do we wanna do it?

And we purposely looked at different cities, and selected Charlotte because at the time, we saw this phenomenal, I think opportunity, that Charlotte always had this can-do attitude, and a great relationship between the governmental side, with the university side combined with business, and folks like Hugh McColl and Ed Crutchfield and others, brought in a great example, about, yes, you can compete in the marketplace, but in Charlotte we're very collaborative, in how we're building the city together, and bringing all these different constituents together, and that was really inspiring, and I think as we grow at AvidXchange, we said, "Hey, I wanna be part of that ecosystem."

And it's one that's growing and developing, and if I can help bring the entrepreneurial aspect to it, and provide a role model that, yes, you can build, a significant company as a startup, in the Charlotte community, and we wanted to prove and demonstrate that, you didn't have to be in Silicon Valley, or in Boston or in Austin, and I can't tell you how many times during our early years, people said, "Oh, Mike, it's great what you're doing, but, like, when are you gonna move?

Because you're not gonna build, a big software company in Charlotte.

You need to be in Silicon Valley, you need to be in Boston."

And from the beginning I didn't understand that mindset.

I think Charlotte is actually a competitive advantage for us and I'd rather be kind of a bigger fish in a smaller pool, and provide, be a role model, than just be another startup company, in one of the other markets.

- And let me inter...

Hold on, Karen.

I wanna make sure I get this in just quickly, Mike.

Let me follow up on that but you look at the triangle, Saas, Wolfspeed now which was Cree, Pendo, I mean, take your pick, Apple, Google.

Wouldn't it make sense to co-locate with giants that also, and I know you know this dialogue, so, again, Charlotte and the triangle would seem, the triangles hands down the place to be for that.

- Well, I-- - And I'm not trying to put them against you.

- No, I probably disagree a little bit, from the standpoint of, I think we have an opportunity to create-- - And we have one minute, sorry, Michael.

- Our own era narrative in Charlotte, right?

And we can cultivate that narrative and position, and AvidXchange as the company, that is that leader of our market, and that gives us a lot of benefits, in terms of access to talent, the impact that we have in the community, and I like that environment, and so I'm Charlotte through and through, and we love being headquartered here.

- Thank you, Mike.

And I'm sorry I didn't give you enough chance, to unpack that one but well said.

Love hearing those debates.

Michael Praeger, congratulations again, and also being named to the Queens University Hall of Fame.

We didn't get a chance to unpack it but well deserved.

So, congratulations.

- Thank you, Chris.

I'm happy to be back anytime.

- Please do.

Thom, good to see you, Karen, best of luck down at the coast, and going forward until next week, I'm Chris William.

Hope your business is good and certainly enjoy your weekend.

Goodnight.

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