Why I Invested in Cashbook

Angel investors provided over $18 billion in capital to early and mid-stage companies in the United States last year, with additional billions invested in European companies.  There are 422,000 active angel investors in the US. I became one last year when I invested in Cashbook LLC, a fintech software company with over twenty years in business. Here’s why I chose Cashbook:

The number one rule for success in angel investing is to stay close to the markets you know.  After eighteen years at Billtrust, I was very familiar with the AR Automation market that Cashbook competes in.  I was also already familiar with Cashbook, as several Billtrust customers had switched to its cash application product and I knew they liked it.

The biggest challenge for software companies is to keep innovating once lots of customers start using your product.  As one software executive said, “The only reason God was able to create the universe in seven days is that He didn’t have a customer base to support.”  While you’re busy making new software work for a growing range of customers, your product slips behind in usage of new technology, better customer interfaces, etc.

Cashbook went through this process during the past decade, building out its product line (four integrated cash management modules) for seventy-five mid-large customers.  Then it spent much of 2022 and 2023 updating the underlying technology so that it’s a fully cloud-enabled solution.   Crucially, it has developed all of its products internally, resisting the temptation to acquire another company’s module.  That strategy provides Cashbook’s customers with consistent behavior across modules while making future development highly productive for Cashbook’s programming team. 

In addition, since Cashbook is headquartered in Ireland, its products have always been truly global in terms of language, currency and region-specific functionality. With 70% of its customers in North America and 30% in Europe, its solutions are a perfect fit for multi-national companies who increasingly insist on using the same fintech products across global regions.

Accordingly, Cashbook now has a highly functional cloud-enabled solution with global capabilities on top of a modern technical foundation.  This competitive edge will drive higher revenue growth as the company sells larger customers and wins more competitive deals. 

The bare minimum of due diligence before making any angel investment is to talk to the company’s important customers. When I talked to Cashbook’s customers prior to investing, I was impressed that they were hard-pressed to come up with complaints or even significant new features they needed. Consistently they said the products worked and the support was excellent.  The only request I heard was a desire among American clients for a local support presence.   Cashbook satisfied this request shortly after I made my initial investment.

Another proxy for happy customers is the length of the current “bug list”.  When a complex financial software is used every day in demanding B2B processing situations, you expect to see bugs pop up. The question is how quickly a software company fixes them. I worked for seven software companies over a forty-year career and most of those companies had literally hundreds of identified bugs, many of which were over a year old. At Cashbook, I keep looking for a long bug list but there isn’t one, as the company prioritizes “making products work” so bugs are fixed quickly.

Too many software companies endure 15-25% annual employee turnover as they “move fast and break things”.  There is a lot of stopping and starting, hiring and downsizing.  Nothing could be worse for the development of great product and the fielding of knowledgeable sales and support teams.  Cashbook has avoided that syndrome, with annual employee turnover of under 5%.  As a result, there is deep product and industry knowledge across all departments.  That translates into those consistently happy customers!

It’s easy to burn through investors’ money.  I wanted to be sure that my investment would go to fund long-term growth. The best measure of a company’s use of future capital is understanding how much capital the company has been consuming in its current operations.  In Cashbook’s case, expense levels have been rising since 2022 but only in tandem with revenue growth.  The company was funding its growth out of its rising sales.  My investment wasn’t needed to keep growing at current levels; it was going to be used for initiatives that will allow Cashbook to grow faster.

It’s been eighteen months since I made that initial investment. Cashbook grew by over 20% in 2024 and signed the largest deal in its history last fall.  In turn, I’ve exercised an option to double my investment in the company, and I’ve bought shares from a long-time investor who needed some ready cash. Angel investing can be very rewarding, especially when the company you invest in has the above characteristics.