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Jul 26, 2023

PeakSpan’s “Do it For Me Automation” Thesis

Originally posted

At PeakSpan, we’ve invested in several companies who would qualify for the “Do-It-For-Me-Automation” (or DIFM) category. What is DIFM? DIFM is defined as any delivery model where the “users” are employed by the vendor and who are leveraging the vendor’s technology to drive ROI for the customer. Put in other words, the software vendor not only provides the technology, they also leverage the solution on behalf of their customer. They “do it for you.” Have you ever purchased an iPhone screen protector, had the store associate rip the box open in the store and proceed to install the protector on your phone? That’s DIFM!

Simfoni, in addition to providing software and payments solutions, offers a Tail Spend Automation platform. “Tail spend” represents the ~80% of business spend purchasing volume (by # of transactions) yet typically only represents ~20% of the $$$ costs. This spend is often non-strategic in nature but when aggregated, is a large sum of typically unoptimized cost in a business. Simfoni “eats their own dogfood” so-to-speak, using their own technology plus a team of seasoned sourcing professionals to fully take the reins on their customer’s tail spend. The team at Simfoni can typically drive six and seven figure savings through the software, supplier relationships and sourcing expertise. Can customers use Simfoni’s technology to do it themselves? Surely, but given the complexity, dearth of time/resources at the customer and given the fact that Simfoni’s sourcing team is head and shoulders better than any customer they serve, the preference by the customer is to “do it for me

FinPay, also in addition to providing “DIY” software and payments technology, offers their solution on a fully managed basis. FinPay serves the behavior health market, assisting clients in capturing the dollars that the patient owes the facility. Pre-FinPay, facilities collected just 13% of dollars that the patient owed (only 13%!!! Getting by just off of insurance dollars). With FinPay, facilities are collecting up to 82%. FinPay accomplishes this through technology, payments infrastructure, playbooks and a team of specialists who engage with patients around the payment. The result i) greatly improved patient experience through immediate, transparent and straightforward communication surrounding the patient financial responsibility and ii) optimized patient admissions and payments. Again, while FinPay offers both options “DIY” and “DIFM”), it is often the case that customers want to leave this domain to the exerts at FinPay to maximize the customer’s ROI (which is immense!).

Finally started as a pure-play do-it-for-me automation solution, employing a team of bookkeepers who leveraged workflow automation to close the books of Finally’s customers. Since PeakSpan’s investment, the business has built out a fully featured expense management platform with an integrated corporate charge card and is now leveraging generative AI to auto-classify expenses. Moving forward, the business will be pursuing a plethora and software and FinTech product extensions with a thesis that they can become the “financial G-suite” for small business owners. The combination of software, FinTech and hands-on assistance is a lethal combo especially when we are talking about closing books or doing taxes (functions that no SMB is eager to tackle). Small business owners do not have the time, nor the expertise (nor the desire!) to do their own bookkeeping and thus Finally is a natural candidate for “do-it-for-me” automation.

Stylitics serves the largest brands and retailers in the fashion and apparel space. Having dominated this vertical, they are now moving to tangential verticals. What Stylitics does is help brands display digital outfits on their website. While it sounds simple, it is actually quite complex and time consuming. As evidence, one retailer tried to build a similar product in-house and after spending a few million in R&D, has scrapped the project. The process for Stylitics starts by ingesting static product content (the product catalogue) as well as model-shot photography. The team then leverages an image editing unit + proprietary “adobe-like” software to render each image consistent with the others. The core Stylitics platform them stiches together these articles of clothing into outfits, leveraging AI to produce thousands of outfit combinations rapidly. Lastly, a team of stylists work with the brand or retailer to understand what types of outfits they would like to show on the website, further training the AI to spit out only the outfits that are consistent with the brand’s preferences (no white after labor day!). The results are stunning! Shopper conversion and basket size increase dramatically when guiding the consumer towards an outfit purchase. Stylitics has built an immense technology platform with much of the process automated. However, the interplay between technology and stylist is key and is responsible for driving the best possible ROI for brands. Stylitics is the type if DIFM that is truly best left to the professionals.

TraceAir, a provider of sitework intelligence and drone services for homebuilders, is another down the fairway example of do-it-for-me automation driving tremendous benefits for certain value propositions and markets. Serving the largest homebuilders in the US, TraceAir makes drone-enabled site intelligence a no-touch proposition — and a no-brainer decision for builders. The Company removes any burden around imagery capture (via a provided 3rd party network of drone pilots) and the corresponding photogrammetry / processing (handled by TraceAir team members) so that their customers can enjoy real-time visibility into current job status without leaving the office / trailer. Rather than having to take the proverbial “test” themselves, homebuilders are simply handed the answer key and are able to tap into TraceAir’s full and interactive dashboard that gives builders a dead-simple overview of project status and corresponding implications (cut/fill progress, sequence planning, site status compared to plan, etc.) that ultimately help projects stay on time and under budget.

At PeakSpan, we love these business models for the following reasons: 1) all of the above mentioned companies do what they do at software-gross-margins of 70%+, 2) this business model exhibits higher gross and net retention (given usage and success is NOT left in the customer’s hands, 3) defensibility is high due to the complexity and combination of people+technology, and 4) at the end of the day, human nature “enjoys” the “do-it-for-me” model, especially when it works and provides a high ROI.

Customers, grab your favorite cocktail and sit back, we’ll take it from here.