Recovering Lost Revenue: Vindicia CEO Gene Hoffman (Part 5)

Sramana: So your initial value proposition for Vindicia was to handle the charge back process for your clients?

Gene Hoffman: Yes. Our intention was to recover revenue for our clients as well as provide them market data that was associated with charge backs. We quickly found two things. First, on the downside, we found that we could sell to CFOs very easily because it was ‘found money’ but CMOs and CTOs had a real subscriber account goal which was a different focus. Getting integrated to do that business was very hard. The second discovery came with the emergence of the PCI Data Security Standard. This is the security standard that Visa and MasterCard forced everyone to comply with after all the major data breaches in 2004. Our founding team had been at PGP so we understood security, and we had run a public company so we understood the control environment, so we went and got that certification ourselves.

That is when we realized how difficult and painful it was to get, even for someone stepped in those methodologies. It dawned on us that this was going to be a major market change. People were going to change how they viewed having their credit card infrastructure held internally versus letting someone else manage it. As soon as we realized that we did a pivot and started to focus on CashBox. We had people in the market who realized we had a unique expertise with recurring billing and they wanted us to help them extend and refine those processes. At first we turned those offers down because we felt we needed to stay focused on charge back management, but the PCI Data Security Standard changed all that. Once companies became willing to outsource credit card processing management we focused more on CashBox, our recurring billing platform.

Sramana: What was your business model? How were you selling these solutions?

Gene Hoffman: Our charge back business model started with us splitting the recoveries. It was intended to be found money for the companies and revenue for us. The extra benefit would be the marketing data that we would have found which we provided to our clients. We had hoped to transition that model to a percentage of raw revenue because if we were really good at preventing charge backs then we would have been cutting into the revenue we would have created for ourselves.

We really got serious in 2004, but we did our major pivot in 2006. We then started building out CashBox and that platform. We had seen people having problems integrating the charge back solution even though we were able to convince them to buy it. It was the right shift at the right time. Now we are charging a percentage of overall revenue. It is a direct sell to people who have some scale. For companies that have that degree of sophistication it makes complete sense. We typically sell to the CMO and we enable them to test and try new business plans and models while extending their total customer life. What we can show is that we will end up increasing their revenue two or three times the amount that we are charging them.

This segment is part 5 in the series : Recovering Lost Revenue: Vindicia CEO Gene Hoffman
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