Hal Davis was rock star. Renaissance man, like Lindt. In fact, Hal Davis is Tom Lindt:
Internet firm gets cash boost
Ann Arbor company led by a former rock star gets $5.8 million in venture capital
By Tom Henderson
Thursday September 3, 1998
Robin Buckson / The Detroit News
Hal Davis, president and chief executive of BlueGill Technologies, says company revenues quadrupled this year and he expects them to quadruple again next year. (That would put 99 in the range of $12mm, BTW)
ANN ARBOR -- Hal Davis didn't follow the typical career path for the president and chief executive of an Internet software company. He wasn't a computer whiz writing software code before he got out of his teens. He wasn't a pocket-protector geek acing his way through engineering school.
Davis' path to entrepreneurship grew out of a biology degree at the University of Michigan and a decade playing rock 'n' roll -- he was lead guitar player, manager and front man for a semi-legendary, Ann Arbor-based band called Bigfoot, which played around town and the Midwest from 1973-83 and opened for a number of national acts.
Today, Davis is head man of BlueGill Technologies, a 2-year-old company. In June, the company got $5.8 million from two of the biggest venture capital firms in the country to market its technology, which allows customers of large companies such as banks to pay their bills via the Internet.
Mick Jagger might be comfortable banging out the hits at 50. But at the end of his rock career in 1983, Davis decided it was time for a change and enrolled in the MBA program at the University of Michigan.
"I got out of rock 'n' roll what I wanted," says Davis. "I had a lot of fun, played in front of some big crowds, produced some music I was proud of."
In 1996, Davis was vice-president of marketing for Interface Systems Inc., which manufactured printers for IBM mainframes, typically printing out millions of documents such as phone bills or monthly statements. An entrepreneur at heart, he had begun using e-mail and thought the timing just might be right for starting a company based on allowing customers of large companies to pay their bills via the Internet, eliminating the need for at least some of those millions of paper documents.
He began noodling the idea over with his customers at banks and phone companies. That summer he wrote his business plan; that fall the fledgling company raised its first round of financing, $400,000 kicked in by him, partners at BlueGill and several outsiders.
More important, some of Davis' customers at Interface agreed to do business, which gave him some wherewithal when it came to seeking more funding, which came in the form of $500,000 in 1997 from Arbor Partners, an Ann Arbor venture capital firm.
The big announcement came on June 6. BlueGill was the recipient of $5.8 million in funding from two of the most prominent venture capital firms in the country -- Menlo Ventures of Menlo Park, Calif., and Morgenthaler Ventures of Cleveland.
"We look to invest in companies that are leaders in large, emerging markets," says Mark Siegel, one of Menlo's partners. "BlueGill is clearly the No. 1 company in the emerging bill and statement presentment area, with superior technology and a winning team (and) promises immediate hard-dollar returns on investment for customers."
The financing announcement followed by just a day an announcement by the publicly traded firm of Vestcom International, which provides documents, statements and bills for about 1,400 customer companies, that it was partnering with BlueGill to deliver such documents via the Internet.
No one assumes the paying of bills via the Internet will replace traditional methods of companies mailing bills out and customers mailing checks back. But the savings can be huge if large companies can get even tiny percentages of their customers to pay electronically. In all, about 15 billion bills are mailed out each year in the United States, meaning a huge potential market for BlueGill's services.
It is estimated that the cost of preparing and mailing monthly documents to 10 million customers is $60 million annually. If 5 percent of those customers opt for electronic payment, that's a cost savings of $3 million annually for software that costs a tiny fraction of that.
More important, says Davis, is that the system allows companies to build better marketing relationships with the cream of its customers. Those paying by Internet would, it is felt, be a better educated, higher-income segment of customers. Getting them to get their bills on-line would give them access to companies' Web sites, which would presumably lead to tailoring and marketing other products for them. Companies also would get the money instantly, being able to use it or invest it at once instead of waiting on the mails and then waiting longer for checks to clear.
In addition, it's simply a way of giving customers better service. They would no longer have to be home to get a bill. They could access and pay bills while on vacation or on business trips.
"We're changing the way the world is going to do business," says Culver.
Large companies are buying into the premise. Davis says he has nondisclosure agreements with his earliest customers and can't name them, but that they include banks and phone companies. New customers include Standard Register and Moore USA Inc., which like Vestcom do billings and statements for other companies.
Davis says BlueGill's client roster is up to 21 today from six a year ago, about half of them Fortune 500 companies, including IBM Corp. Since May, employees have grown from 15 to 24 and he expects to be at 50 in a year. He won't discuss revenues except to say that they will quadruple this year and he expects them to quadruple again next year.
Davis said that while most customers are still in pilot programs involving hundreds or thousands of customers as they fine-tune their systems or build Web pages, one brokerage is already doing 5 million Internet bills or statements a month.
In addition to the company's new 2,000-square-foot headquarters, it has a software development office in Waterloo, Ontario, home of BlueGill's chief technology officer, Ray Simonson. Simonson is past president of Xplor International and former information services manager for the Mutual Group, a financial services company managing assets of more than $30 billion.
Few entrepreneurs are able to round up some $7 million in funding in their first two years. Davis says it was merely having the right product at the right time.
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