Founder: Nirav Patel
Chief operating officer: Monty Bruell
Initial investor: Blank Slate Venture
Customers: Goal of 20 beta business customers within 30 days.
Employees: Two workers in Chattanooga, six software developers in India
Headquarters: Chattanooga, at the Business Development Center
Source: Rapid RMS
Chattanooga investment group Blank Slate Ventures has made its largest-ever investment in an early-stage company.
The group announced on Wednesday that its partners have made a $350,000 bet on Chattanooga-based Rapid RMS, an emerging point of sale technology that combines the best of iPad-based credit card swipes with a more refined technology that allows for easy expansion.
"We are doing this on the ground floor, which allows us to be involved in the future of the company," said Lex Tarumianz, a lead investor with Blank Slate.
The company's ace in the hole is a flat 2 percent credit card charge, which eliminates the unpredictable ups and downs associated with traditional credit card fees, and one-of-a-kind cloud-based advertising that makes offers to customers based on what they buy.
"You're really at the mercy of these companies that are now collecting these fees," said Tarumianz, who is a part owner of a liquor store, where he is participating in the Rapid RMS's beta test. "With these other guys, it's like reading a thesis on nuclear engineering to try to figure out exactly what you're paying."
Tarumianz and Blank Slate previously invested hundreds of thousands of dollars in Quickcue, a restaurant wait-list management company, before selling that business to San Francisco-based OpenTable in late 2013 for $11.5 million. Like Quickcue, Rapid RMS uses iPad-based software, and like Quickcue, Rapid RMS could find itself competing with some of the biggest names in the rapidly changing world of cash registers.
Square, for instance, is already a big player in the point of sale business, with an estimated $500 million in 2013 revenue, while Rapid RMS is just getting off the ground. But many of Square's small square credit card readers will become obsolete when new anti-fraud measures come into play in 2015, said Monty Bruell, chief operating officer at Rapid RMS.
"We're not Square, we're not for a very small operation that just does the occasional credit card operation," Bruell said. "Ours is for a convenience store or liquor store that does $1 million to $2 million per year. It's a real [point-of-sale] system."
On the other end of the spectrum, most traditional point-of-sale registers are vulnerable to employee theft, power outages and other types of disasters, while Rapid RMS's cloud-based service, ease-of-use and lower, more predictable fees will help the company steal market share from established players, he said.
As far as fees, Rapid RMS charges a 2 percent credit card fee on top of the sale of the iPad-based system and a licensing fee that starts at $99 per month. That structure could set it apart from more complicated offerings from competitors.
"The way that the credit card companies will structure it, they'll come in and say we'll offer you a real attractive fee, a 2.2 percent fee, but we're also going to charge you 10 cents per transaction, and there's a $40 per month service fee that you'll offer pay," Bruell said. "They lure you with the rate, but then you find out there are all these other hidden fees. We say we'll charge you 2 percent, no hidden fees."
The company also offers integrated advertising on the customer-facing screen. So if someone buys a case of Coca-Cola, they'll get an advertisement to pick up some ice. If they buy potato chips, they'll see an advertisement for French onion dip.
"We're the only system that incorporates such an advertising display at the point of sale," Bruell said.
Beta testing is already underway, with the goal to test in 20 stores within a month, he said. Thanks to the investment from Blank Slate -- $200,000 from the fund itself, with an additional $150,000 coming from individual investors -- the company will improve the user interface and upgrade servers to get ready to scale the business.
"What we're essentially doing is proving the concept, and if we can successfully do all the things that we say we're going to do, then around September or October we'll go back to the market for Series A round of funding," Bruell said. "That's in the millions of dollars."
The company will become profitable on its way to 100 customers, but will ultimately need to sign up thousands of retailers, liquor stores and other businesses in order to make "serious money," Bruell said. An effort is also underway to expand into untapped markets, such as gas station pumps, which could create another line of business.
But like Blank Slate's last venture, Quickcue, Rapid RMS eventual fate may be the auction block, once it becomes a threat to more established players such as Square.
"The ultimate strategy would be for us to build a product or customer base to be attractive to another company to acquire three to four years down the road," Bruell said.
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