TECH FINANCE 

Capital Confirmation set to raise more capital
Brentwood firm says $5 million will bring profitability

Six years after a 27-year-old student at the Owen Graduate School of Management conceived and founded the company, Brentwood-based Capital Confirmation Inc. (CCI) -- still confident, still profitless -- is poised to ask current and prospective investors for a $5 million vote of confidence.

Later this month, CCI Chairman and CEO Chris Schellhorn (photo, left) and investor-entrepreneur Crom Carmichael will begin explaining the CCI story to prospective investors in a new round of financing.

They'll reprise the story of how CCI's Confirm technology and Web-driven services help banks and accountants corroborate the existence of cash balances and other assets during financial audits.  They'll explain that a secure communications network enables CCI to complete a single confirmation in hours -- with the identity of those responding with vital information electronically authenticated -- versus the four to six weeks required via manual processes that are often more susceptible to fraud. And, they'll estimate they'll save clients about $92 per confirmation.

Both Schellhorn and Carmichael recently told Nashville Post they're confident they'll recruit most, if not all the capital they seek by New Year's, given that many of the company's current 100 or so investors have expressed interest in participating in another offering. In addition, Nashville Capital Network (NCN) Executive Director Sid Chambless confirmed he plans to invite CCI to present its story, once again, to NCN-affiliated angel investors, some of whom participated in an earlier CCI round.

Schellhorn, 55, is also confident that a further infusion of capital will enable CCI both to achieve profitability, and to seize a now-vacant role in the financial confirmation process -- a role he says influential players in the sector want CCI to inhabit, and soon. He would not divulge the names of those players for the record, insisting instead that CCI is genuinely "on the verge" of closing service agreements with "three of the top 15 financial institutions," while CCI offerings are under due-diligence review by another eight, scattered among the industry's top three tiers. He said current contracts have an annualized value of under $1 million.

Schellhorn and others note that in a world that has been rocked by such confirmation frauds as the Parmalot and HealthSouth scandals -- and with business facing the glare of Sarbanes-Oxley scrutiny -- financial institutions are looking for a trusted clearinghouse for e-confirmations. Schellhorn argues the industry has little interest in multiple confirmation platforms, given the additional training and recruitment challenges that would attend market fragmentation.

The sector is familiar terrain to Schellhorn: Prior to taking the helm of CCI in 2001, he was managing director of Integrion Financial Network, the online banking platform owned by eighteen of the world's largest banks. Earlier, he was was president and CEO of VISA Interactive, VISA International's wholly-owned online banking and bill payment subsidiary.

Schellhorn said CCI has since its inception recruited about $7 million in friends and family money, seed capital and debt financing, including a $3 million round of equity capital in 2005 and $750,000 in debt financing in 2003. The company currently has about 100 investors, including all ten of CCI's full-time employees.

He estimated about a tenth of the projected $5 million raise will be spent on scaling-up technology, data storage and recovery capacity and other priorities, with about $4.5 million tagged for operations, sales and marketing, tech-related services and new customer-support capacity of the caliber demanded by the largest institutions. CCI also plans to broaden the application of Confirm to address accounts-receivable, investments and commercial credit variables.

Schellhorn says he and other managers in company went without salaries during most of 2001-2004. They then spent more than a year developing and pressure-testing a fresh business plan, calling on the largest potential customers and bringing in-house a technology team, which has now been led for more than a year by Jim Hamilton, a former technology executive with MyTravel North America, and a former Schellhorn colleague during their years with Visa Interactive and Visa International Electronic Banking.

Brian Fox, the now 33-year-old former Owen student credited with germinating CCI, explains he hit on the idea behind CCI after recognizing the inefficiency and vulnerability of paper-based confirmation processes, while working in auditing for Ernst & Young LLP, and in mergers and acquisitions for PriceWaterhouseCoopers LLP.  Fox is now CCI's vice president for business development.