Second Phase prospers with B2B e-commerce

BOULDER — Second Phase was founded on the idea that it wasn’t worthwhile chasing down the consumer side of e-commerce solutions. Instead, the Boulder-based company focused on the business-to-business side of the equation, which has taken it on an epic ride.

“It was pretty lean in the beginning,” said cofounder and chief executive Mark Kostovny about chasing that secondary market in 2001. “We started to explode in 2012.

“B2B e-commerce is the future of e-commerce. Only 20 percent of distributors have an e-commerce site,” Kostovny said. “Consumers can always go to a brick-and-mortar store, but the plumber has to stock his truck each day. That’s what the wholesale industry feeds.”

Wholesalers also have specific needs, because the accounting databases are proprietary and complex the interaction required to create website-based sales is in turn more complex and also proprietary. Commonly called economic resource planning, or ERPs, these databases manage all the product data and pricing structures for large wholesale distributors.

“They may have 100 different pricings on each item; you can’t duplicate that outside of the ERP,” he said. “We’ve really worked hard to get their price online.”

According to company information, Forrester Research forecasts that U.S. B2B e-commerce market will reach $1.8 trillion by 2023. Bank of America projects there will be a total addressable market for e-commerce B2B of $1.4 trillion by 2021, which is nearly double the firm’s estimated $761 billion market for consumer e-commerce.

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Second Phase LLC

250 Arapahoe Ave.

Boulder, CO 80302

303-582-9326

secondphase.net

Mark Kostovny, CEO

Founded: 2001

Employees: 165

Primary service: e-commerce site for distributors and wholesalers

Growth: 65%

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Both Kostovny and cofounder Scot Shaeffer have been involved in software since the mid-1980s. Kostovny hold an undergraduate degree in engineering and a master’s in business administration, while Shaeffer was a computer science major, with a master’s degree from Colorado School of Mines. While the company was founded in 2001, it wasn’t until a friend introduced them to the ERP world in 2004 that they shifted gears into B2B e-commerce.

“We knew the consumer thing was a runaway, with programs such as Magento or Shopify,” Kostovny said. “We knew the B2B space was a whole ’nother animal.”

Second Phase was acquired by New Jersey-based BillTrust in mid-April for an undisclosed amount. Kostovny said aligning their solutions with the largest automated accounts-receivable solution will allow his company to grow even faster than the 38 percent annual growth they’ve seen over the last six years.

“We are very pleased to welcome the Second Phase team to BillTrust. By adding adjacent functionality, this acquisition enhances our capabilities in the order-to-cash cycle and delivers valuable business outcomes to our important wholesale distributor customer segment,” said Steve Pinado, president at BillTrust, in a prepared statement.

For Kostovny, the sale means there will be the money his company needs to grow even faster.

“We’re in the lead, as far as I can see,” he said, “but with our new owners it will help us grow even faster.”

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