1. APRIL 20-26, 2012
Reprinted for web use with permission from the St. Louis Business Journal. ©2012, all rights reserved. Reprinted by Scoop ReprintSource 1-800-767-3263.
St. Louis Business Journal 9
stlouis.bizjournals.com
BY GREG EDWARDS
gedwards@bizjournals.com
Clearent,acreditanddebitcardpayments
processor that launched in Clayton five
years ago with no customers, now has
12,000merchantclients,processed$1.5bil-
lion in transaction volume in 2011, and has
exploded its revenue to $25.5 million, 84
percent higher than in 2010.
The company asserts that it will double
that this year, to $3 billion in transaction
volume and $50 million in revenue.
Got your attention? Meet Dan Geraty, 45,
chief executive of Clearent, which has raised
$15 million, mostly from angel investors.
AfterbusinessschoolatWhartonandtele-
com, software and Internet jobs elsewhere,
GeratycamehometoSt.Louisin2005.Kev-
in Haar, chief executive of IT company Ap-
pistry, introduced him to Norm Tice, a Boat-
men’s Bank executive for 40 years who had
been a MasterCard board member and
chairman,andDavidTruetzel,aprincipalat
AuguryCapitalPartnerswhohadbeenchief
financial officer of a large payments proces-
sor. Both believed there was a need for a bet-
ter platform.
TruetzelsaidhistimeasCFOofChasePay-
mentech, a subsidiary of Chase Bank, left
him convinced that someone could provide
farmoreusefulinformationtothemerchant
customers, such as simpler, clearer reports.
“We wanted a platform that would help
them run their businesses,” he said.
So,withthehelpofTiceandTruetzel,Ger-
aty and about 10 employees began building
one in 2006. “Dan was a very bright guy
who wanted to come back to St. Louis, and
he had the right temperament and back-
ground,” Tice said. “And he attracted some
very talented people.”
“It’s a major undertaking to build a new
system,” Geraty said. “It hadn’t been done in
about 12 years.”
Clearent launched in April 2007 and fin-
ished that year with $300,000 in revenue.
Its processing systems were certified by Visa
and MasterCard, giving it direct access to
their systems — unheard of for a company
so small. “It’s a big deal, and you can imag-
ine the level of scrutiny we received,” Geraty
said.
Much of Clearent’s capital came from St.
Louis family offices, private companies that
manage investments and trusts for a few
wealthy families, and none of it came from
institutional investors, who tend to be more
worried about the timing of their return
than the business, Geraty said. “We were
abletoraisethemoneybecauseoftheleader-
ship of wealthy St. Louis families,” who do
notwanttobeidentified.“Wehaveinvestors
who advise family offices and pitch Clearent
as an alternative investment.”
Lots of companies are in the processing
business — Clearent ranks 73rd in volume,
accordingtoTheNilsonReport’s2011listof
Top U.S. Merchant Acquirers — but most
are resellers that don’t have their own sys-
tems, and only about a dozen processors are
certified by Visa and MasterCard, allowing
them direct access to the card companies’
systems. And at $1.5 billion in volume,
Clearent is by far the smallest of those. The
next smallest certified processor, WorldPay,
had volume of $100 billion last year.
WhydidVisaandMasterCarddoit?“Ours
was a new system; they knew some of our
board members” — such as Tice and Truet-
zel — “and they look for anything that can
grow their business,” Geraty said.
Another early backer was First National
Bank of St. Louis, a conservative financial
institutionthattookachanceonClearentby
becomingitssponsor,meaningthatitwould
be the deep pocket if Clearent failed. That’s
important because credit card companies
such as Visa and MasterCard don’t take the
financial risk; they’re just the middlemen.
Here’s how it works: In the case of valid
andsuccessfuldisputesovercardcharges—
and there are a lot of them — the credit card
companychargesthebank,thebankcharg-
es Clearent, and Clearent collects from the
merchant. If Clearent were to go broke, First
National would be responsible.
Rick Bagy, the bank’s president, said he
was willing to act as sponsor because he
liked Clearent’s business plan, and its back-
ers included Tice, who is a regional director
of First National and knew the processing
business from the MasterCard board, and
Appistry’s Haar, a Clearent board member
whom Bagy had known since college.
Underlying all of that for Bagy was Clear-
ent’s business advantages: “We have used
other providers that didn’t have a product
that was nearly as user friendly or as eco-
nomical,” he said.
One reason Clearent has been so quickly
accepted by customers is its detailed reports
toclientsanditsfastpayouts.Thekeyisnext-
day funding for the merchants and late cut-
offtimes.Manyprocessorshaveearlycut-off
times and two-day funding.
“Our service department and body shop
do a lot of business, and 99 percent of it is on
credit cards, so their fast payout is a huge
deal for us, and their costs are so much low-
er,too,”saidDavidSinclair,presidentofDave
Sinclair Buick GMC.
Clearent targets $50 million revenue, double volume
BRIAN CASSIDY
CEO Dan Geraty has grown the credit and
debit card processor to $25.5 million in
sales in five years.