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Fund picks E-chx for its first venture
Staff writer
E-chx Inc., a payroll processor in Brighton, has received the first investment from Trillium Lakefront Partners III.
Lakefront Partners, the largest regional venture capital fund upstate, made the investment because so much of the payroll processing market is still untapped, officials said.
Only about 15 to 20 percent of the 7.5 million small- and medium-sized U.S. businesses currently outsource their payroll.
"It's a large market that continues to get larger," said Kevin Phelps, general partner in Trillum Group, the Pittsford firm that managed the year-old fund. "(It) can be a very attractive business if you get up to a scale like the Ceridians and Paychexes and others have done."
Paychex, based in Penfield, reached $1 billion in sales last year and also has discussed in its forecasts the room for growth in the market.
The amount of the investment was not disclosed. However, Phelps said the fund was built to distribute $2 million to $5 million per investment to companies stretching from Jamestown, Chautauqua County, to Albany.
The Lakefront Partners fund now has more than $50 million, he said.
E-chx, which is focused on selling payroll services to clients with fewer than 100 employees, declined to disclose the number of customers it has. The company employs 80 people, including 28 at its headquarters at 200 Canal View Blvd. in Brighton.
E-chx said its revenue has climbed 200 percent in each of the last two years under the leadership of its chairman, Richard Aab. Aab is the former chairman and chief executive of ACC Corp. and also is chairman of the Charlotte, N.C., telecommunications company US LEC.
E-Chx, founded in 2001, is striving to be one of the 10 largest U.S. payroll processors within the next five years. Automatic Data Processing Inc. is No. 1 and Paychex Inc. is No. 2.
"We feel because of our proprietary software that we have some unique opportunities and advantages over our competitors," said Scott Seeman, E-chx's president and chief executive.
Over the next four to five years, Trillium said it hopes to use Lakefront Partners III to invest in eight to 12 companies that have the potential of an E-chx.
"We'll do probably three or four a year," Phelps said.
Lakefront Partners III has received investments from the New York State Common Retirement Fund; the County of Monroe County Industrial Development Agency; and the Rump Group, a consortium of Rochester executives that seeks to influence public policy and economic development.
TGRADY@DemocratandChronicle.com
PHOTO CAPTION
Kevin Phelps
His firm manages region's top venture capital fund.
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The set-up went great! The first payroll run was smooth and easy. Any questions I had were handled very promptly and courteously. I am very pleased with my E-chx experiences and have recommended them to several other offices. Thanks for the great product and above all the great service!
- Joanne Davis
Practice Administrator
Raleigh Ear, Nose, and Throat, Head and Neck Surgery, Inc.
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