We guess there’s a view that small business owners aren’t clued in to how they spend their money. And they’re probably not as much as they should be. After all, a plumber is more focused on making sure the copper pipes are connected to the hot and cold lines. And what about the auto mechanic who’s preoccupied with making sure the shipment of parts is arriving in time to complete the repair jobs of the cars stacked up in the repair bays?
So we thought about these business owners as we read about new growth funding rounds for two companies chasing the spend management space.
Airbase, a four-year-old San Francisco-based startup closed a $60 million Series B round which puts the company’s value now at $600 million. Airbase has raised just over $90 million since its founding in 2017. The company claims to combine all aspects of spending – accounts payable, corporate credit cards, employee reimbursements – into one solution. Competitors in the sector have usually focused on a more narrow set of tracking solutions. Airbase’s target customers are companies with more than 100 employees. That’s the “M” in SMB.
We can imagine how providing the controller or CFO of a 100-person company with a view into how the company is spending its money can be very valuable. This is particularly true with start-ups that have raised nice-sized rounds of investor money. We often see these early-stage start-ups spend in ways that might not be in the company’s best financial interest. But with that data not in one easy-to-find place, it is often too late by the time the finance team has realized that employees were being reimbursed daily for that $20 MIXT salad. By integrating with some of the most progressive SaaS companies around — think Gusto, Xero, Sage, and of course QuickBooks — the company has a “go-to-market” advantage.
We learned of another company that’s tracking spending getting funded. In this case, Copenhagen-based Pleo just raised $150 million (now totaling nearly $230 million) at a $1.7 billion valuation. The company’s main focus is making it easy to manage the often painful process of managing and tracking expenses. The company will use the new money to add more user features. It also plans to fund additional business (aka sales) development activities. According to Crunchbase, the company has some 17,000 small and medium-sized businesses using the platform.
Like so many other SaaS companies that launch with SMBs at their core customer focus, Pleo is maneuvering to move upmarket. It wants to appeal to companies with as many as 5,000 employees. CEO Jeppe Rindom has set a goal of having 1 million users on the platform by 2025. If the majority of the 17,000 customers today have, let’s say between eight and 10 users, then reaching that 1 million user goal is quite ambitious. Expense management is an $80 billion market in Europe alone, according to estimates.
Pleo currently has some 330 employees in five European cities. We’d expect the company to test the market in the U.S. with its bank account now $150 million fatter.
One of their investors, Keri Gohman at Bain Capital Ventures, put it this way. “The future of work empowers employees with the tools they need to be effective, productive, and successful. Pleo understands this critical shift for modern companies toward employee centricity—providing workers with a fun-to-use spend management app that automatically tracks their corporate spending and generates expense reports, paired with the powerful tools businesses need to create full visibility and management of every penny spent.”
The OG of Expense Apps
We think of Expensify, the company that really pioneered employee expense tracking. Oddly enough, Expensify which launched 13 years ago, has only raised about $40 million and has not yet gone public. Is it that a company launched in 2008 is already behind in terms of technology or product roadmap. Or perhaps Expensify has turned its focus on being a lifestyle business for its core shareholders and employees. Whatever the case, we’ll be interested to see if, and how, Expensify reacts if Pleo enters the U.S. market.
Keeping close tabs on the expenditures of an organization is always a smart decision. With company’s like Airbase and Pleo gaining momentum, employees will find tracking their spending more transparent and reimbursement easier. All good. Now if that salad can be $15 instead of $20, life will be a bowl of cherries.