Corporate spend management startup Ramp has raised $30 million more in a new round, it announced today. TechCrunch covered Ramp’s launch earlier this year, when it also detailed that it had raised around $23 million up to that point.
The startup raised its latest round in August of 2020, with conversations about the deal kicking off in June. The new capital is Ramp’s second priced raise after its August, 2019 seed round worth $8 million and the first after its February, 2020-era $15 million raise. D1 and Coatue were new investors in this new investment, which included some prior backers.
Ramp CEO Eric Glyman called the new equity something akin to a Series A3, noting that it had effectively reused docs from a preceding round, albeit with a new price attached. Venture history purists could argue that Ramp’s new raise was the company’s Series B — the second priced round after its seed — or that it is really a Series C, as the startup’s seed round was as big as a 2000s-era A and was also a priced event.
Ramp did not need the funds. Per Glyman, the startup still had part of its original seed round in the bank when it raised the latest check. That implies that the company had more than $45 million in cash as of August, 2020.
Asked why he raised the capital if it was not needed, the CEO told TechCrunch that its new investors had “pretty unbelievable” investment track records. And Glyman added that the round was attractively priced, limiting dilution. The exec also said that having the new funds helped Ramp hire more aggressively with confidence.
But while the round is interesting to a degree, more intriguing is the space in which Ramp competes. So let’s talk about the power of software, and when the startup and its competitors might start charging more for their deployed code.
Ramp competes for market share in corporate spend management, an active vertical with a number of venture-backed players. That actor density has generated a level of competition that has rewritten the ground rules for getting credit and charge cards into the hands of companies. The table stakes are higher than ever in the niche.
Why? Because issuing credit and debit cards to consumers and corporations has largely been commoditized, causing startups hunting for slices of spend via interchange to build increasingly powerful software suites around their original products; if you can’t entice new customers with fancy cards, how about lots of digital tooling built around spend itself, to help your company manage and limit cash outflows?
The examples of this trend are myriad: Brex built out a cash management solution, for example, and expense management tools. Ramp itself launched expense management software of its own this year, and Divvy has a similar service along with other card-related software tools.
Venture capitalists have poured $55 million into Ramp, by our count, north of $400 million into Brex, not counting debt raised by the unicorn, and more than $250 million into Divvy. So, the game of building increasingly robust software stacks atop corporate cards is one to watch, as the scale of venture bets made on the key players in the space is titanic.
Ramp is dropping new code with its funding news, underscoring the point. The company recently added vendor management tooling, and is now adding reimbursing capabilities so that employees can be paid back for expenses not made on the startup’s cards.
Which of the three has the best software stack? They each think that they do, we reckon.
The result of the efforts by Ramp and its competitors to build out software around their card offerings has been rapid customer growth. Divvy, reached this week concerning its own metrics, told TechCrunch that it has seen its customer number expand 120% in 2020 and total spend on its platform rise 100% this year. Brex declined to share growth metrics.
Ramp announced its own growth figures as part of its news passel, including that it reached $100 million in spend on its platform in the first 18 months following its incorporation (a somewhat non-GAAP time frame, we admit), and that a quarter of the total spend that it has supported for corporations was recorded in the last 30 days.
There appears to be plenty of market for the startups to grow into, just as there is plenty of capital available for them to tap.
To close, a question: When will corporate spend management startups flip the switch, and start to charge for their software suite? Currently the trio make money largely from interchange, collecting a tiny piece of transactions that they power with their cards. This scales well, and keeps friction of signing up new customers low; after all, who doesn’t want a free set of financial tooling?
But, eventually, they will charge for their software. SaaS revenue is simply too highly valued to not go after. At some point. Perhaps that day will mark the end of the corporate spend
land logo grab, and the start of the software niche’s maturation. At which point I expect new competitors to sprout up and the cycle to repeat.