Earlier this month, expense management services provider Expensify (Nasdaq: EXFY) went public. I have had several interesting interactions with Expensify’s founder David Barrett, explaining his journey to setting up this multi-billion-dollar unicorn.

Expensify’s Offerings

San Francisco-based Expensify was founded in 2008 by Dave and Witold Stankiewicz. Dave has been a serial entrepreneur. He started building Expensify while he was working at Akamai, which had acquired his earlier startup. Dave wanted to build something that focused on money and could be sold directly to individuals instead of going through the enterprise sales model. His initial idea was to create a prepaid debit card that maintained a zero balance at all times. The user could give these cards to their friends, families, or co-workers while putting limitations on its usage. Every purchase made on the card would be billed back to the actual credit card. But the idea involved working closely with banks, which are traditionally, rather risk-averse.

To help manage the fear of the bankers, Dave set about building an expense report reimbursement system as its core product, while continuing to offer the prepaid card on the side. For the next few months, he built the product on his own. In September 2008, he was accepted to demo at TechCrunch50, and that is when he invited his Co-Founder Witold to join him.

Even at TechCrunch though, David was still pitching the idea of “expensify(ing), the corporate card for the masses”. Their potential customers loved the expense reporting concept unreasonably, more than they could have possibly imagined. Soon, Expensify was being adopted by the employees before even getting accepted by their organizations.

Today, Expensify has become a financial services startup that provides businesses with online expense management services. Its platform helps create expense reports by importing expenses and receipts from credit cards and emails within its mobile app by enabling consumers to take pictures of receipts. The company uses its patented SmartScan technology to read receipts, create expenses, and match them to transactions imported from a credit card. Since its founding, it has added over 10 million members to its community, and processed and automated over 1.1 billion expense transactions on its platform.

In 2019, Expensify finally launched its card called Expensify Card.  To ensure it was different from all the other cards, it introduced the world’s first card reward that helps create a more generous world: Karma Points. Every time someone makes a purchase with the Expensify Card, Expensify donates 10% of card revenue to Expensify.org, its charitable arm. The funds are distributed to a purchase-appropriate cause that is geared on five key areas: climate justice, food security, housing equity, reentry services, and youth advocacy. 

While initially, Dave wanted to set up an organization that focused only on end customers, it has already pivoted to a provider of enterprise services. Continuing with that, it recently announced enhanced invoicing functionality for customers, allowing them to easily manage their accounts receivable. With this update, businesses are able to manage accounts that are both payable and receivable in one place, facilitating the pre-accounting process.

Expensify’s primary competitor remains Concur, which offers very similar functionality but very different customer acquisition strategies. Concur has focused on attracting organizations aided by the fact that it is owned by SAP. Expensify, on the other hand, remains focused on attracting employees first, and then adding their organizations later. It is this bottom-up platform strategy that has helped it deliver a capital-efficient and scalable model.

Expensify’s Financials

Most of its revenues come from recurring, automated monthly payments. Its pricing plans are designed to make it easier for organizations of all sizes to afford its usage. Expensify reported revenues in 2020 of $88.07 million, growing 9.46% over the year. It reported a net loss of $1.71 million for fiscal 2020. For the six months ended June this year, its revenues grew 60% to $65.02 million. Net income grew from $3.49 million a year ago to $14.67 million for the same period.

Expensify went public earlier this month. Dave has always been very frugal about raising money from investors. Prior to going public, Expensify had raised only $38.2 million in eight rounds of funding from investors including GreyRock Investments, CIBC, Redpoint, OpenView, PJC, Hillsven Capital, Coyote Ridge Ventures, Barracuda Networks, PJC, NOMO Ventures. Its most recent round was held in June 2018 when it raised $11 million. Its profitable nature has helped it limit the requirement for additional funding.

Its stock was listed at $27, raising $263 million at the time of listing. Expensify is currently trading at $45.69 with a market capitalization of $3.57 billion.