I first interviewed Dave in 2014. I suggest you read that interview first before reading this one.
This discussion is a terrific back and forth on a wide-ranging set of topics, including FinTech.
Very, very interesting!
Sramana Mitra: We talked back in 2014 when we did your early entrepreneur journey. Let’s catch up.
David Barrett: It’s been an exciting six years. There’s certainly a lot to talk about.
Sramana Mitra: Tell me what happened in the last six years. Highlight the major inflection points and what made the strategic changes happen.
David Barrett: When we spoke last time, I was talking about the importance of making a profitable subscription-based business that grows steadily year after year. We just stuck with that.
We always planned on making Expensify a self-sufficient direct acquisition subscription model for the business, which grows steadily over time and provides a stable place for attracting the best talents and retaining them. We held true to the initial vision and doubled down on it.
From one perspective, you could say that very little has changed. We are just a better version of what we were in 2014. We have more experience doing it. We also have a devoted team that understands our principles and our best practices. We are more profitable. From more of a market perspective, it’s been interesting.
When we started, we were very small, so the tactics that work as a small company don’t necessarily scale to a big company, especially for customer acquisition. For example, we have had this steady stream of sign ups from the beginning because of our mobile first acquisition model.
Everything starts with individual users downloading the mobile app for free and pulling us into the organization. Then over time, with more users in the company, they just gradually adopt us. It’s this word-of-mouth zero marginal cost acquisition model.
That worked really great and it’s still the business model that we have right now. Initially, it was driven by this mobile funnel, then it went to a conference funnel for a while.
Now, it’s this viral case action word of mouth. The business model is fundamentally the same under the hood except for the source of leads which shifted over time as it expanded into a new marketplace. Now we could support the biggest companies and the smallest companies. Everything is bigger and better, but on the other hand, it’s more of the same.
Sramana Mitra: You had told me that in the early days, you acquired customers in a B2C mode and even the larger companies to let some scale happen and then go into enterprise deals. Is that still the case today?
David Barrett: Yes, but I would say the difference is the word enterprise. It’s ambiguous. When people start using that word, it implies that there are moments where the company says, “Let’s get serious. We’re going to have a procurement team reach out to one of our salespeople and negotiate a contract.”
That doesn’t happen. None of our customers go to a sales process like that. No one is on a custom contract or invoice. 90% of our revenue comes from credit card companies that self adopt and use us. Though we do have sales people you can talk to, our most effective sales channel is our customer support tool.
I would say a big product change since 2014 is perfecting the self service funnel. We have this chat agent called Concierge, which is a multi-tier global AI support distributed workgroup. It just seems like a consistent personality that you can talk to 24/7 about anything like expense management, Expensify, and any other tools.
We found that approach was more relevant than having a classic sales contract approach. When you chat with us, almost 80% of our conversation is responded to in under two minutes. We worked hard to get a fast and consistent support experience because we know that self-service is the future and not enterprise sales.
Sramana Mitra: You are doing a B2C SaaS business, is that correct?
David Barrett: We blur a lot of these lines. We have millions of users and numerically speaking, most of them don’t use us inside of a corporate environment. It’s individuals using us to track their personal savings, manage their college expenses, and track their travel expenses.
The bulk of our user base are true consumers using our product for free and then pulling us into a company. They start using us inside the company for free and then the company inquires and adopts our full product.
That gives you more control and features for $5 per employee. It’s a customer tool that uses that to engage with companies and then that company just self adopts for more advanced functionality.
Sramana Mitra: What is the number one use case? Is it not expense reporting?
David Barrett: It’s a question of how you view that. If you are asking what generates our revenue, then it’s expense management because the consumer functionality is just free. From a business perspective, it’s a business paying to adopt us to manage the expenses.
For example, consider an expense policy that specifies your travel rules. We have a built-in travel feature so that you can ask this Concierge agent to do all your travel bookings. It’s one of the features that comes into play when a business adopts us. There is a number of business-centric functionality that companies upgrade to get, but it’s all around the range of managing company expenses.
Sramana Mitra: Is Concur your primary competitor in that space?
David Barrett: Yes, in the sense that they are the most classic expense management tool out there. They are competitive in the sense that they offer the same functionality and everyone has encountered them in the marketplace, but we find that our method of acquiring customers is getting a different set of customers than they do.
They are acquiring through advertising and talking to the CFO, so they are getting one set of customers. On the other hand, we are acquiring through individual employees who are promoting us to their company.
The overwhelming majority of our customers are unaware of any of our competition. It’s not like they did a competitive analysis. They just never thought to check. Yes, there are competitors on paper. In practice, we are in completely different worlds.