SaaS Interviews with CEOs, Startups, Founders
Divvy Founder Sees Clear Path to $100m, 20k Customers, Most Revenue from CC fees, $1b+ in GMV
17 May 2021
Chapter 1: What is the main topic discussed in this episode?
Are you also growing revenues 100% year over year? Yeah. How long can you keep doing that? I mean, it's hard to do that at big numbers. Not forever. Yeah. That's a good answer.
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We got to grow faster. Minimum is 100% over the past several years.
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Hello, everyone. My guest today is Alex Bean. He's sitting on a rocket ship with Divi, but 10, 11 years ago, he was selling scooter parts. What happened? We're going to dive in today. Divi modernizes finance for businesses by combining expense management software and smart corporate cards into a single platform.
Finance leaders can now get real-time visibility into their company's spend and flexible controls that prevent teams from ever going over budget. You can check it out at GetDivi.com. Alex, ready to take us to the top? Yeah. The scooter business reference, but we can dig into it. Well, it's crazy.
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Chapter 2: How did Alex Bean transition from selling scooter parts to fintech?
So we really combine it into one platform. And what we've found is by combining it, it's not only just that it's free, it's like the source of information is so much quicker and so much better. So the things we can do are much different. But yeah, it's free.
And that's why we're super excited to offer it to the mom and pops of the world, because we can tell them, stop paying for those three softwares and come just use Divi. And it's a win-win for both. Yeah. I mean, you have four sort of things, buckets on your website, business credit, spend management, expense management, and AP management.
There are multi-billion dollar companies competing in just one of those verticals. Just to be clear, I'll make sure I'm getting this right. You're giving away spend management, expense management, and AP management free. You're making money on the credit card stuff and the credit fund. Yep. Exactly right. Yep. Wow. Okay. Interesting.
So I guess the question I would have for you is this is not easy software to build. How did you fund it in the early days so that you could give it away for free? So that's actually a really good question. I've had that conversation with a lot of people. A few things. One, we raised money early because we knew that we were taking a big swing. I don't think that's for everyone.
So I'm not like out there recommending to all entrepreneurs, like go raise VC funds, go raise as much as you can. But for us, as you just said, we're taking on trillion-dollar markets in all four of those buckets. So we're like, all right, we've got to bring money to the table and go build a team. So for us, that's what we did.
And at the beginning, nowadays in the fintech space, if that's where you're at, there's so many more tools that enable fintechs to go build companies that didn't exist five years ago, which ā That sounds nuts, but there's a lot of, I can get into the nuances, a lot of things that the banks couldn't offer us five years ago that now they're fully built to offer to these fintechs.
So I think you're going to see a wave of innovation because of that. So year one, it sounds like was what, like 2016, 2017, is that right? Yeah. And I want to touch on founding story real quick because founder equity is obviously a hot topic with anyone launching a company. Do you guys just say, you know what, we're equal partners 50-50 or was there someone who wants there? Nuance. Yeah.
And I'm actually... So here's... Let me give the... Every partnership is different, right? So like anything I give here is not going to be definitive for all. So Blake, my partner, my friend and partner came to me with the concept of Divi, right? And we formulated it together, but his original idea was his and the name Divi came from him.
And frankly, he had the money to kind of help kickstart some of this. How much did he kickstart it with? Um, I think that's private. Sorry. I don't know if we've disclosed that, but it was a decent amount of his own money to say, Hey, we're going to go design and engineer and do some stuff before we went and raised formally. So he, he had, he has more than me, right?
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Chapter 3: What unique features does Divvy offer for expense management?
1.6. So full story there. Don't want to bury it. You just, as an entrepreneur, you're like, do you remember the valuation? I'm like, well, let me see here. Yeah. I remember the valuation. Yeah. Maybe I strategically ask it that way to make sure more people answer. If you phrase it that way, you definitely get a higher response rate.
But I wanted to put that out there because, again, what you're doing here is very interesting, right? We've had David on from ExpenseFive. We've had Brex on. We've had Ramp on the show, right? And they're basically building massive business on something that you're doing for free. So I want to dive more into the credit card business. I mean, how much money can you make on the credit card business?
There's only, what, 200, 300 bips of spread there?
Yeah.
Yep, that's correct. But there's a few different ways, right? You see Brex is starting to launch paid software. We have paid software. You make money on the credit side, right? Fees and things of that nature. I mean, it's just like a bank. It's basically asking the question like, well, how's Amex making money? And it's like, well, I mean, I think they're making a fair amount of money.
So, you know, even 200 to 300 bips, you start to do the math and you're doing billions of dollars in spend and the revenue starts to add up. What will GM be this year through the platform? I don't think that's disclosed, but, you know, we did. Oh, man, I don't think that's disclosed. Can you do a range, Alex? Billions of dollars in spend. Okay. Got it.
So more, more than a billion, less than a hundred billion. Is that a big enough range? Yeah, that'll work. Yeah. That's a damn big range, but okay. More than a billion, less than 10 billion. And then I guess, can you maybe just so I can quickly understand this.
So last 12 months, if you guys look at your total revenue, just give me percentages, what percent would you say is credit card versus paid software versus your credit fund returns? Almost all, I would say majority of that is on interchange. Oh, wow. So really, it's mostly credit card. Interesting.
I was thinking you might have said that there's actually a massive balance sheet business here because you have unique insights and data you can underwrite better than anybody else. Yeah, there's definitely elements of that. But even if you talk to Brex and Ramp, you're not making most of your money on that, right? Because again, underwriting just minimizes your losses.
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Chapter 4: Who is the target customer for Divvy's services?
Now, we're going to start launching it again. It's definitely in our wheelhouse. It's the same conversation Amix and all these guys have. It's not... Maybe in the way we do it, we feel like we'll have some innovation on it, but the concept of those loans is not innovative. Yeah. Talk to me about how many of these customers are serving out today. What's the number? Yeah.
Over 10,000 and adding quite a few every month. So we're super excited about our growth rate. And it just means that, I mean, our motto is spend smarter. So for us, it's about having more and more SMBs, mom and pops, you know, build lucky scooter size companies, uh, spend smarter, stay in budget, you know, like hit payroll, save money. I mean, that's kind of what we're all about.
So for us, seeing that number rise is exciting. Yeah, your press release is 2019, 1,000 customers, 2020, 4,500. It's more than double in year where you're now breaking 10,000. What do you think you'll finish this year at? How many are you adding new per month? Yeah. I mean, I think we'll easily top 20 and even with some growth pay on that. So we'll see. But we're going over 100%.
So we expect that to continue. And that's customer count. Are you also growing revenues 100% year over year? Yeah. How long can you keep doing that? I mean, it's hard to do that at big numbers. Not forever. Yeah. That's a good answer. That's a good answer. Can you give us a sense of revenue today?
Chapter 5: How does Divvy generate revenue if the software is free?
Uh, no, I, again, sorry, I don't want to be coy. I just think that right now it's private. So I'm going to hold on to that, but no, I mean, like we're super excited about it. We hit some, some big milestones recently. You can look at our valuation and probably drive some element of what it is. So, uh, no, but. I haven't, I haven't done a series D round recently. Uh, help us understand.
Don't talk about your own deal, but in most series D rounds, how much of a company is a SaaS founder going to be selling? Yeah, I think, you know, if you're like, actually, I'll give you this.
So if you're going to go public, now SPACs do make it a little bit different, but I think you see a lot of companies that go public and we would look at it and say, hey, you got to be doing like 200 million in revenue, you know, 300 million in revenue to be like, to go public, right? That's when you start to be a known name and really have traction.
So for us, you know, in between that 100 to 300 range, like that's where we, you know, we look at that and say, okay, what are your growth rates? When do you hit what milestone? What do we need to do to accelerate out of this? And, you know, look at Qualtrics, which was, they just went public here in Utah. They're friends of ours. And, you know, it's like, yeah,
they hit the $200 million, then they hit the $300 million, then they hit the $600 million, and now they're approaching the billion. And it's like, you just have to keep that trajectory of growth. So I can't forecast, I'm not going to announce our forecast of two years from now on this podcast, but it's keeping a really healthy growth rate.
It might not double forever, clearly, because at some point that will stop. I mean, do you think, do you guys feel good about your plan to break a $100 million run rate in the next two years? Yes. I'm very good about that. That helps me. Go ahead and make the statement. No, I'm very confident that we will, we will achieve that. Yeah. There you go. That helps me with a bunch of things.
So you're, it tells me you're not at a hundred million yet, right? But the growth plan lab is obviously clearly takes you over that, over that mark. So that's great. Talk to me about any other, is there anything you talk about in terms of product? It sounds like you have a credit fund that's maybe in the works. You'll be more aggressive there. Any other products you can take it away free? Yeah.
So, I mean, AP management, you see that as one of the four buckets. The reason we view that as so powerful is just we want it to be one place that you're making all your spending and you're reconciling and you're thinking through like how much are we, you know, what's going out of the company.
So, we've launched that, but it's not where we want it to be in terms of full scope and capability and the innovation we can bring to that side of the fence. So, that to me is what we're probably most excited about and coming around the corner. Got it. That makes good sense. And then talk to me a little bit about churn right in this space. How do you even define churn?
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Chapter 6: What funding strategies did Divvy use in its early days?
And with Divi, it's like once you have budgets and you're operating out of a budget mindset, which can be a little hard up front, but on the back end, like they're not leaving because it just has changed the way that they're running their finances. So, you know, and no one else is doing that yet. I know people are going to copy us.
I won't name one competitor, but we tend to see a lot of copy from someone out there. But I know who's the competitor. No, I'm not going to do it. What's the first letter? What's it rhyme with? Let me put it this way. I'll be honest. This is my honest opinion. People probably kill me. I don't know how many people are even listening to this.
I have a lot of respect for what I see Brex do in the market. They bring a lot of their own innovation to the market and it's super, super impressive. And so, you know, they challenge us and we challenge them and whatnot. Who's bigger? Well, they just announced a large valuation. So I think I would say. Do you think they're doing more revenue than you or they're just good at driving evaluation?
I don't know their revenue for sure, but I'm fairly confident. I do know that. I think the gaps are smaller than people think. I think they're very good at driving valuation, but they're bigger. I think that it is very fair to say. I can't speak to their numbers and stuff. Yeah, fair. Look, my thing is Brex drove innovation on the credit side, and they deserve a lot of credit for it.
We drove innovation on the software side, and we deserve a lot of credit for it. My point is you're going to see the market, whether it's the big companies like Chase, Wells Fargo, Amex, et cetera, or other startups copying suit. Budget is one of those things that we've held to and we're super proud of, and it's super powerful for our customers.
And I think you will see that be emulated in some form over the next couple of years. Yep. Yep. Your friends at Qualtrics had this in the public market in the SaaS world, anything about like 130, 140% net dollar retention is world class. It's hard to drive expansion revenue in the SMB cohort. What does your expansion look like over the last 12 months on the historical cohort? Yeah.
So again, not going to disclose specific numbers. Here's the thing though, with Divi, because it's like, hey, someone will get in and they'll start using us for the card software. But then they start using us for the AP management or then they start, you know, at some point they're going to start using us for the loan management.
So we actually feel like there's another five things we can add in that stack and five just being a, you know, kind of a figure. That's all mainly free though, right? Everything we launch has something that adds to the wheel, whether it's direct revenue, whether it's future software revenue. Let me give you an example. I'm not going to give you a price point, but AP management.
Let's say it takes five days for your ACH check to get into your vendor's hands. Well, hey, for a fee, for a premium fee, you can get it. We can get it to them in two days. OK, cool. Right. And every single thing that we do has a flywheel effect. OK, you want to suck in your invoices into the system.
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