Airbase Series B

In 2021 Airbase raised a nice chunk of change. Specifically $60m for their series-B which is impressive. I don’t say that lightly. $30m is a nice series B, so do the simple math there.

But this isn’t about the round, it’s how they raised it. They did things differently.

The normal way to get a fundraising process going is to write a pitch deck. This quickly helps investors decide whether or not they’re interested in investing in you. It’s the norm. PowerPoint, get to the point.

What’s different and I’m noticing as a trend is writing not a PowerPoint, but a Word document instead. In the vernacular, it’s an investment memo.

In VC land, investors write investment memos on deals they want to fund to get the investment committee to pass them with the partnership. Very few VC investment memos are shared, but I have made an investment memo collection of them here so you know what I’m talking about. They aren’t easy to write, and honestly, I believe most investors know they are hard to write.

But now it seems founders want to start writing them too. I find this worrying.

Honestly, founders struggle to embrace the constraints of PowerPoint to tell a story. I perish the thought if all founders start writing essays. Aka business plans. You know those things from the 80s that take forever and no one ever wants to read? I still remember the pain of the first and only time I ever wrote one.

The great thing about PowerPoint is that you can get to the point, use images to support your message and get the heck on. And for investors, they can literally triage your startup in 20 seconds and figure out if it’s interesting to them. Founders might think “What, 20 seconds, I DESERVE your attention”, but do this. Go to my site and read 20 pitch decks. I give this as an exercise to founders, and they tell me, “I couldn’t get past 5!”. What exactly do you think a VC is going to do when they get 30 of these a day?

So now, the great idea is to write essays and use them for investors to decide at scale. Nope. It doesn’t match how the VC process works. “Fighting the man” is for hippies outside of Capitalism.

The only exception is for when you are raising a $60m round and already have investor interest, or similarly in the case of Rippling, which is the first startup memo I have noticed, are super-fecking famous and are also raising a lot of money. Investors at this stage look at fewer deals and so are happy to indulge you in your peccadillos.

Am I really so against these startup investment memos? Absolutely not. I think they are potentially fabulous! But there is a large caveat and addition to the process.

1. You still need a pitch deck
2. You went to Ivy League/Stanford as an undergrad

You Still Need a Pitch Deck

Being a VC isn’t as cool as everyone thinks it is. You’re basically a glorified researcher with a Patagonia uniform.

The simple fact of the matter is that, hm, 90% of startups are dog shite (in terms of being a VC candidate). Find that offensive? Well, reconcile that with the number of exits there are. Just saying!

I watched a video from 500Startups last night whilst researching investment thesis’ and thought this helps those getting epileptic that even the good startups that get funded fail en masse.

Of pre-series-A funded startups (which aren’t total crap, they’ve been filtered by professionals) 2.9% get to series D. That’s not even an exit. It’s just a funding stage.

Great VCs need to sort through deals to find the wheat. Cleaning chaff is seriously dull. Cleaning chaff with a pitch deck is hella faster than having to pretend you’re an academic or crypto investor reading pompous white papers. Could you imagine?

So make a pitch deck. Send it with your warm introduction to help VCs triage and decide if they are interested.

Next, show your smarts, you can share your startup investment memo. Once investors are interested, the nerdy ones at least will lap it up. But not till then.

This leads to the second point.

You Went to Ivy League/Stanford As an Undergrad

Do you know who is great at writing smart essays? Skinny Asian kids with Tiger moms that went to Stanford 😉 Put differently, are the best entrepreneurs academics or those that get shite done? Richard Branson isn’t an academic. He dropped out of high school. On the other side, Jeff Bezos was a turbo nerd. But I bet there are more “bozos” that got a 3.0 in undergrad that is making money than the nerds that got a 4.0. At least for hustlers. It does take some genuine smarts to build things like Stripe, right?

So if you want to start talking about diversity and inclusion, these memos are going to bring us right back to school where grades matter. Because that’s literally what’s required to write a thoughtful memo.

If you want to show off in a pitch deck, you can add a slide with your summary investment thesis. Do I do this with clients? No. Why, because almost no one can do one, so I’ll end up having to make it. I’ve only had one client ever make one on their own initiative, and it was a C. I’ve also taught VCs to do investment thesis’ and I can tell you they’re not all better, and that’s their job.

If startup investment memos become a standard, what will happen is a reversion to “business plans”. Most people are totally incapable of getting to the point so we won’t suddenly have a raft of crisp memos, we will just have awful 100-page business plans.

If you can’t write a solid narrative in a pitch deck, where the standard is pretty low, there is absolutely no chance you can ever write a concise and insightful startup investment memo. I’m not saying this as an elitist wanker. I was in “special” classes as a kid. I’ve just more exposure than most people in the world doing one very hard thing, with above-average intelligence people.

I help repeat founders write pitch decks, and there’s possibly only one team I would dare to do a memo with, and one of the founders was a former a16z partner. That’s not to say others can’t write a memo, it’s that the ROI is simply too low. A solid pitch deck will get you meetings, and from there, you do the talking thing and close the round (hopefully).

A memo isn’t needed. Unless you went to a fancy-ass uni because you’re a total fecking nerd, most just can’t ship one in a timeline with a meaningful RoI.

Who Wrote the Memo?

I have zero clue about Airbase. I saw the memo (haven’t even read it yet lol) and just started writing this blog. Just had an idea given what I wrote… Let’s go to LinkedIn and check the founder.

Totally not picking on him in any way, but will just make some observations for those who think “I can do a memo too!”

He started out at a 55-ranked tech college in India, which given how “IIT” obsessed folks in India isn’t a wow. But, that can be circumstances. He did the usual Infosys thing and managed to get himself to UC Berkeley for a master’s and start a multi-award-winning startup at the same time. Ok, impressive. He then “Raised $30M in equity capital and $10M in debt across seed, Series A and B rounds” and sold his next startup Automatic for $115m. The dude is officially a big deal. He then got on the board of TiE.

So now what about Airbase?

• Seed of $7m from First Round Capital
• Series A of $23.5m from Bain Capital
• $60m from Menlo Ventures

Every stage of that is a huge wow. So yeah, he can write an “investment memo” if he wants. He has the academics and the credentials to decide to opt to do so.

We, normal folk don’t have the luxury.

Commentary on the Founder’s Narrative

My experience with raising venture capital was very different from my first company; it was a slog every step of the way.

His first startup had some signs of success and of course, will be the hardest as you learn the ropes. His second sold for over $100m.

But, it was also an incredible educational experience in what it really takes to raise money from high-quality investors.

I always tell people that the deck (you’re paying me for) needs to change as you talk to investors. I half feel people are thinking “Well, WTF am I paying you for then????” but I have to say it because it’s true. Why? Real-world experience isn’t something you can read.

You can buy the “joy of sex”, but it’s only after you have a fiddle you figure out what works, and that it doesn’t necessarily transfer with the next fiddle you have.

You have to share your narrative with investors to get feedback on what’s not working to improve. And that some things just don’t work with others, but sometimes it will.

After a while, you learn what to care about and what not to, and you build confidence to just eye feck investors when they ask dumb questions, and they drop it.

There is lots of very specific advice out there about how pitch decks should be structured, how many slides they should have, the important elements you should communicate, etc

There is a lot of regurgitated advice perpetuated by neophytes looking for clout by being perceived as knowing about fundraising since this is all founders care about. I  know because I was one of them before I actually put in the work to think for myself and question everything. And… it took around 12 years.

The short version is that anyone who uses specifics doesn’t know what the F they are talking about. If people use ranges, you’re in a safer zone.  No, a deck should not be 10 slides. No, the Airbnb deck isn’t great. And FML, Mint and Square are not even real pitch decks but morons don’t sense check the names on the cover to realize they are student projects…

70% of “common” advice is total bollocks. It’s not only bollocks, but it harms your efforts by setting you in the wrong direction.

I can write an entire blog on this topic so I will halt before I catch fire (love the tv show).

But, I’ve learned that telling a good story about your startup is so important that you should pick whatever approach suits your business and unique strengths as a founder

Boom.

This is 100% golden. Well, half so.

Mentally change the word story to the narrative as I think that’s more instructive. It’s same same but different. To me, narrative means a structured story, a “written account of connected events.”

The narrative is the key thing missing in 99% of pitch decks. Slides flow with coherent statements, supporting the core message you want to imbue in the minds of investors. This is hard, but it’s what makes a deck magical. It’s also what your child expects to hear before they go to sleep.

The proposition you should choose the approach that suits your business and individuality stems from the fact that telling narratives is not something most people can do. If you are a Pixar-level story boss, it doesn’t matter the medium, mode or, method, you can do it.

If you’re a nerd and good at essays, you want to write a memo and will cognitively justify the fact post hoc.

Fundraising is at its essence an exercise in story-telling. You’ll be far more successful if you tell a compelling and credible one.

Yes. You need to practice this like David Blaine practices magic if you want it to feel like magic.

There are two points to deconstruct:

1. Compelling
2. Credible

The utilization of superlatives “we have the best team ever” may seem compelling to you, but I assure you it’s not logical to investors.

A bunch of nerds with CS from Stanford is your cliche team.

1. They are compelling because it’s a sad wet, professional dream
2. It’s credible because these geeks make money, empirically speaking

When I do decks, I explain we have the superficial level of the what. That’s base-level interesting and acceptable.  The why is what humans crave. What are the contrarian insights you have as to why people are approaching things wrong, and you if contrarian and right, will be buying tropical islands for all?

I’ve found that my thinking is more structured when I write down my thoughts and I best communicate complex ideas that way

Yes, but to make a good pitch deck, you go a step further and boil it down more. A good pitch deck is the shorter, visualized version of a good memo.

When I make decks, I take everything and select what to choose at the exclusion of everything else you could say. You reserve those notes for in-person meetings.

My thinking was simple — if a potential investor can’t spend the time to read a 10-page memo before making the decision to invest millions of dollars in Airbase, I know I don’t want to work with them.

This is living my best life, Instagram land.

Thejo already has $30m from f-u big names, he’s already earned the attention of any new investor.

For Joe Shmo with an entitlement mentality that investors will allocate time is politely optimistic, but in reality, positively going to f-up your process.

It’s one thing to raise $500k, when you raise a $60m check and the deal will close in 10 days, sure you can have different expectations. That’s not f’n normal so don’t think it is.

It gave investors the opportunity to self-select themselves out of the process once they understood the business in more detail

It also allows investors that don’t know you to open up your essay and think FML I am not reading this and deleting your email.

Airbase has credibility so investors were probably reaching out to them to invest. That’s a starkly different dynamic.

You get to share your story on your terms. Doing that is much harder when you’re trying to walk a group of people through a set of slides

This is BS. If you use headers in your pitch deck properly, you can tell a narrative. It is hard to do though.

I have never once had a founder “walk me through slides”. The best pitches are conversations.

Any VC firm that wants to give you a term sheet has to write an investment memo internally as part of their process of convincing all the stakeholders. You’re doing a lot of their work by writing a memo and likely ensuring that your story is being told the way you want.

This is true but it’s as I explained. Only a few academic nerds are capable of writing a memo that would be useful for investors.

I wrote a detailed memo laying out my case for why I thought we should build a hardware device and shared it with all the investors.

This is fine if 1/ you can write memos, and 2/ you are sending it to existing investors who literally have a vested interest in understanding WTF is going on!

I’d like to think the clarity of thinking in the memo helped, something I may not have been able to communicate as successfully

Note “clarity of thinking”! That’s not a common ability!

Airbase Founder’s Narrative on the Investment Memo

We recently announced our Series B fundraising of $60M. That brought Airbase’s total funding to $91M. I was fortunate enough to sign the term sheet with Menlo Ventures 10 days after I started the fundraising process. A key part of that process was an investment memo (shared below) that I used to tell the Airbase story.

Airbase is the second company I’ve founded. My experience with raising venture capital was very different from my first company; it was a slog every step of the way. But, it was also an incredible educational experience in what it really takes to raise money from high-quality investors.

In this post, I want to focus on one important lesson about how startups should tell their story to investors. There is lots of very specific advice out there about how pitch decks should be structured, how many slides they should have, the important elements you should communicate, etc. But, I’ve learned that telling a good story about your startup is so important that you should pick whatever approach suits your business and unique strengths as a founder.

Fundraising is at its essence an exercise in story-telling. You’ll be far more successful if you tell a compelling and credible one.
I’ve found that my thinking is more structured when I write down my thoughts and I best communicate complex ideas that way. So, when I had to tell the story of the business we’re building at Airbase to investors, I naturally gravitated towards writing it down for them in the form of a memo. My thinking was simple — if a potential investor can’t spend the time to read a 10-page memo before making the decision to invest millions of dollars in Airbase, I know I don’t want to work with them. Sharing the memo very early in the process with investors also had the following benefits:

• I did not have to spend a huge amount of time explaining the nuances of our business, like the product principles we value and competitive differentiation, to every investor. It was all covered in the memo.
• It gave investors the opportunity to self-select themselves out of the process once they understood the business in more detail, and one firm among the few we engaged with did. Not everyone has the same thesis you do about a market, and the sooner you figure that out the better. The goal is to spend more time with the people who agree with your opinion of the market opportunity.
• You get to share your story on your terms. Doing that is much harder when you’re trying to walk a group of people through a set of slides. If investors come to a subsequent meeting having read the memo, you can have a much more substantive conversation about just the areas that they still have questions about.
• Any VC firm that wants to give you a term sheet has to write an investment memo internally as part of their process of convincing all the stakeholders. You’re doing a lot of their work by writing a memo and likely ensuring that your story is being told the way you want.

By the way, writing a memo isn’t just a good idea for $60M growth rounds. In my first startup, we raised a $1.5M seed round of funding with a story around being a software company. Soon after closing the round, I decided we needed to add a hardware component to succeed. That was a big shift in strategy and I was nervous about whether the investors would want their money back. I wrote a detailed memo laying out my case for why I thought we should build a hardware device and shared it with all the investors. Luckily, they all agreed with me and not a single one asked for their money back! I’d like to think the clarity of thinking in the memo helped, something I may not have been able to communicate as successfully if I tried to have a conversation with every one of them, or created a slide deck where brevity is the goal.

I’ve focused on the fundraising process for venture-funded companies here. Raising venture capital is not the only path to success. Certain markets demand that you invest aggressively ahead of revenue growth and Airbase happens to be a one. But, I think the discipline of writing down the story of your business can help every company at every stage. If you’re a founder on a startup journey, I hope this slightly redacted version of the Airbase Series B investment memo helps you.

How Airbase Raised $60M in 10 Days Video

View the Airbase Investment Memo

Airbase Investment Memo

April 2021

Introduction

Every business spends money. A simple way to classify all the money spent by a business is into payroll and non-payroll dollars. Payroll spending is managed by the well-established category of payroll software. The non-payroll dollars include marketing spend, software subscriptions, T&E, employee engagement, and the number of other areas in which a typical business spends money. In mid-market businesses,¹ managing the non-payroll dollars is incredibly painful because of the siloed and fragmented nature of the tools used. This is the problem Airbase solves.

Airbase replaces multiple categories of tools typically used by mid-market businesses to manage non-payroll spending, with a single comprehensive platform:

• Request and Approval Workflows: These happen via email, Slack, JIRA, Google Forms or through dedicated tools like Procurify
• Corporate Cards: Amex, banks (and newer offerings like Brex) are popular options
• Expense reimbursement: Expensify is a popular option
• Accounts Payable / Bill payments: Bill.com is the leading player in the mid-market

The ecosystem of tools to solve non-payroll spend management evolved this way primarily because they are either front ends to specific payment rails used by businesses to pay their vendors (corporate cards for Visa / Mastercard / Amex, and Bill.com for ACH / check), or a specific business process (expense reimbursement).

¹ Our definition of a mid-market business is one with 50-1000 employees.

No finance and accounting team – who are the primary stakeholders in the spend management process in mid-market companies – would design a siloed and fragmented system like this. They just don’t think about the lifecycle of spending this way.

In Practice, the Pnance and Accounting Team Care about Three Simple Steps:

1. Make sure there is a good process to control spend before it
2. Pay the vendor once it’s approved internally. The rails over which money flows are largely irrelevant and an implementation
3. Correctly categorize and record it in the general ledger (GL), ideally in a completely automated

But, What They Have to Deal with in the Traditional Siloed System is:

1. An archaic and periodic monthly close process which is an enormous amount of low-value, manual work that involves downloading data from each system, categorizing it, recording it in the general ledger, chasing people throughout the company for additional information about how to categorize specific transactions, dealing with a deluge of expense reports and reconciling the flow of money through multiple Simply put, a large part of the work undertaken by finance and accounting teams reflects the limitations of tools they are forced to use.
2. A lack of high-quality control and visibility into how money is spent by decision-makers across the business because they don’t have access to all the systems where the money is spent, and they have to wait for 2-3 weeks after the end of every month for the information to be collated into the general ledger as part of the monthly close process. Most businesses are not enabled to make good decisions based on real-time spend-related

Airbase is a reimagining, from first principles, of how spend management should work in any business. We believe that our approach will be the default expectation of the market over the coming years, and the current fragmented approach will disappear as the market is educated about this step-change in improvement in a foundational business process.

Why Hasn’t Anybody Solved this Problem So Far?

The primary reason the landscape of tools has remained in silos until recently is due to the lack of maturity of the underlying payment infrastructure. It’s important to understand that solving the spend management problem the right way involves deeply integrating workflow-driven software and payments into a single product.

Historically, Tools in this Domain Have Fallen into Three Buckets:

• Standalone software workflows that don’t touch the money: examples include homegrown pre-approval workflows using emails, Slack, Google Forms etc., or more formal systems like Procurify, or the PO module in an ERP system like NetSuite.
• Payment systems that address one need without any support for associated workflows in the business: corporate cards are the prime example of this, where the only interface to internal business processes is a downloadable statement at the end of the
• Workflow-focused systems that integrate with the related payment rails: for example, Bill.com for ACH / check

Over the Last 3 Years, Two Big Changes Have Made it Easier (not easy!) to Build a System that Integrates the Software Workflows with Payments:

1. The maturity of developer-friendly card issuing platforms and program managers. Marqeta, Stripe, Galileo, and Adyen all have good offerings at this point.
2. Banks have gotten better at allowing startups and earlier-stage companies to integrate into their systems to provide the necessary building blocks to hold and move

This has allowed anyone who deeply understands the lifecycle of spend in a business – starting with collaboration between team members as they decide how to spend budgets, paying vendors across multiple payment methods, and accounting workflows for how it’s all categorized and recorded correctly in the general ledger – to bring the software workflows and payments together in a way that very closely maps to the actual workflows that happen inside a business.

Product Principles

Please watch a demo of the Airbase platform to get a better sense of why taking a first-principles approach to solving the entire spend management problem fundamentally changes spend culture in a business, and leads to significant time and money savings.

In addition to familiarizing yourself with how the product works, it’s important to understand how we approach the product development process and the principles that guide us.

We’re a Workflow-driven Software Product First and a Fintech Company Second

We believe that almost all of the value we can offer to our customers comes from the workflows enabled by our product. Payments are an important enabler, but just that – an enabler. We never forget that we’re not solving a payment problem for our customers, but workflow, process, and information exchange problems in their business. As far as we and our customers are concerned, payments are a utility, and the value is in the deep software layer above it. Of course, we make money from financial services as a side-effect of the usage of our platform, which is great, but, the value perceived by customers is primarily in the workflows, and not from moving money from point A to B.

Offer a Best in Class Solution Across Every Product Area

We fundamentally reject the rationalization that siloed products exist because they are “best of breed” and platforms can’t truly solve the whole problem. We’re committed to delivering the breadth and depth of the solution that allows mid-market companies to manage 100% of their non-payroll spend in one platform without any compromises when they move from point solutions. We’ve been able to do that rapidly because when you approach spend management in a holistic way, it allows you to reuse a lot of the common platform elements (E.g. pre-approval workflows, and the infrastructure to sync transactions to multiple general ledgers). An integrated platform also allows us to innovate in completely new ways – like assigning vendor specific virtual cards to purchase orders, and limiting card spend in a dynamic way based on spend happening across a number of different vendors.

Deeply Understand the Work of Finance and Accounting Teams

We care a lot about helping finance and accounting teams avoid low-value and manual work so they can focus on being strategic business partners. That can only happen if our platform shows a deep understanding of every step of the work they do. Finance and accounting is a profession of details and correctness, and our customers love us because they see that our team is full of the same DNA and that we really understand the work they do every day.

** Ask us to dig into this if it does not come through in the product demo.

High-quality Design and UX are Table Stakes

Finance tools are notorious for having terrible design and UX. Most of the established players are 15 years or older, and they don’t particularly care about UX. So, we don’t have a very high bar to meet. But, the fact that we value high-quality design and UX has turned out to be a big differentiator for us. We’re committed to investing in this partly for pride, but more importantly, unlike other systems, pretty much every employee of a company interacts with our platform and they use well-designed business and personal software all day long in other areas. That’s the bar to which we hold ourselves.

The Airbase System Has a Large Surface Area

We offer multiple established categories of products in one platform. We have made a significant investment in R&D and will continue to do so. We currently have 54 people on our product development team, which is more than half the team and we won’t stop hiring in that area for the foreseeable future.  We’re convinced that our thesis that customers value breadth and depth in one platform has been validated, and we’re going to double down on that approach to keep our lead in the market.

Competition & Our Strategy

We Classify Competitors into Two Categories:

• Established, legacy players: nine times out of ten, prospects we engage with are using point solutions like Bill.com, Expensify and a corporate card. This status quo approach to solving the problem is the primary competition we face in the market, and most of our sales effort is spent showing prospects that there is a much better way to solve the spending management
• Emerging players: These include Brex, Divvy, Ramp and Teampay.

We’ve always taken the approach that the perceived value is in the software, and the financial services/payments aspect of the platform is an important enabler. So, we’ve built a robust software platform and charge a subscription fee for it. That has been a contrarian opinion over the last few years, with more than

a billion dollars invested behind the alternate approach followed by Brex, Divvy and Ramp of giving away the product for free and making money from interchange. We believe that only making money from interchange forces a very corporate card-centric view of the problem.

Of course, this is such a large market that multiple valuable companies with differing approaches will be created. But, it’s important to understand how our strategy differs from the other players.

Our Primary Goal is to Own the Spend Related Workflows in the Business

We think the most valuable problem to be solved in this space is the unification of multiple siloed tools into a single spend management platform. Owning all the non-payroll spend-related workflows allows us to charge subscription fees, which makes for a good business. But, orchestrating the flow of money opens up a significant opportunity to generate financial services revenue (interchange, FX conversion, interest income on float), and that makes it a great business. Right now, we’re at an X/Y split in favour of subscription revenue, but we expect financial services revenue to grow faster as transaction volume increases across payment methods on the platform. That makes it a no-brainer for us to continue investing deeply in owning the spend-related workflows.

We Occupy Very Strategic Real Estate in a Business

Airbase is the system of record which contains every detail of the lifecycle of how a business spends money. This is very sticky and strategic real estate and valuable on its own, but it allows us to target a number of large adjacent opportunities in the future. Refer to the last section for how we think about this.

Corporate Cards Are a Commodity Product

With the availability of mature card issuing platforms, anybody who can plausibly offer a corporate card will do so. There is a glut of corporate card offerings in the market and this will only continue. We believe that trying to acquire customers on the promise of rewards and the size of the line of credit is a race to the bottom. Yes, there is an opportunity to go head-to-head against the legacy card issuers like Amex and the banks with a better product, rewards and line of credit, take some market share and build a valuable business. But, we don’t believe that’s the best way to maximize long-term value creation. Our opinion is that corporate cards of the future are primarily workflow-driven software products where the real value is in deeply understanding the entire lifecycle of how businesses spend money on cards and supporting that in software workflows. Also, corporate card spend is just one piece of the larger problem finance and accounting teams have to solve.

Focusing on the Software and Partnering with Banks is a Better Long-term Strategy

We issue our own cards today. But, we started with that approach because there was no other way to showcase our view that a corporate card system is a software product. We have no interest in competing in the corporate card wars long term and have built the system to issue either our own cards or integrate with other card issuers. We think it’s better to focus on the software layer and partner with the incumbent card issuers like the banks with large commercial card portfolios. By partnering with us, they can offer a

high-quality card spend management experience to their customers, while keeping at bay the emerging competition from players like Brex. We are going to launch our integrated offering with XYZ mid 2021, and are in advanced discussions with ABC.

Solving the Global Spend Management Problem is a Huge Opportunity

The trend of building globally distributed teams has been accelerating over the last few years, but the pandemic brought it forward by 10 years. Companies at every stage of growth are now hiring around the world, which means the spending management problem is global. If dealing with 5-6 systems to manage spend in the US is hard, adding 2-3 additional systems per international entity and meeting the needs of a distributed workforce is a big challenge for finance and accounting teams. It’s a huge opportunity to deliver a single global platform to manage every dollar spent by a business across currencies and locations. We have all the building blocks in place and will be delivering this to our customers by the end of 2021.

Mid-market and Then Upmarket

Our primary focus so far has been on the mid-market (50-1000 employees). We’ll continue with that focus and invest in going further upmarket where companies truly value comprehensive software solutions that solve their problems and will pay good money for it. The mid-market is highly underserved at the moment and there is a clear opportunity to create the category leader that consolidates all non-payroll spending in a company.

Progress So Far

You will get a good sense of the business we’re building from the metrics deck and operating model that will be shared with you.

Here is a High-level Summary of How We’re Doing

• At the end of March 2021, we have X paying customers and an ending ARR of $Y. We make an average of ~$X per customer (ranges from about $X to $Y). The split between subscription and financial services revenue is X%/Y%.
• Gross margin for the financial year ending Jan 31 2021 (FY2021) was 90.12%. We expect it to be about 84% at the end of the current financial year since we’re hiring aggressively in our onboarding and support teams.  But, it will climb back up to above 90% in 2022/FY2023.
• We entered FY2021 with X renewable logos and $X dollars with annual contracts and renewed Y logos with NRR of Z%. We did not lose a single customer because they implemented Airbase and did not find value. The top reason for churn by far has been customers getting acquired.
• NRR in Q1 FY2022 is expected to be X%. We’re targeting Y% for the year.
• Payment volume on the platform across all payment methods grew from an annualized rate of $X per year in March 2020 to $Y per year in March 2021.
• We’ve been very capital-efficient so far. We’ve raised ~$30.5M and have ~$21.5M in the bank for a net burn of $9M.
• The employee headcount is currently 96. Our team is spread across 9 countries since we’re a fully distributed team.

We’re convinced at this point that our thesis is that a software-first approach to unifying all non-payroll spending into a single platform and owning the workflows is the right long-term angle of attack in this space. We’re also confident that we have happy customers who really value the problem we solve for them and are buying more from us as we expand our offerings. It’s now time to really accelerate our GTM effort.

How Big Can This Get?

The opportunity to create the leading mid-market spend management platform is massive. But, the strategic real estate that the Airbase occupies in a business given the nature of the problem we solve opens up a number of large adjacent opportunities for us over time.

Here are the Adjacent Opportunities

• Budgeting and planning collaboration: Airbase has all of the real-time spending information, but the collaboration around budgeting and planning happens in a separate system (Excel, Anaplan, Adaptive Insights). There is huge value in overlaying budget information over actual spending data to help budget owners make better decisions. We’re going to ingest and surface budget information in various parts of the spend-related workflows this year, but it’s a natural extension to bring in the planning and collaboration workflows into Airbase too.
• Contract Lifecycle Management: Today, the decision-making process related to new spending happens in the Airbase, but the contract management happens outside. The finalized contract is attached to Airbase. A robust CLM module is an obvious add-on to our platform.
• SaaS management: This is an emerging category that helps businesses manage all the SaaS and recurring spending in the business. When the purchase lifecycle of these recurring expenses is happening on Airbase,

Of course, we have to earn the right to enter any of these categories. We’re currently focused on becoming the leading spend management platform. We may not get to execute on any of these adjacent opportunities for many years. We will likely partner in the near term to help our customers solve these problems. But, depending on how things play out, the upside potential is very large.

1 Product, 9 Countries, 96 Employees.

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