Expensify became the newest IPO blockbuster as the expense management company's shares rallied more than 52% in its first day of trading Wednesday.
For CEO and founder David Barrett, the successful debut capped a hectic week which had him performing a task he hasn't had to do in a long time: wooing investors for the company he founded 13 years ago.
"We're kind of out of practice, honestly," he told Protocol shortly before Expensify's stock started trading. "We don't really raise money. We haven't raised money in like, six years or something. So we don't really talk to new investors, or at least haven't in a very long time."
But the novel task gave Barrett an opportunity to explain the company's main focus: the small and medium-sized business market. Investors don't always get it, he said.
"More often than not, people are like, 'OK, so you're this payments super app in SMB. That's cute and all. But when are you going to start thinking about the real enterprise?'" Barrett said. "I just have to remind everyone, 'Guys, the enterprise sucks.' The enterprise is by far the smallest, slowest, lowest-margin part of the market."
Expensify does offer its expense management tools to big corporations, but the Portland, Oregon-based company sees SMBs as its core market.
Barrett explained why in an interview with Protocol. He also talked about Expensify's game plan, his views of the expense management software market and how the company has adapted to the pandemic. Barrett, who became famous for scathing criticisms of the Trump administration, also shared his views on President Biden's performance.
This interview has been edited for clarity and brevity.
How have the last few days been?
It's pretty hectic basically talking to every hedge fund and investor in the world in the past week or so. We're kind of out of practice, honestly. We don't really raise money. We haven't raised money in like, six years or something. So we don't really talk to new investors, or at least haven't in a very long time. It's been fun to get back out there and talk with people and share the vision and hear people like, "Wow, you guys have been busy." Yeah, it's a big opportunity.
What's been the toughest question to answer from investors?
I don't know if there's a particularly hard question to answer after you've answered the same questions 50 times in a row. Maybe one of the most persistent questions — though we didn't get this as much as I expected — more often than not, people are like, "OK, so you're this payments super app in SMB. That's cute and all. But when are you going to start thinking about the real enterprise?" I just have to remind everyone, "Guys, the enterprise sucks." The enterprise is by far the smallest, slowest, lowest-margin part of the market.
What makes Expensify special, fundamentally, is that we have a completely different business model. Everyone else in our industry has a top-down acquisition model. They've got a sales team calling into the CFO or whatever. And that model works fine, but it only works in a tiny corner of the marketplace and it's the same market that everyone else was going after.
Can you talk about the competitive landscape?
Our competition is email and Excel. It's like a manila envelope stuffed full of receipts that is the actual competition. And no one is defending it.
Our competitors use the same business model. You buy a list of CFOs and then you call that list from top to bottom and then you put them through a qualification [process]. They're all calling the same people off the same list with the same message, selling the same product. And, shocker, it's really hard to compete when you're exactly the same as everyone else.
Our approach is starting with the employee, and then they pull us into the company. The bulk of our revenue is subscription revenue that comes from companies between, let's say, 10 and 500 employees.
There's a view that B2C fintech has become increasingly hard, and a B2B approach is more cost-effective.
I love that everyone thinks that because that's why they're all failing while we thrive. If you try to apply an enterprise business model in the SMB, those are really different markets. The economics of top-down acquisition just do not scale well outside of the mid-market. Almost every company looks at the SMB and they're like, "Wow, there's a ton of SMBs that aren't using anything. I gotta go acquire it." And then they use the same top-down sales model and they're like, "Shit, these economics don't work. We need to go to bigger businesses."
We're different. We're like, "Screw the enterprise." Again, we support them as customers, but we'll start with you as a sole proprietor, the Venmo seller, the side hustle, whatever it is. We will be your very first accounting tool because way before you have revenue, you definitely have expenses. Then we'll grow with you forever.
What trends are you seeing that are notable? Business travel is back.
Business travel is back, which is great. We see a different slice of business travel than I think most because we're more of a Main Street business than a Wall Street business. When people think of business travel, they typically think George Clooney in "Up in the Air," sort of flying around. And that happens. It's obviously a big deal.
But there is a huge fraction of business travel which is just mileage, people driving around. My dad drove around all of Michigan essentially selling machine tools. You drive to Toledo and you stop by the Home Depot and you pick up a whole bunch of materials for the job or something like that. We get way more reimbursements for Home Depot than for United. Business travel is a very humble affair for a huge fraction of our customers.
How do you view the market environment going forward, given that we're still in a pandemic?
The pandemic was basically the ultimate stress test of our business model. I think we've weathered it pretty fine. Going forward, so long as we don't have an even worse pandemic, I think we're gonna be just fine. I'm actually quite optimistic, and I think that our customers are as well. I think we feel we're through the worst of it. I think there's a ton of reasons to be super optimistic, honestly. And I think that that's why we're excited about it.
You were very critical of the previous administration. What do you think of the job President Biden is doing?
Boy, you know, I wouldn't envy this job. I think my job is way more fun than this.
Is there anything that the new administration has done that you are critical of?
I think the vaccine mandates are some really hard calls. I can see value in both perspectives. Obviously the vaccines work and they're wonderful, but at the same time, I think your body is your ultimate line of sanctity.
These are really hard issues. I don't know that I have a real clear opinion to be honest. I think that it's a muddy process. A vaccine or pulling out of Afghanistan — these are huge, multitrillion-dollar issues. These are not clean issues. No one's gonna just knock it out of the park. I think that Biden's doing a great job in the most important thing, and that is he's defending democracy. I feel very good about the prospects for democracy going forward under the Biden administration. And that's all we're ultimately looking for.
