Dive Insight:

• Airbase, a San Francisco-based company that sells corporate expense management software services, raised $60 million in funding with venture capital firm Menlo Ventures leading the fundraising. The company has raised a total of $91 million since its inception in 2017, the company announced. 

• The expense management tools sector has been gaining traction especially during the pandemic as companies seek to streamline their operating expenses.

• According to Data Bridge Market Research, a market research and analysis company, the global market for business spend management company (BSM) software is expected to hit $17.79 billion by 2027 and is expected to grow at a compound annual growth rate of 10.85% from 2020 to 2027.

Dive Brief:

With the new investment from Menlo Ventures and Bain Capital Ventures, among other investors, Airbase now has a private market valuation of $600 million, according to the press release. 

Airbase's software helps companies manage and track their general corporate spending as well as employee expenses. It aims to use the new capital to expand its services and target larger clients by adding specialized features like advanced approval and cross-border payments for vendors and contractors.

The company issues corporate spend cards powered by Visa in partnership with Sutton Bank. The company soon aims to add features that provide specialized insights and spend management tools unique to the requirements of different companies, Airbase CEO Thejo Kote said.

“The larger a company gets, the requirements around workflows become more specific,” Kote said in an interview last month. “In the last couple of months, we listened to our clients and launched an advanced approval product.”

By using advanced approval, companies can pre-approve an employee's transaction until they hit a certain threshold of spending, or block spending in areas that weren’t pre-approved by the company. Airbase aims to bring “every single non-payroll dollar into a single platform,” to give companies flexibility on how to manage their operating expenses, Kote said.

The company allows U.S.-based businesses to make payments to vendors and contractors based in other geographies via ACH transfers, paper checks or the SWIFT network.

“The demand for that product jumped quite a bit in 2020 because the pandemic really accelerated in terms of where people are hiring, and every company is now hiring employees and vendors remotely all over the world,” Kote said.

Airbase currently serves companies with up to 1,000 employees but it aims to grow its platform to serve larger clients who have up to 1,500 employees, Kote said in the interview. The recent fundraising will help Airbase to double its product development staff so it can add features for larger clients, Kote said in an email response.

Business expense management providers are gaining traction among companies as the pandemic hampered many businesses' cash flow and companies are looking to rein in operating expenses.TripActions, Teampay, Sievo and Emburse are also market participants in the expense management arena.

"We were in an era with the bull market where capital was effectively free," Teampay CEO Andrew Hoag told Payments Dive. "Last year, with the pandemic and kind of the shift in the economy, the capital was no longer free and I think companies have now woken up to the need to actually control that."

The use of expense management tools is here to stay even after the pandemic subsides, Michael Sindicich, General Manager of TripActions Liquid said in an interview last month. TripActions Liquid added a COVID-19 dashboard on its platform to help customers identify cities and regions with high infection rates and also provides a carbon emission tracker for business travel launched in April 2021.

While the corporate expense tracking service sector is getting crowded, Matt Murphy, partner at Menlo Ventures, believes that Airbase is in a position to capture a sizable market share and scale its operations in the future. 

Menlo Ventures invested $40 million of the recent $60 million raised, grabbing 7% of Airbase's equity, Murphy said by email.

“Spend management is a huge category and all existing players are focused on one part or silo of the overall need,” Murphy said. “The biggest growth opportunity for Airbase is to continue to build the best product that serves the end to end workflows around spend management and make the job of the CFO and team easier.”