A new credit card startup is targeting American Express and other stalwarts that have long dominated corporate spending accounts. Ramp, a New York-based fintech company whose founders sold their latest company to Capital One, has raised $ 25 million and subscribed nearly 100 companies on its card, the company announced Wednesday.
Ramp declined to disclose his valuation, but Keith Rabois, a Founders Fund partner who invested in the company and now sits on its board, said the figure is well under $ 1 billion. Investors in the startup also include BoxGroup, Coatue, and Conversion Capital, among others.
Speaking publicly about Ramp for the first time, co-founder and CEO Eric Glyman tells Fortune that while his company and Brex make plastic business credit cards, “that’s where the similarity really stops.” (While Founders Fund leader Peter Thiel invested in Brex, it was a “personal investment” – the company itself does not own Brex and opts for Ramp, Rabois clarifies.)
What sets Ramp apart from its competitors, according to Glyman, is that it is designed to help cardholders save money; claims to have helped clients spend an average of 2% less so far (savings of up to $ 250,000 for a business), using technology to identify “wasteful expenses.”
For example, Ramp has reported cases where a business simultaneously subscribed to multiple software products with very similar features (such as Trello, Asana, and Monday.com), or was paying for three different Dropbox accounts (saving nearly $ 500 per month). reduce duplicates). Ramp also indexes current market prices for popular trading tools and compares them to what the company is being charged; in one case, one of Ramp’s customers was paying $ 378 a month for Basecamp software, where the current fee was $ 99.
If that sounds a bit similar to how startups like Honey (acquired by PayPal for $ 4 billion in the fall) help online shoppers find better prices, there’s a reason for that: Glyman’s previous company, Paribus.
Ramp, which comes with built-in spending software, also allows companies to rank their employees by their expenses and find out “if some employees are spending too much money,” such as spending 20% more on Uber rides, Rabois says. “As someone who has run multiple companies, it is extremely difficult to know where your employees are spending money,” he adds.
Of course, credit card companies, from Visa and American Express to Ramp and Brex, make money by taking a small portion of every charged purchase (usually up to 3%). If Ramp customers end up spending less on their cards, Ramp’s own revenue will decrease accordingly.
Their goal is to offset lower margins with scale, convincing companies using corporate cards like American Express and Brex to switch to Ramp.
(A Brex spokesperson says their card “is explicitly designed to help their customers save money,” for example, through their reward points, which can be redeemed for discounts on business software and carpooling.)
So far this year, Ramp customers are on track to spend tens of millions of dollars on their cards, with the average customer charging expenses of around $ 1 million a month, according to Rabois. Ramp cards are issued by Visa, which collects a percentage of each transaction, but passes most of its limit to Ramp.
Rabois isn’t concerned that saving companies money could mean lower profits for Ramp compared to rivals: “In the short term, we don’t have to obsess over that,” he says. Instead, he’s more concerned with helping Ramp’s customers increase their own profitability: “And satisfied customers will therefore drive volume.”
While Brex has become popular by offering credit to startups that have been shunned by traditional card issuers due to their lack of revenue, Rabois expects Ramp to compete less with Brex than its older peers. “More of our [target] customers are probably using something like Amex right now,” says Rabois. “We are not really targeting startups.”
