Executive Summary:
Ramp is an expense management platform that works together with companies of all sizes to better manage their cost.
Ramp makes money via interchange fees from its card, interest on financing, and the investments it makes.
Founded in 2019, Ramp has become one of the fastest-growing companies in the FinTech space. It is currently valued at $8.1 billion.
What Is Ramp?
Ramp is an expense management platform that works together with companies of all sizes to better manage their cost.
At the core of its offerings stands its Visa-powered card aimed at employees. Transactions are automatically synced to Ramp’s platform, thus giving superiors and the finance department a more accurate overview of what their employees are spending the firm’s cash on.
Furthermore, the card does not incur any fees and allows users to earn cashback rewards of 1.50 percent.
Ramp targets companies of every size and stage, whether they are still in the startup stage or already global leaders in their respective industries.
Therefore, Ramp offers a variety of other expense management features. Examples include:
- AI-powered receipt scanning
- instant receipt collection
- automatic expense categorization
- the ability to pay vendors in the United States and abroad
- workflow automation
… and so much more. Moreover, Ramp integrates with over a thousand important business tools, ranging from Intuit’s QuickBooks to Slack.
There are also a variety of free tools, which are primarily aimed at startups. Those include a burn rate calculator, a list of VCs and angels, a company name generator, a pricing intelligence database, and more.
Ramp can not only be accessed via the platform’s website but it also offers a mobile app for Android and iOS devices.
Detailing the Founding Story of Ramp
Ramp, which is headquartered in New York City, was founded in 2019 by Eric Glyman, Karim Atiyeh, and Geene Lee.
Now, if you expect to read a story about how the founders overcame obstacle after obstacle, then I have to disappoint you. In fact, Glyman, Atiyeh, and Lee are probably the wet dream of every venture capitalist looking to deploy their LP’s cash.
The three founders, who all knew each other from way back when exemplified excellence from a very early age. Both Glyman and Atiyeh went to Harvard while Lee pursued a degree in Psychology at the University of Chicago.
Glyman and Atiyeh, after spending the first few years of their career in finance and consulting, founded rewards collection platform Paribus in 2015.
The founders, after introducing the offering at TechCrunch Disrupt 2015 in New York and raising $2 million in funding, sold the business to Capital One just a year later. Glyman and Atiyeh, as well as Lee who had joined Paribus as a software engineer, all joined Capital One as part of the acquisition.
Paribus was eventually merged into Capital One Rewards while the trio worked in the firm’s U.S. Cards division. However, after 2.5 years at Capital One, the urge to start a business was simply too big again.
At the time, a young Silicon Valley-based startup called Brex was turning the venture world upside down. It largely democratized access to cheap capital and spending tools for startups that have traditionally been ignored by larger banking institutions.
However, given that the global business-to-business payments market is worth a whopping $120 trillion (yes, trillion with a t), there was certainly enough space for competing solutions.
On the other side, time was somewhat of the essence. New Brex competitors, such as Airbase, Divvy, or Mercury, were popping up left and right. Even payment powerhouse Stripe launched a dedicated expense management solution.
And since the window of opportunity won’t be open forever, the founders decided to take action. They officially incorporated Ramp in March 2019. It would only take five months, until August, when they raised a first seed round of $7 million from Keith Rabois of Founders Fund and other high-profile investors.
Over the coming six months, they refined the product, which was still in closed beta, with a set of early adopters. Then, in February 2020, alongside a Series A funding announcement of $15 million, they officially unveiled Ramp to the public.
In the beginning, Ramp offered a corporate card that would provide business customers with 1.5 percent in cashback rewards, among many other crucial features.
And the timing of the launch couldn’t have been better. The ensuing Covid-19 pandemic motivated businesses across the United States and beyond to digitize as many processes as possible. Moreover, startups, which were Ramp’s initial target customers, would be flooded with cash due to the excessive money printing that went on.
Consequently, Ramp strongly benefitted from these headwinds, too. It started to raise money like there was no tomorrow. First, it announced a $30 million Series B round in December 2020, only to top that up with a $150 million debt facility with Goldman Sachs in February 2021 and another $115 million Series B-2 raise in April.
The company, which was valued at more than $1.6 billion during the April 2021 fundraise, became the fastest-ever growing startups in New York’s illustrious history. Interestingly, Ramp did not seem to spend too lavishly as it ‘only’ boasted around 100 employees at the time of funding.
Ramp, as it expanded the size of the customer it targeted, also began to snatch away customers from more established providers like Concur or Expensify.
This wasn’t the end of Ramp’s almost-legendary fundraising spree, though. Just four months later, in August, it raised another $300 million in Series C funding while more than doubling its valuation to $3.9 billion.
Notably, one of the investors in the Series B and C rounds was Stripe, a Ramp competitor, which did raise some eyebrows. However, since Stripe wasn’t granted a board seat, the data it could get its hands on was somewhat limited.
Meanwhile, Ramp also used cash from the funding round to acquire its first company. It purchased Buyer, a service that negotiates on behalf of other companies to lower their spending on software and other tools.
Moreover, Ramp began to adopt Stripe’s playbook as well and started to invest in other startups, such as Pluto or Karbon, mostly at the seed stage.
And since going from strength to strength is what Ramp seemed to be doing, it wasn’t surprising that it managed to raise yet another funding round soon after.
In February 2022, it raised a total of $750 million in funding, of which $550 million could be attributed to debt while the rest was equity-based.
The firm used that capital to expand horizontally into the travel segment with the launch of Ramp for Travel. Interestingly, despite heavy market downturns prompted by heightened interest rates and rising inflation, Ramp kept growing like wildfire and continued to hire throughout 2022.
As a result, Ramp managed to introduce a variety of other products, including Buy Now, Pay Later solutions, or international payments, among others.
Today, Ramp employs over 400 people throughout the United States and works together with over 10,000 companies that utilize its payment solutions.
How Does Ramp Make Money?
Ramp makes money via interchange fees from its card, interest on financing, and the investments it makes.
The business model strategy that Ramp pursues is largely based on getting customers into its ecosystem by offering free cards and access to software.
Once they are onboarded, Ramp can cross-sell them into a variety of other products that it then makes money from (which I’ll detail in a bit).
The single biggest advantage to its freemium strategy is that greatly accelerates user growth by virtue of the product being free.
And since we are dealing with business customers, there may, depending on their size, be great opportunity costs involved in switching providers.
So, Ramp utilizes the venture dollars it raises and its existing cash flow to expand into an even greater set of use cases, which ultimately increases the dependency its business customers have on the service.
The best example of that being the case is Ramp’s acquisition of Buyer. Ramp now helps its customers save money on SaaS contracts – a service, by the way, it could also monetize in the future.
Going forward, you can expect that Ramp continues to widen its feature set to appeal to an even broader set of customers. Additionally, it will likely horizontally expand into other segments as it did with travel.
With that being said, let’s take a closer look at how Ramp actually makes money.
Interchange Fees
The biggest source of revenue for Ramp comes from the interchange fees, which are generated whenever someone uses its card for making a payment.
Ramp itself offers a charge card (meaning the outstanding balance has to be paid in full by month’s end) powered by the Visa network.
The charge card itself is actually issued by another partner, namely Marqeta, though. Ramp essentially just acts a frontend to that payment infrastructure.
And by partnering with Marqeta, Ramp gets to take advantage of a variety of different features, such as advanced fraud monitoring, that would be costly to implement.
As a result, Ramp shares the revenue it generates from interchange fees with both Marqeta and Visa.
The interchange fee that is being collected varies depending on the type of service that’s being paid for, in which country you pay, and so forth.
In general, Visa charges somewhere between 1 percent to 3 percent plus a fixed fee of $0.10 for every payment.
Ramp itself incentivizes card usage by offering a flat 1.5 percent in unlimited cashback rewards whenever the card is being used. As a result, it can be assumed that the interchange revenue it derives is at least equal to that amount.
Interest
Ramp introduced its so-called Flex program back in August 2022, which is essentially a Buy Now, Pay Later solution for its business customers.
More precisely, a business using Ramp can decide to pay back its outstanding invoices in 30, 60, or 90 days, respectively.
Ramp then collects a fee in exchange for issuing what is essentially a loan. Businesses can apply for a loan directly within Ramp’s product and don’t need to even talk to a human before.
When Ramp announced the launch, founder Glyman said that the interest rate businesses pay would be around 1 percent to 2 percent.
Businesses applying for a loan likely use the service as an arbitrage opportunity. They rather pay Ramp 2 percent than whatever substantially higher percentage their vendors would charge for missing a payment.
Ramp itself does possess a huge data advantage in that it literally tracks all the expenses a company generates. That data can then be utilized to better predict how likely a borrower is to default, which ultimately decreases risk.
Investments
A very small portion of the profits that Ramp generates may come from the investments it makes in other startups.
As previously stated, its investment strategy mirrors that of Stripes. Both companies invest in tangentially related businesses and sometimes even competitors.
Consequently, Ramp will generate a profit if it sells the shares it owns at a higher price. And since it mainly invests in firms that are at the seed stage, selling shares during a future funding round is quite likely. That concept is commonly known as a secondary sale.
However, the bigger advantage it gains from those investments is access to revenue and other business-critical data. It can then utilize said data to inform its own product or investment decisions.
Ramp Funding, Revenue & Valuation
Ramp, according to Crunchbase, has raised a total of $1.4 billion across eight rounds of debt and equity funding.
Notable investors include Founders Fund, Goldman Sachs, D1 Capital Partners, FinTech giant Stripe, and many others.
Ramp is currently valued at an eye-popping $8.1 billion (post-money) after having raised $750 million in Series C funding back in March 2022.
Unfortunately, Ramp does currently not disclose its revenue figures to the public. Nevertheless, CEO and founder Glyman told TechCrunch that the firm 10x its revenue in 2021.
