In our Making Markets series, learn from exceptional entrepreneurs about their magic moments in company building and important lessons for shaping the industries that matter today.
At every company, no matter the size or sector, accounting teams invest countless hours on “spend management” each month, using a mix of software and spreadsheets to manage invoices, corporate card transactions, bill payments, and month-end reconciliation, but they would much rather streamline those tedious tasks. That’s where spend management software comes in, and Airbase is the leading player for small and midsize businesses in this space.
Founded in 2017 by CEO Thejo Kote, Airbase has grown tremendously fast, raising $91 million in funding and currently processing around $3B in payments per year for customers such as Cameo, Finix, Front, and Getaround.
Airbase ranks as the #1 spend management platform for midsize companies on G2. It combines accounts payable automation, software-enabled corporate cards, and employee expense reimbursements, applying consistent approval workflows and providing real-time reporting for all non-payroll spend.
Thejo recently shared his thoughts on how to grow fast in a competitive category by growing alongside your customers.
Before starting Airbase in 2017, you built and sold another company, Automatic, in the automotive software industry. What made you want to shift to fintech and spend management in particular?
Automatic and Airbase are clearly in different domains, but when it comes to why I founded both of them, the reason is similar: I find it interesting and challenging to build a company as an industry outsider.
I didn’t know much about the automotive sector before starting Automatic, only that it had a lot of room for disruption, and the same is true for Airbase. I’m not an accountant, but I saw firsthand as the CEO of Automatic how spend management and accounting are massive headaches for any company, and especially fast-growing ones.
In the case of both Automatic and Airbase, disrupting both industries from the outside, while bringing my tech skills and company-building expertise to the table, gave me an unclouded perspective on how to fix entrenched problems.
Sometimes, a bit of ignorance really helps to tackle challenges in a fresh way.
Airbase has made huge inroads with small to mid-sized businesses in every sector. How have you achieved growth for Airbase and where are you headed?
Having discipline around product-market fit is very important. A common mistake many founders make, and I have fallen into this trap at times, is trying to be everything to everybody.
The best way to determine product-market fit is to spend lots of time interviewing your potential customers about their biggest pain points. Before I founded Airbase, I spoke to hundreds of financial controllers, CFOs, and accounts payable staff. Start by targeting one market first; in our case, it was medium-sized businesses.
As Airbase has grown, we’ve expanded the definition of our market to include both mid-sized business and early-enterprise ones, that is, between 100–5000 employees. We’ve been able to grow our product, and the sales and customer support teams around it, right alongside our customers, some of whom have grown from a few hundred employees to several thousand.
As they grow, they encounter new pain points, and so we add new functionality to our product to address those issues.
You recently announced a free version of your software for small businesses. How does this strategy fit into your overall business model?
After a few years of honing our product for the mid-to early-enterprise market, we saw that a great way to capture new customers was to get them using our product when they were still small companies. So we launched a lightweight free product. We want small businesses to know that we will handle all their spend management from day one–just take that worry off their plate–and grow with them all throughout their journey, even up to an IPO.
As a founder myself, every time my company reached a new growth milestone, we had to rip-and-replace the software we used, going from a small-business provider to a mid-market one. It was so time consuming and expensive to research and buy new products, get them to work with our tech stack, and train our employees how to use them. That’s why we have built the Airbase platform to grow with companies.
You raised two significant rounds of funding in a 15-month period. What advice do you have for software founders raising money today?
The current market environment is the best ever for venture-funded startups, so of course the winds are in founders’ favor right now. That said, I always raise money the same way, whether it’s a down market and up market, and that is to focus on building a disciplined business with a clear path to sustainability.
Ask yourself two simple questions: are we building a high quality business? If I was an investor, would I invest in this business? If you can answer yes to both of those questions, and your business is growing well and hitting milestones, investors will come to you.
Bain Capital Ventures first invested in Airbase back in March 2020 because we saw tremendous promise in Thejo, a successful serial entrepreneur, and believed in his vision to make spend management a simple and transparent task. BCV also participated in Airbase’s Series B round that valued the company at $600 million. Here’s our take.