How Divvy CEO Blake Murray grew to $100M revenue and 10K customers in 2021.

hello everyone my guest today is alex bean he's sitting on a rocket ship with divi but 10 11 years ago he's selling scooter parts what happened we're gonna dive in today divi modernizes finance for businesses by combining expense management software and smart corporate cards into a single platform finance leaders can now get real-time visibility into their company's spend and flexible controls that prevent teams from ever going over budget you can check it out at getdibby.com alex ready to take it to the top yeah scooter ready for the scooter part the scooter business reference but we can dig into it well it's crazy i mean you go i mean my research team was looking they're going wait this guy went from basically being a gm at a scooter place to running like one of the fastest growing fintech businesses today how the hell does this happen yeah so real quick on the scooter business i mean i actually feel like those are some of my most informative years or formative years um i mean i was in my mid-20s uh knew the owner of the business he got sick and he said hey i'm sick can you come in and run it like can you come in and and build this thing and you know at the time we were we thought we were going to like take over the x games and take over skateboarding so you kind of thought big but we did some fun stuff learned a lot about manufacturing and and branding and uh he got healthy so that's when we i gave it back to him and then and got into tech so um learned a lot a lot of fun but definitely different than fintech for sure so tell the division if you had divi when you were running that business like what sort of credit lines would you been pulling what sort of expense management would you have been doing like sort of explain the current product as as like how you would use it back then yeah but it's funny because you might say like well how did you go from selling scooter parts to doing divvy and and to me i'm actually it's super natural because you know when i'm running uh lucky which was the scooter company we had 10 riders all over the world traveling for various tournaments you know building content uh we would do trade shows and so i would send seven guys to vegas on a trade show conference and we're a small company we didn't have a ton of cash so spending the budget of 15 000 for the conference was like imperative like you can't go over but everyone was using their own card we were getting expense reports you know a month and a half late so we were going over without knowing we were going over and divvy would have solved that entirely we you know we could have said hey here's your budget had cash check credit everything inside of that expense reports from all the riders and all the employees would have come directly so honestly when we started divvy my partner blake and i it was just like well we've ran multiple businesses and we understand the needs and so we built it not as tech engineers but as business owners and saying we're building something that we would have wanted to use in our prior company yeah and what's who's the customer target today is it the luckies of the world smbs yeah yep luckies of the world but just smbs you know we we kind of have two audiences i say like one to fifty and fifty to five hundred slightly different use cases for the most part but smbs in general that that's we're going after the mom and pops of america main street america not just the bc backed companies yup and and talk to me about that segment right so if an smb is listing right now and they're going man i'm currently using like six tools to do all these things alex is talking about they want to start with you like what's the average price point an smb is going to pay you guys nothing it's free okay so how do you make money yeah so we basically take amex right like you're not paying for your chase card or wells fargo card or whatever we take your credit card that's how we make money so we make money just like the banks would and then we uh give you the software that expensify and others are are giving you so we really combine it into one platform and what we've found is by combining it it's not only just that it's free it's the like the source of information is so much quicker and so much better so the things we can do are much different um but yeah it's free and that's why we're super excited to offer to the mom and pops of the world because we can tell them stop paying for those three softwares and come just use divi and it's you know it's it's a it's a win-win for both yeah i mean you have four sort of thing buckets list on your website business credit spend management expense management and ap management there are multi-billion dollar companies competing in just one of those verticals just to be clear make sure everything's right you're giving away spend management expense management management free you're making money on the credit card stuff and the credit fund yup exactly right wow okay interesting so i guess the question i would have for you is this is not easy software to build how did you fund it in the early days so that you could give it away for free so that's actually a really good question had i've had that conversation a lot of people a few things one we all we raised money early because we knew that we were taking a big swing i don't think that's for everyone so i'm not like out there recommending to all entrepreneurs like go raise vc funds go raise as much as you can but for us as you've just said we're taking on trillion dollar markets and everyone in all four of those buckets so we're like all right like we've got we've gotta bring money to the table and go build the team so for us that's what we did um and at the beginning like nowadays in the fintech space if that's where you're at there's so many more tools that enable fintechs to go build companies that didn't exist five years ago which that sounds nuts but you know there's a lot of i can get into the nuances a lot of things that the banks couldn't offer us five years ago that now they're fully built to offer to these fintechs so i think you're going to see a wave of innovation because of that so year one it sounds like was what like 2016 2017 is that right yeah and i want to touch on founding story real quick because founder equity is obviously a hot topic with anyone launching a company do you guys just say you know what we're equal partners 50 50 or was there someone who wants there uh nuance yeah and and i i'm actually so here here's let me give the every partnership's different right so like anything i give here is not going to be definitive for all so blake my partner uh my friend and partner came to me with the concept of divvy right and and we formulated it together but his original idea uh was his and the name divvy came from him and frankly he had uh the money to to kind of help kick start some of this how much did he kick started with um i think that's private sorry i don't know if we've disclosed that but you know it was a decent amount of his own money to say hey we're gonna go design and engineer and do some stuff before we went and raised formulas so um he he had he has more than me right clearly it was you know he had it and the advice i would give a non-ceo co-founder is you have to understand where you where you sit for me i always knew blake was the quarterback and i was the running back to use a football reference meaning we were partners and he i don't think he could have done it without me but i know i couldn't have done it without him and uh you can still be partners and not be 50 50. uh i think i've seen a lot of partnerships where you go in and they are equal partners one might be the ceo but the other one they have the idea together and that's 50 50. great that would be awesome but for us it was not 50 50 but that doesn't take away from the partnership so nuance their first formal round was landon how much uh 10 million from paleon partners here in utah and i think that was in [Music] was it 18 20 yeah okay yeah you just raised more this year i think what was that right yep brought on hanako will rock uh crew right so some great investors was our series d and how much did you guys raise there 165 i think and do you remember the valuation 1.6 1.6 so full story there don't want to bury them you just as an entrepreneur you're like do you remember the evaluation i'm like well let me see here yeah i remember the valuation yeah maybe i strategically ask it that way to make sure more people answer uh if you phrase it that way you definitely get a higher response rate but i wanted to put that out there because again what you're doing here is very interesting right we've had david on from expense high we've had brexon we've had a ramp on the show right and they're doing they're basically building massive business on something that you're doing for free so i want to dive more into the credit card business i mean how much money can you make on the credit card business there's only about 200 300 bits to spread there yeah yep that's correct but uh there's a few different ways right you see brex uh is starting to launch paid software we have some paid so we have paid software um you know you make money on the on the card uh i'm sorry like on the credit side right fees and things of that nature i mean it's just like a bank it's basically asking the question like well how's amex making money and it's like well i mean i think they're making a fair amount of money so you know two even 200 to 300 bips you start to do the math and you're doing billions of dollars and spend and the revenue starts to add up is what will gmb be this year through the platform uh i don't think that's disclosed but you know we did we did oh man i don't think that's just close so i'm gonna keep can you can you do a range alex billions of dollars in spend okay got it so more than a billion less than 100 billion is that a big enough range yeah that'll work yeah that's a damn big range but okay more than less than 10 billion and then i guess can you maybe um just so i can quickly understand this so last 12 months if you guys look at your total revenue just give me percentages what percent would you say is credit card versus paid software versus your credit fund returns almost almost all uh i would say majority of that is on interchange oh wow so really it's mostly credit card interesting i was thinking you might have said that there's actually a massive balance sheet business here because you have unique insights data you can underwrite better than anybody else yeah there's definitely elements of that but even if you talk to brexit ramp like you're not you're not making most your money on that right because again underwriting just minimizes your losses it doesn't actually add you if you're really good at underwriting it doesn't add revenue it minimizes your loss rate well i mean so look i mean either cabbage you know cabbages of the world right that play in the space right which it's a purely balance sheet business you drive your cost capital plus one or two you have underwriting you do deals smbs that have 35 effective apr you make a big spread yeah so the difference on that um i think you'd see the same with brexit ramp too right now when we're underwriting we're not doing a lot of loans we will be you know adding to that we kind of have that beta it's more underwriting like your credit card like an amex so if you don't pay if you don't pay then there are fees and obviously there is revenue that comes from like hey if you don't pay your credit card bill you pay it late you know it's carried interest et cetera um but cabbage is doing like loans right there there's just straight out saying hey we're gonna give you a hundred thousand dollar loan and at this return so got it so just to be clear you're just doing the credit card stuff you don't actually you guys haven't went out raised a billion dollars as a balance sheet credit fund to do small business loans into your partners well we we do have that set up we are not fully launched on it simply uh from a product standpoint we actually launched it pre-covered we pulled it obviously with covid um and now we're you know gonna start launching it again so i'm definitely in our wheelhouse right it's the same conversation amex and all these guys have so it's not uh maybe in the way we do it we feel like we'll have some innovation on it but the concept of those loans is not innovative so yeah talk to you about how many of these customers are turning out today what's the number yeah over ten thousand uh and adding uh quite a few uh every month so we're super excited about our growth rate and it just means that i mean our motto is spends smarter so for us it's about having uh more and more smbs mom and pops you know build lucky scooter size companies uh spin smarter stay in budget you know like hit payroll uh save money and that that's kind of what we're all about so for us seeing that number rise is exciting yeah your press release is 2019 a thousand customers 20 20 4 500. so you're more than double in your year now that now breaking ten thousand what do you think you'll finish this year at how are you adding new like per month yeah i mean i think we'll cool easily top 20 and even with some growth pay on that so we'll see but uh def we're going over 100 percent so we we expect that to continue and that's customer count are you also growing revenues 100 year-over-year yeah how long can you keep doing that i mean it's hard to do that at big numbers not forever yeah good that's a good answer that's a good answer can you give us a sense of revenue today uh no i again sorry i don't want to be coy i just think that right now it's private so i'm gonna hold on to that but no i mean like we're super excited about it we hit some some big milestones recently you can look at our valuation and probably derive some element of what it is so uh no but i haven't i haven't done a series d round recently uh help us understand don't talk about your own deal but in in most series d rounds how much of a company is the satisfyer going to be selling yeah i think you know if you're like actually i'll give you this so if you're going to go public uh now spacks do make it a little bit different but i think you see a lot of companies that go public and and we we would look at it and say hey you got to be doing like 200 million of revenue you know 300 million in revenue to be like to go public right that's when you start to be a known name and and really have traction so for us uh you know in between that 100 to 300 range like that's where we you know we look at that it's okay what are your growth rates when do you hit what milestone uh what do we need to do to accelerate out of this and and you know look at qualtrics which was uh they just went public here in utah they're friends of ours and you know it's like yeah they hit the 200 million then they hit the 300 million and they hit the 600 million and now they're approaching the billion and it's like you just have to keep that trajectory of growth so i can't forecast you know i'm not going to announce our forecast of two years from now on this podcast but it's keeping a really healthy growth rate it might not double forever clearly because at some point that will stop but i mean do you think do you guys feel good about your plan to break a 100 million dollar runway in the next two years uh yes i feel very good about that that helps me go ahead make the statement no i'm very confident that we will we will achieve that yeah there you go that helps me with a bunch of things so you're it tells me you're not at 100 million yet you're right but the growth plan lobbies obviously clearly takes you over that over that mark so that's great um talk to me about any other is there anything you talk about in terms of product it sounds like you have a credit fund that's maybe in the works you'll be more aggressive there any other little products you can give away free yeah so i mean ap management uh you see that as one of the four buckets um reason we view that as so powerful is just we want it to be once one place that you're making all your spending and you're reconciling and you're thinking through like how much are we you know uh what's going out of the company so we're we've launched that but it's not where we want it to be in terms of full scope and capability and the innovation we can bring to that side of the fence so uh that's that to me is what we're probably most excited about and coming around the corner got it that makes good sense and then talk to me a little bit about churn right in this space how do you even define churn because you're not like a traditional sas company or they're starting an end date do you find churns like they have a credit card and they stop using the credit card yeah basically okay um we so we're very like churn for us is very strong um we have launched strong or we so what's the what what are you churning like annually right now we we are not churning very much we're in a very good position when it comes to churning and the reason is because i'd consider a very good position like under five percent annual is that fair to say yeah it's very important so um which is crazy on a free product that people can walk away right like you know you would assume a lot of people just sign up for free and they walk away one smb i mean that's crazy but but why we're in a really good position uh is is budgets right so if someone gets into divi they set up virtual cards and they set up budgets uh and they set up this this new process to go back to another way of doing it or an old way of doing it they've got to like go get their amex card again they then have to like set up expensify then they have to like bring everything you know together and with divi it's like once you have budgets and you're operating out of a budget mindset which can be a little hard up front but on the back end like they're not leaving because it just has changed the way that they're they're running their finances so um you know and no one else is doing that yet i know people are gonna copy us uh i won't name one competitor but we tend to see a lot of copy from from someone out there um but who's the competitor no i'm not gonna do it what's the first letter what's it rhyme with let me put it this way i'll be on this is my honest opinion people probably kill me i don't know how many people are even listening to this i have a lot of respect for what i see brex do in the market they bring a lot of their own innovation to the market and it's super super impressive and so you know they challenge us and we challenge them and and whatnot um so bigger uh well they just announced uh a large valuation so i think it's fair to say that they are do you think they're doing more revenue than you or they're just good at driving evaluation uh i don't know the revenue for sure but i'm fairly confident i do know that i don't i think the gaps are smaller than people think um i think they're very good at driving evaluation but they're bigger i think that you know it is very fair to say i can't speak to their numbers and stuff yeah but there look brex like my thing is like brex drove innovation on the credit side and they deserve a lot of credit for it uh we drove innovation on the software side and we deserve a lot of credit for it yeah and that what my point is you're going to see the market whether it's whether it's the big companies like chase wells fargo annex et cetera or other uh startups copying suit um budgets is one of those things that we've held to and and we're super proud of and it's super powerful for our customers and i think you will see that be emulated in some form over over the next couple years yup yup uh your friends at qualtrics had this and the public markets in the south world anything about like 130 140 percent net value retention is world class it's hard to drive expansion revenue in the smb cohort what does your expansion look like over the last 12 months on the historical cohort yeah so again not going to disclose specific numbers here's the thing though with with divi because it's like hey someone will get in and they'll start using us for the card software but then they start using us for the ap management or then they start you know at some point they're gonna start using this for the loan management so we actually feel like there's another five things we can add in that stack and five just being a you know kind of a figure that's all mainly free though right yeah but everything we launch has some something that adds to the wheel right whether it's direct revenue whether it's future software revenue whether and let me give you an example and i'm not gonna give you a price point but uh ap management right so let's say it takes five days for your ach check to get into your vendor's hands well hey for a fee for a premium fee you can get it we can get it to them in two days okay cool right and every single thing that we do has a flywheel effect okay you want to suck in your invoices into the system well every invoice is a new vendor that we can talk to and say do you want to accept a virtual card yeah or do you still want to accept ach and there are ways for us to make money in that flywheel and get new customers so even though something's free i mean like the obvious one is look at facebook it's free well yeah but clearly there's flywheels that are making a ton of money and we have a very similar one just on the business side fair can can we say your net revenue retention is above 120 percent or 110 percent uh to be perfectly honest i can't actually recall the number on top of my head so that i'd have to go check no problem no problem last question that i want to dive into so you're giving the software away free but you find unique sort of almost like utility-based ways to pull some margin out you just gave a good example on the ap management side of things i mean how much right now can you guys make on average per smb using the platform is it like ten thousand dollars sort of a year or a thousand a year or what uh yeah and again like i'm just i'd have to look at the number it's it's thousands right it's really healthy meaning we feel really really good uh the averages can change depending on you knows at the 150 to 50 to 500 clearly if someone's 100 companies spending a hundred thousand dollars you know there's 200 to 300 bits so you can do the math right like now there's a lot that we have to account for though right what people don't forget is we are giving rewards back to our customers yeah you don't make the full 300 bips do you i mean imagine you're probably making like 70 dips or 100 bits max yeah i mean it comes to us but there's there's costs right there's risk you know you have to you have to put money away for risk you have to put money away for cogs you have to put money away for uh paying it back to the customer and rebate uh and so there's a lot of factors in there but yes there's still a very healthy business in which you can make a fair amount of money on a free product to an smb yeah it's super attractive alex last thing i want to touch on before we wrap up a lot of founders they don't understand the content of secondaries but i like it it removes risk from the business allows you to double down and go for a 10 billion dollar sort of thing and build something bigger how have you and your blake thought about secondaries and even for your early employees have you guys done it was any of the 165 million recent rate of the secondary uh yeah and again i don't want to speak to specifics because there's always a lot of people involved and and whatnot um but i will say as a whole i think the secondaries i agree with you secondaries uh done right can give motivation uh which which allows you know early founders and early employees to to keep going as opposed to you know stop right because it's easy to say oh i've been grinding away for however many years and i just need something out of it like fine press to press the button um but you know secondaries i think are really really healthy if done correctly which is by the way uh i i don't know if everyone would agree with that statement um in silicon valley so you know i'd love to hear other people's opinions but i do think it's healthy all right let's wrap up here with the famous five rapid fire number one favorite business book uh actually you know what it's not my favorite of all time but the john iger book i found at least very entertaining the one he uh wrote last year number two is there a ceo you're following or studying uh i've been i'm like late to the party because i'm not on twitter but i've been following the vol more and i know like i i found a lot of what he says to be pretty interesting so sure we'll go with him number three besides you're on what's your favorite online tool for building divi sorry say it again favorite online tool that used to build the company so like favorite tool that we're using internally yep or personally yeah uh okay i'm gonna get both so i i i don't know how i would live without slack so slack is clearly up there everyone's heard of it but you know what i gotta give a shout out to is one note one note like evernote's super sexy it's the silicon valley but i'll i look at one note is a vastly superior product to evernote and and what you can do with it so i'll go with one note number four alex how many you have i think today three month or three-year-old how many hours of sleep you get in these days i have four kids under the age of ten so well if it was just one three-year-old i wouldn't be stressed that would be quite easy actually but i have two girls and two boys but i also have an amazing wife who helps obviously do a ton so i'm getting adequate sleep but yes it's you know my my 10 year old was up until midnight last night and having to lie in bed with her and talk her through the whole thing so there are some you know some nights where it's longer than others now it's how old are you 36 last question take us back 16 years what are you wishing you when you were 20 um you've heard it but i will i i just i i believe so strongly your 20s are meant to learn don't focus on the salary obviously salaries a matter of respect salary is what you're gonna what you valued at i totally get that but don't take jobs for the salary like take jobs that you're going to learn what you need to learn to take the leaps and jumps that you want to ultimately do and make your money and that might happen in your late 20s or in your 30s or 40s but please if when you're 20 find the right people in the right companies work with them and you will learn so much that the rest will be taken care of money will come guys there you have it alex from get divi they launched back in 2017 finance with their own personal capital did a first formal round of about 10 million bucks crossed a thousand customers smbs mainly in 2019 now over 10 000 customers with a clear path to break 100 million bucks in ar over the next two years most of their business it's give away free software where they have multi-billion dollar competitors in the ap management space expense space really to make all their money on those 300 bips on the credit provider process currently between a billion and a hundred billion nice big range there alex thanks for taking us to the top anytime thank you one more thing before you go we have a brand new show every thursday at 1 pm central it's called shark tank for sas we call it deal or bust one founder comes on three hungry buyers they try and do a deal live and the founder shares back end dashboards their expenses their revenue arpu cac ltv you name it they share it and the buyers try and make a deal live it is fun to watch every thursday 1 pm central 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