How Expensify CEO David Barrett grew to $134M revenue and 50K customers in 2024.

hello everybody my guest today is David Barrett he started programming at the early age of six and has been aspiring to become an expense report magnate ever since enough I believe him by the way on that we'll check it we'll check that a second he attended the University of Michigan where he worked in a virtual reality lab before moving to Texas to write 3d graphics engines for the video game industry next he moved to California to join Travis and building a peer-to-peer file transfer technology technology called red swoosh that's obviously Travis remover and that company was acquired by Akamai in 2007 in 2008 he left that company to start Expensify and has since been relieving the world's frustrations one expense report at a time David are you ready to take it to the top I'm ready so you just you popped up a room and you're said give me the P&L mom let me see the balance sheet let's do it's been supporting baby that's right I just got into it for the chicks you know it's obviously prints that tell us about the company what do you do it how do you make money so it's been safai is pretty straightforward it's a mobile app for business travelers you take a picture of your receipts we read all the information off the receipt automatically so there's no typing involved and then it will submit your company for reimbursements and so we get you paid the very next day for the Starbucks purchasing me today okay that makes good sense and what like tell us the origin story here when did you launch the company and what turned you onto it well origin stories are always complicated and I would say the summarized nine I initially I had no interest in the expense reports whatsoever I was doing something just completely different to the prepaid debit card space and the bank's just had no interested me there suddenly is just way too risky and so my guy I needed some low risk and there's some boring I'm like where does the most boring thing I can think of oh my god she bore it so that's how I got into it was as a Trojan horse to get permission for the banks to launch an Italian product and then after we launched this product everyone's like yeah your prepaid debit cards are cool and all but your expense reports are amazing and up until that point I actually hadn't intended to build it I was just it was a fake product that I was just making up so they went along and I think I developed the story around it's like oh this mobile app where we use your camera to scan receipts then we reimburse you the next day and the important credit cards and expert your accounting package and all this stuff and everyone's like if you just if you just did that that would be amazing oh my god well maybe wishes do that so how again that's interesting and the business model now you know you mentioned last show that you're on guys if you wanna listen do the last episode David came on Oh his episode 844 and actually he was on in episode 655 which would have been about a year ago as well David you start with even with the janitor on a free plan and you said they go up to an average are proved about nine bucks a pop is that accurate uh yeah that's right because I would say the entire business model and I would say the way that we differentiate is by acquiring the individual first and then so that's why the product has to be so good for the end user is because the end user is our champion they're the person who pulls us into the organization and then promotes us to the top of the organization yeah would you go so far as to say that you actually you're onboarding is a consumer app absolutely I mean yeah I think that was very weird sort of middle ground between service can wear these really consumer great enterprise application yep that this is a model that I you're the second one in about a week I've had on so Malwarebytes is I mean they'll be pushing 100 million here soon in ARR but they do the same thing it's bottoms up they have a consumer approach then they land and expand based off logos they seem naturally coming in on their consumer product and it works really really well for them you're doing the same thing huh yeah that's exactly right because you forget a differentiator you can't differentiates the functionality alone it has to be through acquisition to business model yep and how many let's not use number of companies although I'm sure that's obvious that's probably well into the thousands or tens of thousands but employees so so how many seats are being used on Expensify today you know honestly I don't know that number I would say like so we think about 45,000 paying companies so there's not many incomes adapted oh yeah so we've met more more companies is Expensify than the next four expense reporting companies how many did you say David about 45,000 oh that's amazing yeah I mean you were just on four months ago you are at 42,000 so yeah yeah I mean that's your growing quick yeah and so this year especially has been crazy it's been actually use is crazy keeping on top like this year yeah yeah so it's been great and then before we get more of the origin story and kind of where you see this space going I want to talk about Matt and the TSheets deal as well and just film Tech in general especially some data related to this space can we put a general bracket on your thing so I mean you guys are somewhere between the call at sixty and a hundred million dollar a hour range is that fair yeah we're still under 100 that's right yeah do you I mean are you are and the reason I'm asking is just for the significance in term when people start thing about IPO and other sources of capital mean do you think you'll break a hundred and twenty eighteen or do you think it's more 2019 yeah okay got it I'm interesting so let's talk about the space and guys by the way I'm not gonna focus on David's backstory cuz you can get that in the other interviews you know launch the thing in 2008 they were at 120 people about three months ago or you're still at about that size David yeah actually that numbers may be a little bit off it's more like maybe 110 right now hundred I think that probably gave you the bad numbers before that's okay no worries so let's talk about this space so a lot of people I mean especially when you start hearing people go man I should do an expensive like concept on blockchain right where's your head in terms of just FinTech in general and blockchain wow that's interesting so I guess I would say I think right now is a really hard time to start a company because any company that just involves like the Internet and mobile and through that it's like it's been done it's been done like ten years ago and so any we're seeing like this whole series a crunch it's because so many the early stage funds in the past few you are doing terribly because again all these kind of need to want to be is basically have come around you haven't raised any more right you're at twenty five million still super more time you haven't raised additional capital since we last spoke right you're at 25 yeah we're profitable so we just we're off that whole band way yeah are you but you only raise 25 today right in 27 I think it is do you regret it raising that's tough I mean it's easy to say yes because I give I regret the dilution the other hand I spend it's tough to say like one of the challenges as money got so cheap for a while I wish that I had raised a few years later but then now I realize those companies have raised a few years later maybe they got good terms but they're all gone they're just done because they came too late and say yes we came in to time and capitals more expensive but there's also much earlier and that's what enabled us to kind of take over the market so it's hard to look back and say what you do different yeah the whole funding thing is tough I mean I'm looking at you here cuz we're doing this on a Skype interview I mean you look like a guy that doesn't have ego I mean you're you're showing up your natural sobbing your hat you know how they're ripping it up here I mean you haven't shaved in years your shirts you know you look good but you're like Portland and you're like I don't give a and I'm just doing my thing so it's great so you don't seem a guy that would raise for evil purposes oh well no I think that's really kind of stupid you like to celebrate raising money is to celebrate that you took out a loan it's like so like what butch kills the edge that when you did raise you just saw a path to spending the capital to get number one in market share or what yeah I don't know I mean I things get more refined number time and I'd say we raised because it was possible because everyone thought yourself had to we took some big swings that missed and so it's again it's time to know one of those swings um I would say like advertising like advertising is tough everyone everyone will tell you it's like oh yeah everyone knows how this works you raise a bunch of money you spend it on ads and then you get this you know high performance sales team and then that's how you build your business with the exception that no business you cared about was ever built that way like every business every all the top names industry have built through word of mouth and but no one talks about that because it's not possibly funded with capital and so therefore VCS don't care about word of mouth because it's not their business model and I think that's the big challenge being an entrepreneur is recognizing that your job is very different than your investors job and your world out view is this very very different as well that makes good sense I mean your whole model now right you're not doing any paid spend anymore right no we have no advertising going on whatsoever right now it's all hundred isn't weird enough and it's the janitor starts using it and then they before you know the Jenner tells Sally who works the desk and then John who works the dusts next to Sally and before you know what 20 people at a company and then it moves from a personal credit card payment to the company buying a seat package with you guys right that's exactly right and that's that's our whole business model it sounds crazy that I could work at this scale but like it does it works great yep and it's all a is it no touch or is there a portion of your hundred ten folks dedicated to picking out the logos they see signing up and expanding you know it's certainly not no touch there's no Enterprise sorry there's no commissioned sales component to specify so no one's paid a commission at all but we certainly have a support team that stands by because it's activity-based pricing that means we only get paid when you get active but the only way that you get active is that you've gone through your whole setup process and getting a company on board so we have a whole team standing by that will help you get on board and we've got different types of teams for different parts of the organization different accounting packages and so forth but I would say that um so it's not no touch where there's no Commission sales and the lack of commish is what destroys everything and is the company so cannabis it's also of growth so like last year at this time you know what were you at if you're comfortable sharing and then obviously we can back into growth rate sure it's really so last year we're under a hundred percent but I would say what's nice of us what's been really interesting is we're going through this kind of like the second s-curve no so when I say s-curve everyone thinks is how you start slow you grow fast and then you kind of like slow off into the distance sort of thing and so lowly die slowly yeah so like diet scale I guess or something like that and uh but one thing we're finding is very unusual about our business model and so in the past couple of years we spend a lot of time making the products easier for smaller business like everyone thinks about the enterprise now a great dinner presence and if a sucks man it's just like it's super slow sales cycles and the margins are terrible as super competitive it's whatever the real opportunity is mid market below and so we've been reorient in the company around sort of mid-market companies and set nsmb and as we do that we are actually seeing a revenue really accelerate which has been great and so I think that we have this very broad range the market everything from like individual of fortune 500 but like really the lower half is where they have the opportunities that so it's can we say you you kind of grew 90 to 100 percent year over 80 to 100 percent year over a year between this time and last time the same time not going to get to those numbers in detail but yeah I would say like the nice thing is I think that accelerating at this scale is like turning the ship around at this scale it's real hard to do that's honestly David that's why I'm pushing you here on this because I want people to understand you can still get healthy growth numbers without dumping it hundreds of millions of dollars into paid ads diluting the hell out of your company right where we have to sell for three billion dollars before your first employee sees a dime oh yeah that's exactly right and I would say then they the only reason we slowed down at all was because begins is fashioned by the enterprise let me start off kind of like lower mid market SMB and the enterprise was just there it seemed good like big names and so forth and so we just kind of got distracted by them for a couple of years and so now we're getting back to the okay can we say was over 50% you over here I want to give you credit here okay got it between 50 so guys listen it's lists follow this story check out Expensify it's possible to grow at this scale I mean it again it's easy to go from $1 to $2 right and say huh growth when you're going from fifty million trying to get to a hundred million its way obviously tougher so dance doing anything in an unconventional way David what's next do you you seem uh you mentioned you're trying to make it easier for smaller companies which is great because then you're kind of increasing the number of people using you are you ever gonna go to the space we're gonna try and increase wallet share on your current customers we up selling new stuff that's interesting um I don't know we've always try to keep ourselves the the least expensive option in the market and I think that we think that the path that grows is not so much by like increasing sort of how much you extract from each customer but just getting more customers and so I I'm much more focused on this massive scale than I am on trying to like you know squeeze harder yeah that's interesting let's talk the reason I bring it up is because our friend Matt right Matt was on the show with TSheets he just sold two infusions or start to uh into it for 340 million bucks on a great multiple and you know he was I mean I would put him in the payroll space but it's not just like a timer it's kind of more intricate payroll you I mean you could very easy there's a clear path for even our product from our perspective to jump into these kinds of spaces well I wouldn't say that's I mean yes you could say that in that sense when all accounting ultimately deals with you know numbers that have a dollar sign in front of them and so they're all very similar but there are differences they're like um t she certainly has focused on making the best time roll it sort of time tracking sort of software and it's not just about the numbers behind it but like it'll take a picture of new Clocky and there's like gps tracking is a whole bunch of nuance around the space and so yes it would be very easy for us to do shitty time tracking it's very hard for us to do time tracking good before we wrap up you look like you're in a very cool spot can you like move your camera round show us around where you are sure yeah this is my office here and so oh wow this is actually my daughter's birthday we rented this bus called the tumble bus which is a it's a whole gym that comes out and it's just the whole thing that's going playing out there said oh my gosh wait go back to your bookshelf how do you organize fiction nonfiction tickets are my wife's bugs she's an opera singer and so like everything down here is like classical music everything up there is more history and so uh I'm more of a digital person I'm not much of a book person I love that all right David let's wrap up here with the famous five number one what if you have one what's your favorite business book I guess I would have to say the innovators dilemma number two is their CEO you're following or studying right now it has to be Elon Musk who wouldn't I know that's it that's right number three is there beside your own is there favorite online tool you have uh it's basic I also know Google Docs okay number house it's a you don't have to go basic you can if you want but Google Docs number four how many hours of sleep to get every night eight okay and what's your situation married or single obviously we mentioned your wife and one kid you have any more kids I know just the one but I do have a dog and she's certainly precocious no what are you David I'm not 42 I think okay who asked question take us back 22 years when he was your 20 year old self new hmm I would say uh stop listen to pcs there you guys have it from David stop listening to VCS look he he launched this company many many years ago kind of jumped into the VC trapped raised 25 million took some swings missed learned it the hard way but really now it's beautiful what he's doing acquisition basically if their consumer out bottom-up focusing his R&D team on making it the tool easier for small business owners and for the consumer themselves cuz when the consumer uses it more they tell more people word-of-mouth grows they move to the paid plan at about eight bucks a month they're doing between you know call it sixty and a hundred million currently growing year-over-year between last year and today December 2017 between 50 and 90 or 100 ish percent again without spending loads of money on capital and without raising a bunch of extra capital as well David thank you for taking us to the top it's been a real pleasure thank you