Airbase's Series B memo

Introduction
Every business spends money. A simple way to classify all the money spent by a business is into
payroll and non-payroll dollars. Payroll spend is managed by the well-established category of payroll
software. The non-payroll dollars include marketing spend, software subscriptions, T&E, employee
engagement, and the number of other areas in which a typical business spends money. In mid-market
businesses,1
managing the non-payroll dollars is incredibly painful because of the siloed and fragmented
nature of the tools used. This is the problem Airbase solves.
Airbase replaces multiple categories of tools typically used by mid-market businesses to
manage non-payroll spend, with a single comprehensive platform:
Request and Approval Workflows:
These happen via email, Slack, JIRA, Google Forms or through dedicated tools like Procurify
Corporate Cards:
Amex, banks (and newer offerings like Brex) are popular options
Expense reimbursement:
Expensify is a popular option
Accounts Payable / Bill payments:
Bill.com is the leading player in the mid-market
The ecosystem of tools to solve non-payroll spend management evolved this way primarily because they
are either front ends to specific payment rails used by businesses to pay their vendors (corporate cards for
Visa / Mastercard / Amex, and Bill.com for ACH / check), or a specific business process (expense
reimbursement).
1
Our definition of a mid-market business is one with 50-1000 employees.
Airbase Series B Memo 2

No finance and accounting team - who are the primary stakeholders in the spend management process in
mid-market companies - would design a siloed and fragmented system like this. They just don’t think about
the lifecycle of spending this way.
In practice, the finance and accounting team care about three simple steps:
1. Make sure there is a good process to control spend before it happens.
2. Pay the vendor once it’s approved internally. The rails over which money flows are largely irrelevant
and an implementation detail.
3. Correctly categorize and record it in the general ledger (GL), ideally in a completely automated way.
But, what they have to deal with in the traditional siloed system is:
1. An archaic and periodic monthly close process which is an enormous amount of low-value, manual
work that involves downloading data from each system, categorizing it, recording it in the general
ledger, chasing people throughout the company for additional information about how to categorize
specific transactions, dealing with a deluge of expense reports and reconciling the flow of money
through multiple systems. Simply put, a large part of the work undertaken by finance and
accounting teams reflects the limitations of tools they are forced to use.
2. A lack of high-quality control and visibility into how money is spent by decision-makers across the
business because they don’t have access to all the systems where the money is spent, and they
have to wait for 2-3 weeks after the end of every month for the information to be collated into the
general ledger as part of the monthly close process. Most businesses are not enabled to make
good decisions based on real-time spend-related data.
Airbase is a reimagining, from first principles, how spend management
should work in any business. We believe that our approach will be the default
expectation of the market over the coming years, and the current fragmented approach will
disappear as the market is educated about this step-change in improvement in a
foundational business process.

Why hasn’t anybody solved this problem so far?
The primary reason the landscape of tools has remained in silos until recently is due to the lack of maturity
of the underlying payment infrastructure. It’s important to understand that solving the spend management
problem the right way involves deeply integrating workflow-driven software and payments into a single
product.
Historically, tools in this domain have fallen into three buckets:
○ Standalone software workflows that don’t touch the money: examples include homegrown
pre-approval workflows using emails, Slack, Google Forms etc., or more formal systems like
Procurify, or the PO module in an ERP system like NetSuite.
○ Payment systems that address one need without any support for associated workflows in the
business: corporate cards are the prime example of this, where the only interface to internal
business processes is a downloadable statement at the end of the month.
○ Workflow-focused systems that integrate with the related payment rails: for example, Bill.com for
ACH / check payments.
Over the last 3 years, two big changes have made it easier (not easy!) to build a system
that integrates the software workflows with payments:
1. The maturity of developer-friendly card issuing platforms and program managers. Marqeta, Stripe,
Galileo, and Adyen all have good offerings at this point.
2. Banks have gotten better at allowing startups and earlier stage companies to integrate into their
systems to provide the necessary building blocks to hold and move money.
This has allowed anyone who deeply understands the lifecycle of spend in a business - starting with
collaboration between team members as they decide how to spend budgets, paying vendors across
multiple payment methods, and accounting workflows for how it’s all categorized and recorded correctly in
the general ledger - to bring the software workflows and payments together in a way that very closely maps
to the actual workflows that happen inside a business.

Product Principles
Please watch a demo of the Airbase platform to get a better sense of why taking a first-principles
approach to solving the entire spend management problem fundamentally changes spend culture in a
business, and leads to significant time and money savings
.
In addition to familiarizing yourself with how the product works, it’s important to understand how we
approach the product development process and the principles that guide us.
We’re a workflow-driven software product first and a fintech company second
We believe that almost all of the value we can offer to our customers comes from the workflows enabled by
our product. Payments are an important enabler, but just that - an enabler. We never forget that we’re not
solving a payments problem for our customers, but workflow, process, and information exchange problems
in their business. As far as we and our customers are concerned, payments are a utility, and the value is in
the deep software layer above it. Of course, we make money from financial services as a side-effect of the
usage of our platform, which is great, but, the value perceived by customers is primarily in the workflows,
and not from moving money from point A to B.

Offer a best in class solution across every product area
We fundamentally reject the rationalization that siloed products exist because they are “best of breed” and
platforms can’t truly solve the whole problem. We’re committed to delivering the breadth and depth of the
solution that allows mid-market companies to manage 100% of their non-payroll spend in one platform
without any compromises when they move from point solutions. We’ve been able to do that rapidly because
when you approach spend management in a holistic way, it allows you to reuse a lot of the common
platform elements (E.g. pre-approval workflows, and the infrastructure to sync transactions to multiple
general ledgers). An integrated platform also allows us to innovate in completely new ways - like assigning
vendor specific virtual cards to purchase orders, and limiting card spend in a dynamic way based on spend
happening across a number of different vendors.
Deeply understand the work of finance and accounting teams
We care a lot about helping finance and accounting teams avoid low-value and manual work so they can
focus on being strategic business partners. That can only happen if our platform shows a deep
understanding of every step of the work they do. Finance and accounting is a profession of details and
correctness, and our customers love us because they see that our team is full of the same DNA, and that
we really understand the work they do every day.
** Ask us to dig into this if it does not come through in the product demo.
High-quality design and UX are table stakes
Finance tools are notorious for having terrible design and UX. Most of the established players are 15 years
or older, and they don’t particularly care about UX. So, we don’t have a very high bar to meet. But, the fact
that we value high-quality design and UX has turned out to be a big differentiator for us. We’re committed to
investing in this partly for pride, but more importantly, unlike other systems, pretty much every employee of
a company interacts with our platform and they use well-designed business and personal software all day
long in other areas. That’s the bar to which we hold ourselves.
The Airbase system has a large surface area
We offer multiple established categories of products in one platform. We have made a significant
investment in R&D and will continue to do so. We currently have 54 people on our product development

team, which is more than half the team and we won’t stop hiring in that area for the foreseeable future.
We’re convinced that our thesis that customers value breadth and depth in one platform has been validated,
and we’re going to double down on that approach to keep our lead in the market.
Competition & Our Strategy
We classify competitors into two categories:
○ Established, legacy players: nine times out of ten, prospects we engage with are using point
solutions like Bill.com, Expensify and a corporate card. This status quo approach to solving the
problem is the primary competition we face in the market, and most of our sales effort is spent
showing prospects that there is a much better way to solve the spend management problem.
○ Emerging players: These include Brex, Divvy, Ramp and Teampay.
We’ve always taken the approach that the perceived value is in the software, and the financial services /
payments aspect of the platform is an important enabler. So, we’ve built a robust software platform and
charge a subscription fee for it. That has been a contrarian opinion over the last few years, with more than
a billion dollars invested behind the alternate approach followed by Brex, Divvy and Ramp of giving away the
product for free and making money from interchange. We believe that only making money from interchange
forces a very corporate card centric view of the problem.
Of course, this is such a large market that multiple valuable companies with differing approaches will be
created. But, it’s important to understand how our strategy differs from the other players.
Our primary goal is to own the spend related workflows in the business
We think the most valuable problem to be solved in this space is the unification of multiple siloed tools into
a single spend management platform. Owning all the non-payroll spend related workflows allows us to
charge subscription fees, which makes for a good business. But, orchestrating the flow of money opens up
a significant opportunity to generate financial services revenue (interchange, FX conversion, interest income
on float), and that makes it a great business. Right now, we’re at a X/Y split in favor of subscription revenue,

but we expect financial services revenue to grow faster as transaction volume increases across payment
methods on the platform. That makes it a no-brainer for us to continue investing deeply in owning the
spend related workflows.
We occupy very strategic real estate in a business
Airbase is the system of record which contains every detail of the lifecycle of how a business spends
money. This is very sticky and strategic real estate and valuable on its own, but it allows us to target a
number of large adjacent opportunities in the future. Refer to the last section for how we think about this.
Corporate cards are a commodity product
With the availability of mature card issuing platforms, anybody who can plausibly offer a corporate card will
do so. There is a glut of corporate card offerings in the market and this will only continue. We believe that
trying to acquire customers on the promise of rewards and size of the line of credit is a race to the bottom.
Yes, there is an opportunity to go head-to-head against the legacy card issuers like Amex and the banks
with a better product, rewards and line of credit, take some market share and build a valuable business. But,
we don’t believe that’s the best way to maximize long term value creation. Our opinion is that corporate
cards of the future are primarily workflow-driven software products where the real value is in deeply
understanding the entire lifecycle of how businesses spend money on cards and to support that in software
workflows. Also, corporate card spend is just one piece of the larger problem finance and accounting teams
have to solve.
Focusing on the software and partnering with banks is a better long-term strategy
We issue our own cards today. But, we started with that approach because there was no other way to
showcase our view that a corporate card system is a software product. We have no interest in competing in
the corporate card wars long term and have built the system to issue either our own cards, or integrate with
other card issuers. We think it’s better to focus on the software layer and partner with the incumbent card
issuers like the banks with large commercial card portfolios. By partnering with us, they can offer a
high-quality card spend management experience to their customers, while keeping at bay the emerging
competition from players like Brex. We are going to launch our integrated offering with XYZ mid 2021, and
are in advanced discussions with ABC.

Solving the global spend management problem is a huge opportunity
The trend of building globally distributed teams has been accelerating over the last few years, but the
pandemic brought it forward by 10 years. Companies at every stage of growth are now hiring around the
world, which means the spend management problem is global. If dealing with 5-6 systems to manage
spend in the US is hard, adding 2-3 additional systems per international entity and meeting the needs of a
distributed workforce is a big challenge for finance and accounting teams. It’s a huge opportunity to deliver
a single global platform to manage every dollar spent by a business across currencies and locations. We
have all the building blocks in place and will be delivering this to our customers by the end of 2021.
Mid-market and then upmarket
Our primary focus so far has been on the mid-market (50-1000 employees). We’ll continue with that focus
and invest in going further upmarket where companies truly value comprehensive software solutions that
solve their problems and will pay good money for it. The mid-market is highly underserved at the moment
and there is a clear opportunity to create the category leader that consolidates all non-payroll spending in a
company.

Progress so far
You will get a good sense of the business we’re building from the metrics deck and operating model that
will be shared with you.
Here is a high-level summary of how we’re doing
At the end of March 2021, we have X paying customers and an ending ARR of $Y.
We make an average of ~$X per customer (ranges from about $X to $Y). The split between
subscription and financial services revenue is X%/Y%.
Gross margin for the financial year ending Jan 31 2021 (FY2021) was 90.12%.
We expect it to be about 84% at the end of the current financial year, since we’re hiring aggressively
in our onboarding and support teams. But, it will climb back up to above 90% in 2022/FY2023.
We entered FY2021 with X renewable logos and $X dollars with annual contracts and renewed Y
logos with NRR of Z%.
We did not lose a single customer because they implemented Airbase and did not find value. The
top reason for churn by far has been customers getting acquired.
NRR in Q1 FY2022 is expected to be X%. We’re targeting Y% for the year.
Payment volume on the platform across all payment methods grew from an annualized rate of $X
per year in March 2020 to $Y per year in March 2021.
We’ve been very capital-efficient so far. We’ve raised ~$30.5M and have ~$21.5M in the bank for
a net burn of $9M.
Employee headcount is currently 96.
Our team is spread across 9 countries since we’re a fully distributed team.

We’re convinced at this point that our thesis that a software-first approach to unifying all non-payroll spend
into a single platform and owning the workflows is the right long-term angle of attack in this space. We’re
also confident that we have happy customers who really value the problem we solve for them and are
buying more from us as we expand our offerings. It’s now time to really accelerate our GTM effort.
How big can this get?
The opportunity in creating the leading mid-market spend management platform is massive. But, the
strategic real estate that Airbase occupies in a business given the nature of the problem we solve opens up
a number of large adjacent opportunities for us over time.
Here are the adjacent opportunities
Budgeting and planning collaboration:
Airbase has all of the real-time spending information, but the collaboration around budgeting and
planning happens in a separate system (Excel, Anaplan, Adaptive Insights). There is huge value in
overlaying budget information over actual spend data to help budget-owners make better
decisions. We’re going to ingest and surface budget information in various parts of the spend
related workflows this year, but it’s a natural extension to bring in the planning and collaboration
workflows into Airbase too.
Contract Lifecycle Management:
Today, the decision making process related to new spend happens in Airbase, but the contract
management happens outside. The finalized contract is attached in Airbase. A robust CLM
module is an obvious add-on to our platform.
SaaS management:
This is an emerging category that helps businesses manage all the SaaS and recurring spend in
the business. When the purchase lifecycle of these recurring expenses is happening on Airbase,

there is an opportunity for us to build the tools to help our customers to track the expense at a
deeper level.
Procurement management:
This is another emerging category where certain companies essentially act as an outsourced
procurement team to help companies manage the long tail of recurring spend in their business.
Collecting contract meta-data like renewal terms, overage fees etc. as the spend flows through our
system opens up the opportunity to address this problem.
Invoice factoring and similar offerings:
Once we have sufficient scale, it should present an opportunity for us to partner with lenders to
provide factoring or related products.
Of course, we have to earn the right to enter any of these categories. We’re currently focused on becoming
the leading spend management platform. We may not get to execute on any of these adjacent
opportunities for many years. We will likely partner in the near term to help our customers solve these
problems. But, depending on how things play out, the upside potential is very large.
1 Product, 9 Countries, 96 Employees

Airbase's Series B memo

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