Spend management has become one of the hottest verticals in fintech globally. Hardly surprising given the massive pain point — most companies still rely on clunky Excel sheets or legacy IT solutions, like Coupa or Concur. If you have worked in a corporation, you know what we are talking about… Vast amounts of time and energy are spent on manually processing card transactions, expenses and the related records.
The latest technology helps to drastically streamline this process, eliminating errors, repetitive tasks —easily reducing the total cost of processing an expense by up to 5x. That’s why even large, historically slow-moving corporations have started adopting these new solutions.
And the vertical is massive, worth more than $400B globally, growing 11% year-in-year. No wonder many investors have taken note of the market’s potential and a number of disruptors (Soldo, Spendesk, Pleo, Payhawk, Brex, Moss, Divvy, Ramp, and many more) have raised >$4B since 2017.
During the recent pandemic, we were repeatedly told to avoid crowded spaces. This advice normally applies in investing as well. So on the surface, spend management may seem a rather counter-intuitive choice. With this in mind, what makes us so excited to invest in Yokoy?
The spend management market is undoubtedly super crowded. But not all of the competitors are created equal. The complexity related to local tax and accounting systems, products (e.g. expenses, invoices, payments) and client segments (e.g. startups, mid-sized businesses, large enterprises) should make clear that a one-size-fits-all solution is unlikely to succeed.
Startups and small-scale companies are often a logical first step in entering a new market. They are not constrained by a variety of legacy systems and are notably easier to sell to than large corporations.
This is the path almost all challengers have taken, rightly offering what these customers are after: out-of-the-box solutions with a speedy online setup and self-customization options.
Spend management for larger companies is a different ballgame. A simple out-of-the-box solution (e.g. Spendesk, Pleo) works well for a startup with 10 card users, but is not fit for purpose for a global multi-entity company with a number of existing IT systems.
These larger companies look for different:
Larger organizations are complex, but they present a tremendous opportunity. Not only is the midsized company and enterprise segment larger than the small business segment (in developed economies)— the unit economics are just so much better.
With more users who spend more and churn less, larger companies are the ultimate prize in the spend management market. However, selling to this market can be a challenge, but the Yokoy team nailed it. The critical success driver has been their product, which is:
The rapid revenue growth has validated many choices made by the Yokoy team. Combined with strong margins and ample opportunities to further expand the product offering in multiple directions, we believe they are well-positioned to become a global leader in the spend management market.
Strategic choices are important, but the most important factor in the success of any business are of course the people. Maybe it is not professional to say—but we love the founding team.
The five founders, Melanie, Philippe, Devis, Lars, and Thomas are highly complementary with the right mix of technical and commercial skills, as well as previous scale-up experience. All outstanding in their own field and area of responsibility. Rarely do we see a CEO at this early company stage to focus entirely on strategy because the co-founders take care of perfect operations.
We have closely followed Yokoy for over a year during which they expanded to 3 new countries. So we could witness a track record of strong execution coupled with the ability to attract other A-players into the organization to help them scale at pace. Yokoy leverages the increasing momentum and talent in Switzerland's broader tech ecosystem. And the close ties with ETH Zurich is an additional unfair advantage in the current war for developers and engineers.
We have been waiting for a looong time to make an investment in the spend management space. None of the opportunities before ticked all three checkmarks. This is why we are now even more excited to back the “Yokoylinis” from Zurich.
And we are in good company. Together with Sequoia, we are entering Yokoy’s rocketship at the Series B stage. Can’t wait for the journey ahead!