Divvy, a corporate spend management company headquartered in Utah, has revealed the successful completion of a $165 million funding round, resulting in a company valuation of $1.6 billion. According to the company, this new funding was provided by investors including Hanaco, Schonfeld, Whale Rock, and PayPal Ventures, in addition to existing investors.

This substantial investment represents a further significant capital injection for Divvy. The company previously secured $200 million in funding back in April 2019. TechCrunch previously reported that this earlier round established Divvy’s valuation at approximately $700 million, meaning the current deal signifies more than a doubling of the company’s worth.

Divvy is part of a growing wave of innovative technology companies emerging from Utah, contributing to the state’s increasing prominence within the broader startup ecosystem. Companies like Podium share a similar trajectory, while Qualtrics represents an earlier generation of successful Utah-based tech businesses.

The corporate spend management sector – encompassing corporate cards and expense management software – is currently experiencing considerable activity as organizations seek to update their financial systems. Divvy’s new funding arrives alongside similar recent investments made in competing companies, highlighting the dynamic nature of this market. Let's examine Divvy’s competitive landscape in light of this new funding.

Competition

Several weeks ago, Ramp, a company also focused on corporate cards and related software, publicized a $30 million funding round and reported that its users had processed $100 million in transactions within its first year and a half of operation. Concurrently, Divvy informed TechCrunch of a 120% increase in its customer base and a growth exceeding 100% in total platform spending during 2020 when contrasted with 2019. Brex, a fellow competitor in the corporate spending market, chose not to disclose its performance figures at that time.

Divvy’s success in securing substantial funding, considering its recent growth trajectory, is understandable. However, the consistently strong expansion demonstrated by numerous companies within this industry is particularly noteworthy. Following coverage of Ramp’s funding in December and the sharing of Divvy’s statistics, both Airbase and Teampay proactively provided their own data.

Teampay reaffirmed its previously reported metrics from October, stating a 320% increase in annual recurring revenue (ARR) and an 800% surge in total spend since its Series A funding round a year prior. Airbase highlighted a 250% growth in ARR – equivalent to a 2.5x increase – and a 700% expansion in payment volume on an annualized basis.

Consequently, Divvy, Teampay, and Airbase are all experiencing rapid growth, albeit through slightly different business models. Divvy and Ramp provide their corporate spending tools and software at no upfront cost, earning revenue through interchange fees on transactions. Teampay and Airbase also benefit from interchange revenue, but additionally charge fees for access to their software platforms. This dual approach generates income from both spending volume and software subscriptions.

This leads us to Divvy’s recent announcement. While I generally refrain from directly quoting press releases, a particular statement in this instance is worth highlighting:

Divvy intends to make significant investments in its product development? That is a logical step. However, the decision to offer its software perpetually without charge appears unusual, especially given that several competitors are implementing subscription fees. Why wouldn’t Divvy follow suit?

Only time will tell, but it’s evident that the investments made in startups like Divvy have been directed towards a market exhibiting substantial demand. Therefore, further developments and announcements within this sector are anticipated throughout 2021.