Ramp Secures $150 Million Debt Facility with Goldman Sachs

Ramp, a company operating within the corporate spend sector, has announced a new $150 million debt facility provided by Goldman Sachs. This funding comes after the startup’s previous successful fundraising rounds, including a $30 million Series B in December 2020 and a $23 million Series A earlier that year.

Financing Growth and Product Development

According to Ramp co-founder and CEO Eric Glyman, the company previously funded customer spending directly from its own balance sheet. As the customer base expanded, this approach would have become increasingly challenging and less efficient. The new debt facility addresses this, enabling continued growth.

The corporate spend management market is experiencing significant expansion, with companies like Ramp, Brex, Airbase, Divvy, and Teampay vying for market share. These businesses typically offer credit to companies via charge cards, generating revenue through interchange fees and, in some instances, software subscriptions.

Strategic Use of Funds

Glyman stated that the newly acquired credit facility will primarily be used to accelerate product development. Access to revolving debt will liberate capital previously allocated to funding customer spend, allowing for increased investment in software enhancements.

Demonstrating Strong Performance

Ramp has demonstrated substantial growth, reporting a 47% increase in transaction volume from November to December. While this figure doesn't represent revenue directly, it strongly suggests a corresponding rapid increase in revenue, given the company’s monetization model.

The company surpassed $100 million in total spend in the fall of 2020, a milestone achieved within 18 months of its founding. This data point allows for estimations regarding the company’s current spend base.

Focus on Cost Savings

Ramp differentiates itself through a software package designed to help customers identify and eliminate unnecessary expenses, such as recurring payments and wasteful spending. This focus on savings is a core component of its value proposition.

The Evolving Competitive Landscape

Ramp’s competitors are also integrating software solutions with their corporate card offerings. A key question facing the industry is whether these companies will ultimately begin charging for their software layers in addition to the credit services they provide, as Teampay has already done.

Such a shift would likely expand the total addressable market (TAM) for corporate spend management solutions.

Parallels to Venture Capital

The current dynamics of the corporate spend market mirror the evolution of venture capital over the past decade. Historically, venture capital was scarce and concentrated, giving investors significant leverage. Today, abundant capital has led to more favorable terms for startups and increased support services from venture firms.

Similarly, in corporate spend, simply offering credit is no longer sufficient. The real competitive advantage lies in the software that enhances the value of the revolving charge card.

Looking Ahead

The growth trajectory of Ramp, encompassing customer acquisition, spend volume, and revenue generation, will be closely watched. It will also be interesting to observe how competitors respond to Ramp’s latest funding announcement with news of their own. The corporate spend management space is proving to be a dynamic and engaging area of innovation.