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Expense Management Enters More Sustainable Niche-Focused Phase

If you’ve been following the expense management space like I have, you’ve most likely noticed that we are entering into a new, more sustainable phase in the industry’s evolution.  A key marker in this progression is the recent $92 million capital raise by Coast, a spend management startup laser-focused on fuel and fleet spending.  Contrast this with the recent challenges faced by more general spend management startups like Brex and which have run into significant headwinds.

It was around 2018 when many of the once-hot spend management startups burst on the scene.  Brex launched what they touted as the first corporate card for startups, and plastered the city of San Francisco with billboards and bus-stop ads, their marketing budget turbo-charged by over $1.5B in funding.  Other competitors like Airbase and Ramp quickly emerged and the space became increasingly competitive.

The meteoric initial growth of these companies was partly driven by their pricing model: free.  Brex, Ramp and the like monetized their business through interchange, essentially taking a small piece of each transaction that flowed on cards issued through their platform.  However, the end of the “growth at all cost” business model came around 2022, when it became clear that these companies could not rely on interchange to build a profitable business.  Many of the leading providers scrambled to impose a fee-based pricing model to augment their slim interchange margins.

Flash forward to this past year, and profitability remains elusive.  As a result, the layoffs have come fast and furious.  Brex announced a 20% layoff just this past January. shed 15% last December.  Navan (born TripActions) let go 5% of their workforce in December as well.  Clearly there has been a reckoning for these once-high flying startups.

With the emergence of Coast, we’re seeing the industry’s next phase: a natural evolution towards more specialized solutions that leverage both software and access to industry-specific data to provide unique value and justify additional user fees.  Coast appears to have taken many of the key features from general spend management providers and then layered data-enabled capabilities specific to the fleet management segment.

As with other general providers, Coast offers standard features such as custom MCC controls, real-time card issuance, and granular spend controls.  But they also have built in additional capabilities specific to fleet management such as notifications when fuel purchases exceed a specific vehicle’s tank capacity, and automatically declining a fuel transaction when the vehicle is far away from the specific gas station.

It appears that the heyday for general spend management providers has peaked.  I suspect we will see more niche-specific providers emerge in other segments where dedicated features and proprietary access to data can offer competitive moats and justify sustainable business models.