This article was originally published as part of the Friday File for members of the Stock Gumshoe Irregulars on October 8. We’re opening it up to all readers now, but it has not been updated since it was first posted a month ago. There has not been a huge amount of news from the company since this article was posted, but they will be reporting earnings next week, on November 15.
Alexander Green has a new teaser pitch out for his Oxford Microcap Trader, one of their “upgrade” newsletters for which they advertise a “retail price” of $10,000 (currently being sold at $1,975, no refunds, hopefully they don’t sneak a $10,000 autorenew in there to blow up your credit limit). The only other pitch we’ve looked at from this service is the Chinese wearables company Zepp (ZEPP), which I considered a “meh” idea at the time, but let’s see what he’s got to pitch this time around.
The general theme of the “presentation” is that Green likes to take an idea that he knows works, a proven business or business model or a big, successful stock, and then look for the “microcap match” to go with it… this is the intro:
“Forget About the Fortune 500! Investors Who Want to Make Big Money in the Markets Are Now Trading…
“Alexander Green’s ‘Microcap Matches’
“These Unknown, Low-Priced Stocks Have Grown as Much as 105 Times Faster Than Fortune 500 Companies.”
And then blah blah blah, these are a bunch of small stocks that grew much faster than the big stocks in their industry, lots of shiny graphs with big numbers… and we finally get to the part where he hints at his new specific stock idea, which is what we’re interested in. Here’s a little excerpt:
“This $20 stock – which I’m calling Microsoft’s Microcap Match – checks all the boxes in the first part of my Dream Microcap Checklist.
“And I believe it could grow 1,635% faster than Microsoft in the year ahead.”
That checklist? There are four entries on it, he sums it up here:
- Three Consecutive Quarters of Revenue Growth
- A Maximum of 10 Analysts
- At Least Two Major Partners
- A Market With a 10% CAGR
- 20% Year-Over-Year Revenue Growth
- Price-to-Book Ratio < 5
- 100% Institutional Buying Surge
And then goes on to drop the hints as he goes through the checklist… here’s some of that:
“I like companies that’ve boosted their revenues over the last three quarters.
“Well, this company’s done that for the last six quarters.”
And he includes a chart showing the revenue growth for the past six quarters, from something like $85 million in the first quarter of 2020 to almost $120 million in the second quarter of 2021.
He also says that they’ve beaten analyst estimates for five of the last six quarters, and that it hits the “few analysts” criteria, with only three analysts covering the stock.
And we’re given some clues about its partners…
“… this company has FIVE major partners.
“IBM, for one, has signed a licensing agreement to use one of this company’s tools to help clients build and deploy business applications.
“Better still, this firm has inked deals with the four biggest software companies in the world.
“Enterprise software company Salesforce uses its technology to automate its workflows and business processes.
“This firm also streamlines business operations for SAP, the $191 billion German tech giant.
“Oracle – the world’s second-largest software developer – uses this company to optimize its clients’ ventures.
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just click here...“And this company recently became a gold-certified partner to Microsoft, the largest software firm.
“That puts it in the top 1% of Microsoft’s elite partners worldwide.”
How about the growth of the industry?
“… this firm boasts a foothold in an industry that’s expected to grow at a CAGR of 21.3% from 2020 to 2026.
“That’s more than double my 10% minimum.
“Statisticians expect it to be bigger than 5G, blockchain, cloud computing and artificial intelligence combined.”
Why on earth would statisticians know which industry is going to grow fastest over the next five years? Yeah, I don’t know the answer to that question, sorry.
But what he’s talking up, and this is eventually revealed in the presentation, is the “Internet of Things” — which was one of the hotter buzzwords a decade ago, though has been somewhat eclipsed by other story themes like artificial intelligence, cloud computing and blockchain. Still, it’s a real trend — more and more stuff connected to the internet, more “smart” sensors and appliances and devices all talking to each other and making the world a little more efficient, or safer, or just more fun.
And what he’s specifically focused on is the industrial IoT trend, particularly factories that are growing more connected and more efficient.
He includes a quote from McKinsey that “Factories are likely to have the greatest potential impact from IoT use – as much as $3.7 trillion a year,” and then moves on to imply that his little secret stock is a big potential winner…
“I believe the Microcap Match I’ve identified could be the biggest beneficiary of this $3.7 trillion windfall.
“It just rolled out a product that could become the leader of this industry.
“I wouldn’t be surprised if you started seeing this software everywhere from the Tesla Gigafactory to NASA’s Kennedy Space Center.”
OK, so it’s something in the software space, something to do with Internet of Things, and it has a new product for industrial applications. More hints on that:
“… this software solves the #1 biggest problem facing the manufacturing industry: surprise downtime.
“When machinery fails, entire production lines can grind to a halt.
“Before the Internet of Things, you could address this problem in one way:
“Let the machines break and call a maintenance person to fix them… and lose about $2 million in the four hours it takes to get things up and running again….
“But if these factories implement my pick’s proprietary IoT software, it’ll be like equipping all your machinery with X-ray goggles.
“Production supervisors will be alerted as soon as a machine even starts to malfunction.
“And they’ll be able to schedule a repair during non-peak hours.
“By harnessing these types of software, companies have seen their revenues surge by 28% on average.”
OK, that’s just a reference to a study done seven or eight years ago, for anyone using any IoT solutions in any manufacturing situation — there’s a little story about that here in a Business Insider article from 2016, in case you want some context.
I think we can probably assume that yes, IoT devices and technologies can help increase output, automate more processes, improve maintenance scheduling, and make factories safer and more efficient… on average. Whether that means anything for the specific product or company being teased, we’ll have to decide later.
Other hints…
“… one of the world’s most powerful militaries relies on its patented software…
“… its revenue has skyrocketed more than 600% since 2009…”
And the standard mix of boilerplate disclaimer and hype:
“Now, listen, nobody can see the future – not even me.
“I would never tell anybody to put all their savings into one play.
“That said, this might be the best microcap I’ve ever recommended during my career at The Oxford Club.
“Its revenue is up not 20% year over year – but 38%.
“It’s trading at just three times its book value.
“And it recently saw its institutional buying surge 913%. That’s about 12 times higher than the daily average.”
He mentions that Renaissance Technologies “is holding nearly $10 million worth of shares” and is one of the most successful hedge funds in the world, which is a throwaway line but does at least provide a clue (Renaissance is a quant fund, in and out of thousands of stocks every year, so a particular holding of theirs should not provide any fundamental signal of a company’s long-term prospects).
And better yet, he name drops Cathie Wood, too… Ark Investments has apparently bought at least a little bit of this stock…
“Will this stock be Cathie’s next pick that skyrockets?
“I don’t have a crystal ball, but I can tell you this much…
“She’s betting $5 million that it will.”
So who’s our secret microcap from the Oxford Club today? This is Magic Software (MGIC), an Israeli tech company that harkens back almost to the birth of the personal computer age — they were a pioneer of “no code” business software integrations in the 1980s, though I don’t think they called it that at the time, and they’ve been reorganized and restructured a couple times, and have changed the names of their products and updated them and moved to the cloud, but they are still basically focused on integration — building systems that allow the dozens of different software and hardware platforms in an organization to be monitored together, or in some cases to talk to each other. That’s my impression from a distance, at least, I don’t have experience with their products and this is the first time I’ve looked at the company.
If you want to call this a “microcap match” for Microsoft, it is interesting that this company is almost as old as Mr. Softy, and has its roots in some of the same business-focused software platforms. This is one of the companies that surged in the dot-com boom of the late 1990s and almost went bankrupt in the aftermath, getting into the $30s in 2000 (reaching a valuation of 15X sales, back when that was an unheard-of crazy bubble multiple), and falling well below a dollar by 2002. Over the past decade they’ve been far more stable, with steady business from big Israeli and US customers, and with some decent growth, but nothing that really has gotten to the level of “exciting.”
MGIC does have just three analysts on Wall Street, all of them rate it either “buy” or “outperform”, and they have an average price target of $22, versus the current price of about $20. I wouldn’t call it a microcap, but it’s certainly on the small side, with a market cap just under a billion dollars, and it has had respectable revenue growth (averaging about 16% for five years now), though hasn’t turned that into much earnings growth yet. The stock does indeed trade at close to 3X book, as teased, it’s about 3.6X book value at the moment, and has a forward adjusted PE ratio of about 21, so it’s slightly cheaper than the overall market (trailing adjusted PE is 25, or close to 40 if you use GAAP numbers and don’t ignore stock-based compensation like most analysts still do).
And they pay a solid dividend, which is always nice to see with a small cap company. They pay the dividend twice per year, and if they continue at the current pace their yield would be about 2.3% — the dividend has recently been growing, but it has gone both up and down in the past decade, their policy is to distribute up to 75% of net income as dividends. That’s an encouraging sign of fiscal discipline, and a signal that this company is not very capital intensive, it doesn’t need to reinvest all its money to buy more growth… though it’s also probably an indicator that nosebleed growth is unlikely.
Magic’s new industrial IoT offering, which seems to be what has caught Alexander Green’s attention and may provide the next avenue for growth, is called FactoryEye, launched earlier this year as what they call a “Industry 4.0 Solution” for manufacturers.
This is a pretty quiet company, with solid growth that seems to be about half organic, half from a steady stream of acquisitions, as they buy IT consulting companies in order to get more employees or customer access, or companies with particularly software products that slot into their offerings. That can work well as long as they have solid management at the top level to integrate all these acquisitions, and as long as their customer relationships are generally sticky and recurring — it’s not exactly a Software as a Service (SaaS) business, they’re not really firm subscriptions, but they do have what sound like pretty predictable recurring relationships with major customers, particularly in the US and Israel (in their materials, they say they revenue is “80% from repeatable business based on long engagement cycles.”)
And yes, the company has grown quite dramatically over time, from $55 million in revenue in 2009 to $425 million over the past four quarters. That’s a very respectable compound annual growth rate (CAGR) of about 19%. If you account for the dilutive effect of options and using shares for acquisitions, looking at revenue per share instead, that number is lower but still pretty good, about 15% a year. The challenge is that this growth on the top line hasn’t really led, at least at this point, to meaningful growth on the bottom line — earnings growth has come in at less than 10% a year.
Which might well be fine — if we have a company that’s a great serial acquirer, and they’re just emphasizing growing the cash-generating businesses by reinvesting before that money hits the earnings line, it can work out fine… that’s how you get a conglomerate that quietly builds into a colossus in niche industries, like TransDigm (TDG) or Constellation Software (CSU.TO). But not every company that follows that kind of strategy is successful, of course, that’s largely a matter of management focus and skill in capital allocation and an ability to continually find bolt-on acquisitions that expand the company’s footprint without getting them out of their sphere of expertise. I don’t know enough about Magic Software to have a strong opinion on whether that’s a possibility here. Mostly, what I lack here is any real understanding of how important their product is to their customers, and whether their core business is keeping up with change or being disrupted.
What do I know? Well, if it’s being disrupted by competitors, it’s happening very slowly, and they’re still able to grow the business, partly because they’ve made two or three acquisitions a year for more than a decade without major shareholder dilution. It’s one of those stocks that looks perfectly reasonable, and if you’re inclined to study tech companies it’s probably worth the time to research — it’s basically an IT services contractor at its core, and that’s a very competitive business, but with their strong customer relationships and some specialized software platforms, like this new factory IoT software, they could continue to distinguish themselves and grow.
And yes, the stock is fairly hidden, just because it’s so small, and has had a little surge of earnings growth recently that, if sustained, could start to get them more attention.
So where do I come down? I’m willing to open a small position here and keep an eye on this one, I don’t see Magic Software as likely to dramatically outgrow Microsoft anytime soon in any fundamental way (Alexander Green says he sees it growing “1,635% faster than Microsoft in the years ahead,” whatever that means, but Magic is not very likely to do dramatically better than Microsoft’s likely 10-15% revenue growth and 15-20% earnings growth unless their acquisitions get a lot bigger — and that’s OK), but certainly the potential is there for this to compound into pretty solid long term growth if they continue to add new products and have success with them, like FactoryEye, and keep chugging along at anything similar to their pace over the past decade.
They’ve had a stable enough path to give me some confidence, though the valuation is a little more stretched than it was a few months ago, so I’m going in here with an initial position, roughly 0.25% of the portfolio, and will watch and learn and see if I want to increase that over time.
That’s my take on MGIC, at least, and it’s a company that’s been around for a very long time so maybe some folks out in Gumshoeland have experience with this one — if you’ve got a take on Magic Software, or anything I should be looking for in terms of skeletons or reasons for optimism, feel free to shout it out with a comment below. Thanks for reading!
Disclosure: of the companies mentioned above, I now own shares of Magic Software. I will not trade in any covered stock for at least three days, per Stock Gumshoe’s trading rules.
Hey travis hope ever Is good I bough glxy early in the the 18 and after btc decline i have been adding in the low 20 ( not working out so far) do you know about any news or investor sentiment changing towards this stock since btc is heading slowly upwards and the stock declining
Prices for Bitcoin and Ethereum are the biggest driver for Galaxy and most of the other crypto-related businesses, but that connection has gotten less direct in recent weeks — most of the stocks that I look at in this space, including Galaxy and Voyager and Coinbase, are down a bit for October while Bitcoin is up. That tells you something about investor sentiment, I suppose, though sentiment also turns quickly sometimes. I don’t know of any other firm and immediate reason for that slight disconnect in the past couple weeks. There’s a lot of short interest and it’s a volatile name, with pretty low float, so it might continue to be awfully bumpy.
Yeah it’s really under the rader only thing I could find were some older youtube videos on it would you ever consider buying mara( best miner in my opinion) I got caught of guard on mara last February and sold…( still learning)
I’m not crazy about the miners, I don’t understand enough about any advantage they have in the arms race — I’ll generally take cryptos themselves instead of leveraged cryptos, mostly because I don’t really want to bet big in this niche.
BITO is doing OK so far
I purchased MARA about 52. glad it’s finally moving. Got clipped on Gilt….5k…
Hope everything is good! Sorry typo
Bill O’rielly /Alex Green what happened to their $3 Hon Hai Foxconn pitch for a single stock retirement buy.. Anyone know if Foxsonn is going to send
buyers to the BEACH or Mountains? thanks for some wisdom.
DeWitt
MGIC is already at 23+ and low volume. Why does every one wait until a stock peaks to give it out???
Travis responded to a similar question by @cjagadis above. When the stock was first covered on this site on 10/8, the closing price on that day was $19.75. I don’t know how long before 10/8 The Oxford Club recommended it to its paying members but the stock wasn’t doing much at that time.
If you’re inclined to “catch up”, there’s a reasonable buying point at the gap between 11/1 & 11/2 ranging from $22.50 to $23.03.
If you’re on the patient side, you can watch the stock till the company reports on 11/15 to see if Oxford did right by its members.
A similar company here is #PLUS as well as Workato (still pre-IPO). I like both and hold PLUS now and will get Workato when it IPOs.
Travis-How did you manage to get into MGIC at $19.60? It is trading at $23+. Maybe the trade was done much earlier.
As noted at the top, this is a rerun of an article that ran for the Irregulars a month ago.
Thanks, Travis. My bad
Thank you Travis. I had the same question and appreciate the clarification too. Should have read the note. On a separate note, I am learning a lot from your detailed analysis from your posts. Keep up the great work
Wondered what anyone would think of TKXHF. Has a ridiculous market cap of $7.6 million.
At least they have an interesting website but don’t know enough about technology or business to determine if this has a future, or maybe is it even a scam ?
Get well a.s.a.p. Best!
Get well soon…love your articles! Learning from them!
How can we trust any of these people that say “this is the one stock to buy”. I am starting to believe they are all shills for the companies. I am referring, also to Hon Hai from Alex Green. They were supposed to build 7 or 8 factories in the US. I don’t think any were built and Hon Hai has languished for years. I saw the stock go from $3 to $4.18 but then saw that my shares were reduced by about 20%. “What a bullsh*t Deal”
Never trust a marketing pitch, their incentive is to wow you enough that you’ll pull out your credit card and subscribe, not to be honest or open about the risk and the tradeoffs that an investment might have. And even if you subscribe to get the fuller and hopefully more nuanced report, it’s often still the huge over-hyped promise from the ad that sticks in the back of your mind.
Doesn’t mean stocks that are pitched that way are bad investments, just that you have to reset your expectation based on your own research.
The way most of us learn those lessons and build up the ability to make rational investment choices is by making mistakes… hopefully as the years go by, the mistakes become less frequent — they never go away, the price of winning is accepting some losses, but they can become more rare and less frustrating.
Hey Travis get well soon! I do enjoy your articles even though I am a speculator and nar one of your articles focuses on any stocks I have bought. I look for beat up blood in the street all time low price stocks with potential to yield a profit. Yeah, I guess I am a black sheep stock investor. Wall Street would be disgusted at the type of investing I do. Yet on the bright side I have made money with my strategies I use to invest. I think you are one of the wittiest writers in the market of stocks. Keep up the good humor and carry on my brother!
Thanks Albert… following your own path is the only way to get above-average results, I hope it continues to work out for you.
David Barrett Unsubscribe
Wed, Nov 10, 11:04 PM (9 hours ago)
to me
Today is a big moment in Expensify history. We have become a public company and we owe the success of our business to you, our millions of loyal members who have stuck with us through the years. Every receipt scanned, every invoice sent, bill paid, card swiped, and every person to whom you recommended Expensify, propelled us one step further and now here we are, 13 years later as a public company.
I want to share with you my Founder’s Letter that I wrote for the IPO which can be found in our S-1 filing. Enjoy, and thanks for your trust and confidence over the years, we will continue working our hardest to be worthy of it!
The next 100 years are going to be nuts.
Global population is going to peak, and then go down—possibly forever—inverting the labor pool. The worst effects of climate change will be felt, and (with enough effort) begin to subside. Automation will wipe out millions of jobs, potentially creating a hyper-concentration of wealth that would exacerbate social tensions around the world. VR and personal VTOL travel will radically alter where we live and work. Miniaturized surveillance and data aggregation will challenge all notions of privacy, while quantum computers wipe out all modern cryptography. The Singularity will (maybe?) occur. We will become a multi-planetary civilization.
To repeat, the next 100 years are going to be nuts.
These vast climate, social, and technological changes are so daunting, it’s tempting to bury our heads and pretend they will only happen to somebody else. But odds are, if you are reading these words, you are going to be alive to witness the most extreme effects of these trends—and if not, your children certainly will.
This stark reality has weighed on me, for a long time. Our world is incredible, mysterious, diverse, and beautiful. But so fragile, and pushed to the brink. I am convinced we can get through this, and leave everything for our kids better than we found it. If enough of us help.
Expensify is how we help.
I’ve been through the startup grinder a few times, and the last time left me a modest chunk of change in my pocket, while I was living in the Tenderloin in San Francisco. And while it can be paralyzing to think about these huge, systemic problems, I wanted to do something for the homeless neighbors I saw on my street every day as I walked to my comfortable job.
So I set out to build a private label electronic food stamp card I could hand out to anyone in need, that could be used once a day, up to $10 per day, only at restaurants that didn’t serve alcohol—with every purchase billed back to me. I reasoned that while I couldn’t solve hunger globally, it was within my power to do it on my street (but only if it was easy enough to manage; I had a day job, after all).
The technology, as is usually the case, was the easy part: I built a decentralized ACID-safe, Paxos-based, WAN-clustered self-healing database using blockchain synchronization (before Satoshi published his first paper on Bitcoin), and prepared to drop it on to Visa’s ISO 8583 private internet to print a stack of instant-issue cards I’d keep in my back pocket to hand out as needed. The hard part, as is usually the case, was getting permission from the many gatekeepers involved.
When I took this idea to the banks, they were like… what? Where is the business model? What about PCI compliance, money transfer licensing, KYC, AML, and a list of TLAs as long as my arm. They were very clear: this is too weird, and too risky, I’m out.
This led me to think, “Hm… I need to sound safe, and boring. What is the most boring application of these cards I can imagine… Aha!”
A corporate card, as a Trojan horse for charity.
I went back to those banks and said “Forget all that. Instead, I’m going to make a corporate card that small business owners can give to their employees, that enforces expense policy such as spend amounts and merchant authorization, at the point of purchase, but then bills every purchase back to the owner, so they keep the rewards. I call it: The Expensify Card.”
It was the same technology I needed to feed people on my street, but presented in a way that would go down easy. They all murmured that this felt safe, and boring, and they hated their expense reports too, so let’s do this.
A lot happened since then.
The first Black man was elected president. Don’t Ask Don’t Tell was repealed. The #MeToo movement held previously unaccountable men to account. The economy tanked, then boomed. America was Made Great. Racist ideology spiked. George Floyd was murdered. Walls were built, old alliances faded, mutual distrust compounded. Wildfires choked our cities, while a virus choked our lungs. The wars droned on, then pulled out. Our capitol was directly attacked for the first time in centuries. Democracy itself came under fire.
Throughout it all, our business grew. We surfed the tidal waves of the iPhone launch, the consumerization of IT, the rise of social media, and in a shockingly short time went from a tiny joke startup ignored by incumbents, to being the incumbent. But our incumbency is very different than the one we replace.
A new kind of incumbent.
Our greatest innovation isn’t our product, it’s the company itself. People are often surprised to learn we have only 140 employees, with no dedicated managers, compensation decided by universal vote, and everyone deciding their own personal career path. We don’t do it to be iconoclastic. We do it to achieve results. Fundamentally, we think shareholders are best served when we build a company that unlocks the full potential of employees by empowering them to:
Live rich. We define this as having comfortable means, and the time to enjoy them. To be excited to go to work, empowered while you are there, and energized to return home to be with those you love. For every boring, average day, to be awesome.
Have fun. Not Xbox fun; bucket-list fun. We make work inherently fun by surrounding everyone with the finest possible peers, and providing them and their families incredible social experiences that exceed anyone’s individual imagination.
Save the world. When every employee has a solid financial baseline and work/life balance, and is making brisk progress through their bucket list, they can truly dedicate the time and resources to focus on solving the biggest problems of the world: enabling everyone to live rich and have fun, not just a lucky few.
The result of all this is a company that doesn’t just generate value for shareholders, but also produces compounding social good for the world at large. We have fully melded our charity model directly into our business model, so each supports and grows the other.
And we never forgot our original mission. Every swipe of the Expensify Card makes a small donation to our Expensify.org charity wing, which has dozens of active campaigns addressing homelessness, recidivism, climate change, youth issues, and—the inspiration for it all—hunger. Just one of those campaigns has already helped feed thousands of families on SNAP assistance, as well as encourage vaccinations amongst our most vulnerable population.
Expensify.org grows in lockstep with Expensify, meaning our business success directly funds our charitable activities. We firmly believe that doing good is good for business.
What we’ve learned so far.
We are very proud of what we’ve done over the past thirteen years. I truly believe that Expensify is the best, easiest to use, most powerful business payments superapp in the world. We are used by more businesses than any company we consider our peers, across a huge range of industries, company sizes, countries, and currencies. And in the process of building it, we learned a lot. Those lessons are too numerous to list here, but to summarize some highlights:
The market for expense management is enormous. Literally every business on the planet does expense management; not all businesses have revenue, but all have expenses.
The market for expense management is almost entirely untapped. There are over 100 million businesses in the world, but less than 0.1% actually use some form of modern expense management. Excel/email—or a physical, paper envelope—are our primary competitors. Everyone else is a rounding error.
Expense management is a company’s first accounting process. Way before you have an accountant or an accounting package, you’ve figured out some way to keep track of your receipts.
Expense management scales gracefully. The employee experience for expense management—swipe a card, scan a receipt—is remarkably consistent for sole-proprietors up to the Fortune 500. What back-end accounting differences that do appear at different scales are neatly contained to a few people in each company, invisible to the average employee.
Expense management is the strategic high ground of the back office. The primary job of expense management is to “normalize” the chaos of the outside world, to clean up all financial data to be ready for the accounting team. We started calling this “preaccounting” (a term the industry has since adopted), which means expense management is the nexus point between rank-and-file employees and the general ledger system, HR system, payroll, CRM, project management, invoicing, bill processing, single sign-on, and basically every back end system you have.
Expense management is extremely high margin in the SMB. Despite offering an incredible range of functionality at no cost to the customer—often replacing a basket of competitors at a fraction of the price—enables us to monetize employees in the SMB at approximately 3x the average revenue per user in our target market than is possible in the enterprise. Our unique bottom-up business model enables us to thrive where others struggle, meaning there’s minimal competition, minimal margin erosion, and better than enterprise-class customer retention in the SMB.
Expense management functionality is a superset of AR/AP. Though historically seen as separate industries, the expense report submission, approval, and reimbursement process is far more complicated than any other accounts receivable/payable process. This is why we are able to offer a single platform to do all these features in one simple app: an invoice is just a simplified expense report you send to a client; a bill is just the other side of an invoice. A paycheck is just an expense report that’s automatically submitted for a fixed amount every two weeks. And so on. All of these synchronize with the same ledger system, and pay from the same bank accounts. Expensify isn’t an expense management platform, it’s an all-in-one business payments platform. It’s one app, that’s free to start, and easy to upgrade.
Expense management grows virally. Every time you submit an expense report, you put us in touch with someone closer to the decision maker than you—your boss, your finance team, etc. This is why we give employees a free expense management app: we turn every expense report into a highly targeted endorsement, from a chain of trusted employees, directly to the buyer. That same viral loop works between accounting departments as well (because every invoice is sent from one accounting team to another), and between employees (because personal money requests often go from an employee in one company to an employee in another). No matter which feature is used, members organically promote Expensify to their friends, co-workers, bosses, employees, vendors, and clients—at zero marginal cost to us.
The SMB expense management market is like the land that time forgot—a huge, high margin, largely untapped “silent majority” of the market that is scraping by with antique solutions. And we are the ones that have created a single, powerful, easy-to-use tool with a viral, word-of-mouth model to capture and modernize it at scale. But expense management alone was never the full plan, just the foundation for what’s to come.
What we’re doing now.
Expensify is a dynamic platform that changes a little every day, and a lot every year. Every change is a step down a long path to unify all of consumer and business payments into a single household-name superapp that grows rapidly, profitably, and scalably at zero marginal cost through viral use cases. There are a huge number of parallel initiatives underway to achieve that vision, but to highlight a few of my favorites:
We serve two bosses: your boss, and you. Making a business purchase with your personal card is akin to lending money to your company at zero interest, and then acting as your own repo man to get paid back. It’s not just a company expense: it’s your expense, and it’s our job to get you paid back. Our novel “individual ownership” legal structure deftly handles the subtle dynamics of joint data ownership in a business/personal context, as well as carefully isolates your personal data (such as your credit card) from company data (such as your corporate card). You own your Expensify account, not your boss. And we work for both of you, equally.
We are blurring the line between work and home. Because you own your individual account, you take it with you when you change jobs. This makes our design more like LinkedIn or Facebook than Salesforce or Concur; joining a company is as simple as joining a group—company groups, community groups, church groups, our architecture treats them equally. Join as many or as few as you like, and leave whenever you want. You are in control. Expensify is a single app that works equally across all facets of your life, and our massively scalable blockchain-synchronized database allows everyone to securely swim side by side in the same data lake.
We are adding end-to-end encryption with quantum-safe tech. Our individual ownership design and bottom-up business model make privacy even more paramount than they would normally be. However, quantum computers threaten to undermine the RSA/DH algorithms that underpin all modern cryptography. Accordingly, we are using the latest in lattice-based public key encryption to protect employee communications from advances in quantum computing.
We are gradually migrating to a chat-centric design. Just like you can’t talk to yourself, you can’t pay yourself: every payment is a conversation, to resolve some kind of financial tension. Expense management has always involved a complex conversation between employees and companies, and we are doubling down on that inherent truth with a highly-simplified chat-centric design that feels like some kind of WhatsApp/Venmo lovechild.
We are becoming a feature-rich, totally free business chat system. If expense management is ultimately just a complex financial conversation, chat is just expense management without the expenses. And since our bottom-up business model starts with individual employees using Expensify to manage those financial conversations for free, we are extending that model further to allow any business conversation for free. This is being designed to get a foothold in new companies even easier and earlier than before.
We are consolidating everything into a single, universal codebase. By using React Native, we can build a single codebase that works identically across iPhone, Android, web, and even desktop. This means we don’t need to rewrite the same features four times—we have one team, working on one app, that works equally everywhere.
We leverage the open source community. Great talent appears everywhere, but not everyone wants a full time job. To capture the benefit from this global talent pool we augment our own engineering team with nearly a hundred open source developers around the world. We are committed to an open world of collaborative development, both by supporting existing projects and inviting everyone into our own.
We will support your side hustle. Today you need to link together a basket of random tools to crowdfund, communicate with fans, and isolate your expenses. Expensify will bring the power of enterprise expense management into your pocket, simplified for the smallest project, growing in sophistication as you do.
We will link your community. Volunteering with your church, hosting a block party, cleaning up a beach—all of these community activities are surprisingly complicated project management exercises, often with people you don’t know very well, and often with large financial obligations split amongst the group. Expensify will make this easy.
We will help you travel with friends. As the world reopens and our wanderlust takes hold, Expensify will be there booking your flights, managing your hotels, keeping track of your tabs, and settling up as you go.
We will connect your family. Managing allowances, digitizing the tooth fairy, teaching financial literacy—Expensify will grow with your family.
Expensify isn’t just a corporate card, any more than Google is just a search engine, or Microsoft just an operating system. Both established an unassailable hold on one critical feature, and then built a moat around it a lightyear wide through ancillary features and services. That deep gravity well of products and services inexorably tugs at every business in the solar system, gradually pulling them into orbit no matter where they started. We aim to do the same: to establish a dominant position in business expense management, and then surround it with a wide array of social, consumer, and prosumer functionality that tips everyone’s trajectory towards our sun, a little more every day.
Given this broad feature set packed into a single, simple app, we call ourselves a “payments superapp” with the tagline: “One app, all free.” But if you can keep a secret, the real long term vision is so much bigger. We are building the first “financial social network”, devoted to people who are doing the real work of saving this world, every day.
Save the world.
The last 10 years have been wild. The next 10 years are shaping up to be more of the same. And the next 100 will make today seem quaint. We have a tremendous amount of incredibly important work to do, not just in the office, but in our homes, in our community, and on our streets. The next 100 years won’t be defined by technology: they will be defined by people, and all the good and bad things those people choose to do.
We built Expensify from the very start to be the platform for the world to unite, coordinate, combine resources, and execute on all the myriad tasks that society depends upon to literally survive this difficult inflection point in the human experiment. This is a massive undertaking, and as such every aspect of Expensify is designed to support this long term vision. We have been extremely deliberate about who we hire, what we prioritize, when we push, where we market, and how we govern.
We believe social technology should help us achieve our dreams, not distract us from pursuing them. Enough time has been wasted retweeting cat pictures, spreading misinformation, salivating over food porn, salivating over actual porn, or watching people who are old enough to know better tumble off of terrifyingly tall stacks of milk crates.
It’s time for us to put aside our silly distractions, come together, and get some serious shit done—and for anyone who answers that call, Expensify will be there.
It’s been a long road, and there’s so much more to do. I cannot adequately express how proud I am of the team that got us here, how thankful I am for the investors who took a chance on us when nobody else would, and most of all how appreciative I am for our members and customers who made it all possible. I would be honored for you to join us on this journey.
David Barrett
Founder and CEO of Expensify
Questions? Ask me on Twitter! @dbarrett
Sent by: Expensify, Inc. – 548 Market St #61434 – San Francisco, CA 94103
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$EXFY Congratulations David!
Thank you for sharing.
Best Alwayz!