Divvy aims to help small businesses better understand their finances through its suite of tools. These include a toolset that allows them to track their expenses, generate reports, and plan their budget. It seeks to replace the time-consuming and error-prone task of manually tracking these numbers.
Launched in 2016 and based in San Francisco, Divvy is an online platform that connects consumers to financial services providers. They offer a range of products including credit cards, loans, insurance, and investment accounts. How do they make profits? In this post, we’ll take a closer look at how Divvy earns income through its website and mobile app.
Divvy operates on a fintech business model where they make money by charging a fee from merchants who use their services. They charge a portion of the interchange fee that merchants pay to credit card companies and financial institutions.
So Divvy doesn’t make any profit from its users but instead collects revenue through third-party payment processors. When a user makes a purchase, the merchant must charge an additional transaction cost. When the merchant charges this cost, Divvy receives a percentage cut. For example, if the merchant charges 2%, then Divvy receives about half of that amount.
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About Divvy
Divvy is a software company that provides a suite of tools for managing business expenses.
Divvy aims to help business owners and managers by giving them an easy-to-use tool for monitoring and controlling their expenses. It allows them to see exactly where their money goes.
Business Model of Divvy
The business model for the company is transaction-based financial technology (fintech) for business-to-business (B2B). Unlike traditional software companies, which charge fees for their products, Divvy charges no fees at all.
Divvy’s unconventional approach is great for attracting small businesses. Most companies don’t provide the high rewards of personal cards.
However, Divvy, in addition to providing an unconventional business strategy, also offers major perks for its cardholders:
- You can earn points by taking surveys, playing games, watching videos, shopping online, etc.
- Great reward rates
Divvy’s competitors include:
- Ramp
- Airbase
- SAP Concur
- Expensify
- Brex
- Emburse Certify Expense
- Pleo
- Bento for Business
Product/Service
Divvy offers solutions for spending, payments, and credit within the B2B sector. These include solutions for different types of companies:
- New business – for small businesses that haven’t had any experience yet. They usually start out with one or two people.
- Medium size business – for larger businesses with between 21-250 employees.
- Construction Companies – To help construction companies manage their budgets and expenses.
- Technology – for fast-paced software companies that need a platform that keeps up with their rapid expansion.
- Accountancy firms – to allow them to streamline the spending of their clients so they can make things easier for everyone involved.
- E-Commerce and Retail – To enable such companies to run uninterrupted marketing activities for their products.
- Health care companies – To allow health care providers to gain greater financial controls without having to invest too much time.
Marketing
Since PayPal Ventures invested in Divvy, it’s likely that Divvy won’t have any issues becoming well known. After all, PayPal was the company that made Elon Musk and Peter Thiel famous.
Indeed, Divvy has attracted lots of business from companies including:
- WordPress
- Habitat for Humanity
- Georgetown University
Divvy offers its services via the following methods:
- Blogging
- Case studies
Expenses
Divvy is fully digital and doesn’t have a lot of the costs of a traditional brick-and-mortar store. Still, it has the expenses you’d expect from a $1B+ online retailer:
- Staff
- Offices
- Materials
- Utilities
- Security
- Compliance
Since Divvy doesn’t charge its customers any fees, its business strategy isn’t quite like that of SaaSAutomated vehicles are sold by car dealerships, which means they’re typically bought through a dealership rather than directly from the manufacturer. However, because Divvy sells its service to companies, it has the overhead costs associated with a traditional SaaS.
- Hosting
- Payroll
- Sales
Plan for Profit
Divvy is an active player in a very competitive industry, the corporate spend management sector.
- corporate cards
- Software that helps companies manage and control their expenses
Because businesses are looking for ways to improve their financial infrastructures, they’re investing heavily in this corporate spend management market.
By focusing on this specific market niche, Divvy aims to eventually reach profitability by combining these things together:
- Credit
- Vendor management
- Spend management
To reach its goal faster, Divvy aims to spend heavily on the following:
- product development
- engineering
Founded by CEO Blake Murray, Divvy aims to become as indispensable as Salesforce products and new initiatives.
- Customer will pay
- Invoices from dashboard
Eventually, Murray’s dream for Divvy is still pretty similar to the one he had for Divvy way back when the idea first came into his mind in 2015: “an online platform that helps small businesses kill the expenses report”.
How Does Divvy Make Money?
Divvy earns revenue by sharing a percentage of the fees that retailers pay to banks and credit card issuers for each purchase made using their payment cards.
Divvy makes its revenue through a service called “Divvy for Businesses,” which allows companies to track their expenses using an app instead of having employees manually enter them into spreadsheets.
Every single credit card transaction made by a Divvy user results in a fee paid by the user. However, Divvy doesn’t charge its users directly; instead, they get charged through their bank accounts.
Divvy helps attract customers who buy things from them by offering a number of different services and features.
- Business Credit
- Spend Management
- Expense Management
- AP Automation
- Credit Builder
- Virtual Cards
- Reimbursements
- Rewards
- Software Integrations
- Mobile App
- Reporting
- Payment Services
Business loans are easy to get and flexible for small business owners and large enterprises alike. You can apply for a loan in just minutes.
Budgeting software helps you take control of your finances by helping you manage them better.
It helps you manage your expenses by making them simpler and easier to understand.
AP Automation uses intelligent accounting software that saves companies time.
A pay-as-you-go program for business owners who need to build credit.
With its innovative features, Virtual Card protects your business from fraud and overdrafts by allowing you to pay for purchases without having to enter a credit card number.
With Divvy, businesses can easily manage everything from employee benefits to payroll, insurance claims, taxes, and more through one easy-to-use platform.
- out-of-pocket expenses
- card spend
- reimbursements all in one system
Every Divvy customer can use the Rewards program to earn rewards for using their card at participating merchants. With Divvy’s integrated features, businesses can maintain their accounting processes using Divvy’s own built-in apps.
Divvy is proud to offer its 4.7/5-rated mobile app for budgeting, virtual card management, and more.
With Divvy’s Reporting tool, customers can track abnormal activity and keep their team accountable. Divvy has a freemium product called Payable that allows users to streamline their payables process.
Divvy Funding, Valuation, and Revenue
Divvy’s fundraising history has been characterized by exponential increases.
From the seed round in 2017 to the series B round in 2018, divvy had grown by five times, going from $7 million to 35 million dollars.
Additionally, between their Series B funding in 2018 and their Series C funding in 2019, Divvy grew by almost five times from $35 million to nearly $200 million.
Notable investors include:
- New Enterprise Associates
- Pelion Venture Partners
- Insight Partners
- Jonathan Weiner
- PayPal Ventures
- Whale Rock Capital Management
- Schonfeld Strategic Advisors
- Hanaco Venture Capital
- Acres Capital
Since January 1st, Divvy’S value has increased by nearly half (50%).
One reason for the steep rise in traffic is because Divvy was purchased by Bill.com, which is a company that competes with companies like:
You can disrupt markets by offering free products and services.
Divvy’s growth rate has been exponential. From 2017 to 2018, Divvy grew from $1 million to $4.5 million in annual revenues. In 2018, Divvy grew by four times. In 2019, Divvy grew by five times.
Is Divvy Profitable?
Divvy is a web application for small business owners that helps them manage their finances, bills, and cash flows. They’re not profitable yet but are closing in on profitability.
According to Forbes, that was what they had to say about the business in 2020.
Regardless, the tone was still complimentary, addressing that Divvy’s revenue has more than quadrupled in the period from 2018-2019. Before Divvy had reached unicorn status, Forbes had included Divvy in its list of “Next Billion Dollar Startups.”
It’s interesting to note that Bill.com completed its purchase of Divvy in July 2021. Like Divvy did before them, Bill.com too had an inability to turn profits even though they were experiencing explosive revenue growth.
Indeed, Bill.com’s profits were well and truly awful. Consequently, the Motleys Fool Stock Advisor has recommended 10 stocks that are better bought.
Conclusion: What makes Divvy different from its competitors?
After looking at their revenue model, it’s now time to finish our analysis. We hope it helps you to better understand how Divvy earns its revenue.
Until now, companies of all sizes needed to use cumbersome tools to keep tabs on their expenses and resource usage at a granular level. Now they can get instant insights into their spending using Divvy.
Divvy is an all-in-one solution for managing a business’s cash flow. It eliminates time-intensive expense reports.
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