This episode features an interview with Alex Song, Head of Finance and Capital Markets at Ramp, a finance automation platform offering corporate cards and expense management so companies save time and money with every click. Alex is a Stanford engineer with an MBA from Harvard who has more than 10 years of experience as a hedge fund investor in structured credit, special situations, specialty finance, and fintech. Prior to Ramp, Alex worked in private credit and structured credit investing at Sculptor Capital Management and as Vice President of Crayhill Capital Management. On this episode, Alex discusses how Ramp identified their target market, risk management as a credit card issuer, and what it takes to be an efficient allocator of both financial and human capital.
This episode features an interview with Alex Song, Head of Finance and Capital Markets at Ramp, a finance automation platform offering corporate cards and expense management so companies save time and money with every click.
Alex is a Stanford engineer with an MBA from Harvard who has more than 10 years of experience as a hedge fund investor in structured credit, special situations, specialty finance, and fintech. Prior to Ramp, Alex worked in private credit and structured credit investing at Sculptor Capital Management and as Vice President of Crayhill Capital Management.
On this episode, Alex discusses how Ramp identified their target market, risk management as a credit card issuer, and what it takes to be an efficient allocator of both financial and human capital.
Quotes
*”There are certain days of the month where that cash flow gets very chunky and we could be moving north of a hundred million dollars of cash any given day. And what that means for us is it's very important to know where our cash is sitting, where our receivables are sitting, and what the various amounts are on a minute-b-minute basis or hour-by-hour basis. And if one of our investors or one of our lenders wants to see a financial report from us, we have to be very careful about, ‘Hey, this is the 8:11 report?’ versus, ‘Hey, this is the noon report?’ Because even in a span of minutes or hours, [that] number could swing by tens if not hundreds of millions of dollars. And that has a huge impact on us. We're managing very high velocity warehouse funding facilities. And so our lenders need to know almost in real time what our financial situation looks like at any given moment.”
*”If you are a very high growth startup and your operating metrics are still kind of lumpy, it probably doesn't make a ton of sense to make a five year plan because you don't even know what the company will look like in three months. So you're probably going to have slightly shorter metrics. For more mature companies with more established market share and customer base, you're much more concerned with net retention and churn. You're probably looking at a multi-quarter, multi-year sort of planning. The operating timeframe of the company over time should increase in length.”
*”Regardless of what timeframe you're looking at, whether it's one month or one quarter or 10 years, at any given moment in time, if you run out of cash, it's over. There is some amount of just longevity planning. But if you're thinking about a concept like cash management, liquidity management, asset liability mismatch, duration mismatch on your balance sheet, that's something where any time you run into the red zone - and that will differ depending on business model, depending on who you are - anytime you're in the red zone, that's it. So you have to be very, very careful about managing instant in time, spot in time, point in time, balance sheet and liquidity as well.”
*”At the end of the day, management teams are allocators of capital. It could be financial capital and it can also be human capital. And what you'll find is that all of the best generational businesses have historically been good capital allocators. And so taking that sort of financial KPI-based and financial metric-based view of ROI on invested capital is something that is going to make folks a lot more efficient and make finance teams a lot more strategic than before.”
*”The relative value of money and the relative value of liquidity is higher now than it was a year ago, or even any point over the last five years. At least in recent history, we haven't really lived through a period of rising interest rates before. So liquidity is much more meaningful. It moves the P&L a lot more. And so it's a function that I think traditionally has been ignored, but now it's definitely more impactful.”
Time Stamps
*[11:05] Segment: Cash Crossroads, where Alex discusses his technology vision
*[19:37] Segment: The Playbook, in which Alex talks about finance strategies and managing risk
*[34:11] Segment: Report From the Future, where Alex considers the skills needed by future finance leaders
*[37:30] Segment: Quick Hits, in which Daniel and Alex discuss cryptocurrencies and more
Sponsor
The Invisible Vault is powered by the team at Kyriba, the global leader in cloud treasury and finance solutions, empowering CFOs and their teams to transform how they activate liquidity as a dynamic, real-time vehicle for growth and value creation. To learn more visit www.kyriba.com
Links
Connect with Daniel on LinkedIn
Alex Song: Regardless of what timeframe you're looking at, whether it's one month or one quarter, or 10 years at any given moment in time, if you run out of cash, it's over, right? There is some amount of just longevity planning. But if you're thinking about a concept like cash management, liquidity management, asset liability, mismatch, right? Duration mismatch on your balance sheet, that's something where any time you kind of run into the red zone and that, you know, will differ depending on business model, depending on who you are, anytime you're in the red zone, that's it. Right. So you have to be very, very careful about managing kind of instant in time, spot in time, kind of point in time, uh, balance sheet and liquidity as well.
Narration: Hello and welcome to The Invisible Vault.
This episode features an interview with Alex Song, Head of Finance and Capital Markets at Ramp, a finance automation platform offering corporate cards and expense management so companies save time and money with every click.
Alex is a Stanford engineer with an MBA from Harvard who has more than 10 years of experience as a hedge fund investor in structured credit, special situations, specialty finance, and fintech. Prior to Ramp, Alex worked in private credit and structured credit investing at Sculptor Capital Management and as Vice President of Crayhill Capital Management.
On this episode, Alex discusses how Ramp identified their target market, risk management as a credit card issuer, and what it takes to be an efficient allocator of both financial and human capital.
But before we get into it, here’s a brief word from our sponsor…
So please enjoy this interview with Alex Song, Head of Finance and Capital Markets at Ramp, and your host, Daniel Shaffer.
Daniel Shaffer: Hey, Alex, welcome to the Invisible Vault. We're really happy to have you today.
Alex Song: Yeah, absolutely. Thanks so much. Thanks for having me.
Daniel Shaffer: So you have a very, uh, impressive background just from, you know, your education to kind of companies that you've worked for. I'd really like to know, you know, about your personal journey to finance. Um, seems like there could have been a couple different directions early on. tell us a little bit about yourself and what brought you to finance, Alex?
Alex Song: Everything up until this moment has led me to kind of my current role and I actually strangely enough feel like it's been a phenomenal fit. So I started, uh, my career, uh, right in the depths of the great financial crisis back in '08, '09. I graduated, uh, out of college with an engineering degree. I actually joined Morgan Stanley as my first job outta school. Traded bonds, spent a lot of time looking at interest rates, spent a lot of time looking at mortgage back securities. Those were some very formative years, let's put it that way. So spent a little bit of time at Morgan Stanley. Did the whole analyst program had a phenomenal time there. I spent the next few years, uh, over on the buy side, working specifically at, uh, bank capital. Uh, again, focusing mostly on fixed income investments, credit investments and mortgage back securities. And as you can imagine, coming out of those first couple of years, coming out of the crisis, investing in mortgages was definitely a thrilling experience, other times frustrating, uh, and whatnot. From there, I spent a few years in business school. And coming out of business school, I, realized that I wanted, uh, to do something that was a little bit, you know, less plain vanilla, a little bit more interesting. And so that's sort of what led me to the world of FinTech. So I spent the next couple of years, um, working at a variety of different, um, investment firms and hedge funds predominantly focusing on FinTech investing. So spent a lot of time looking at consumer lenders and, uh, B2B and commercial lenders and subprime auto, student lending, um, real estate tech, prop tech, you name it credit card companies. And I feel like that gave me ultimately a good amount of kind of foundation and exposure to, you know, how early businesses are built are shaped. Spent a number of years doing that. And then about two years ago, almost serendipitously, met the team at Ramp. Loved the team, loved the thesis and loved the company and the mission that they kind of stood for. And, uh, the rest is history. I spent the last two years really, you know, in my current role as Head a Finance, building out the team here. Um, and it's been in an absolutely tremendous, uh, experience. But yeah, I mean, it's not so obvious, right? Cause coming outta school as a bond trader, spending a lot of time, looking at interest rates and now kind of 10, 12 years later, you know, I'm kind of running a, finance and accounting and capital markets team here. Um, but again, it's been nice. It's been a good fit in terms of my experience, my interest, and you know, where I am today.
Daniel Shaffer: Absolutely. Uh, phenomenal journey story and the path doesn't always have a straight line to the end point. Um, but as you said, uh, your background really does encapsulate that fundamental need for liquidity in fueling the company with cash, finding the ways to prove the need to have that cash funded, uh, or loaned in some cases as, you experienced. And so you really know those levers quite well, um, as the head of finance at Ramp, uh, a company that I've noticed is doing well itself and would love to hear your point of view kind of upfront on what is Ramp doing and how is it helping as a FinTech, uh, drive growth in the global market or in the local market?
Alex Song: So Ramp is a very interesting story. The company itself has evolved, uh, you know, quite a bit and changed quite a bit over time. So we are only a three year old company, so still relatively early, relatively young. Um, we were created, uh, back in early 2019 with, one mission. More or less, that mission has stayed the same, which is really help our customers save money, save time and gain efficiencies. Right? Our customers are, uh, small and medium sized businesses based in the U.S. Uh, at one point or another, I'm sure we will expand internationally, but for now our customers are businesses, right, based in the U.S. And we provide them with a slew of finance automation tools, and currently what that means is corporate credit card, spend management software, AP automation, uh, a travel portal, uh, personal reimbursements, and a few other products that we're probably going to ship, uh, over the course of the next, uh, few months and quarters. But the idea there is really to empower the finance teams, accounting teams, the office of the CFO, with more automation and more transparency so that they can be more impactful with their money, their resources, their bandwidth, and their time. Um, and over the last three years, I would say we've done a, a pretty reasonable job of that. We've, you know, now have thousands and thousands of customers, who transact, you know, tens of thousands, if not hundreds of thousands of times with us on a regular basis. And you know, we're moving, quite a bit of cash around, any given day, week or month. And so it's been a pretty tremendous journey, uh, for us.
Daniel Shaffer: Congratulations. That's exciting to hear. Last I checked with Gartner and other analyst firms like IDC, the mid-market, especially in North America, is the key driver for growth. So sounds like you're onto something there.
Alex Song: It's been good. Yeah. It's been phenomenal. For us, I would say, the mid-market is, and I don't think, you know, folks have, necessarily, caught on just yet, but kind of the lower middle market is an area that's been, you know, largely ignored right by traditional banks or financial institutions and whatnot. I think that if you were a large company, let's say you were at Morgan Stanley, or let's say you were at Bank Capital, right. You can probably find really good, you know, enterprise level software, finance automation. You can probably get a pretty good deal from American Express and whatnot, which is great. I think that's awesome. But if you go into kind of the lower middle market SMB, these are smaller teams, right. With fewer resources and probably if they wanted to set up a corporate travel program, or personal reimbursements, or they want to set up expense policies, um, there's actually historically not been a lot of good solutions for these folks. And so it's a big portion of the pie, right. Of U.S. GDP and whatnot. But it, it has historically been, you know, underserved is what I would say. And I think that's a pretty nice market opportunity, right, for a company like Ramp.
Daniel Shaffer: Absolutely well, thinking about what you're doing at the company and given your background in, finance and lending and really understanding the markets, um, how are you positioning yourself, uh, as a strategic partner to the business?
Alex Song: I spent a lot of time thinking about all of the kind of ins and outs of running, uh, the business on the financial side. Right. A lot of that comes from my prior experience as an investor. Right. You know, what would an investor want to see coming out of this, right? Is it free cashflow yield? Is it contribution margin? Is it EBIDA margin? Right. What sort of narrative and what sort of metrics and KPIs resonate most with investors? And, um, you know, hopefully setting ourselves up for success. Right. A couple of examples of that would be, uh, thinking about how we can build a sustainable business, right, across multiple dimensions for the long run. Right. I think a lot of people understand the concept of a P and L, of an income statement. Right? You have revenues, you have costs and then you have your net income and you're gonna make X percent, you know, net return. Right. Whatever it is. Um, but I do think that there are a lot of folks out there who probably don't spend as much time thinking about the cash flow statement, right. Or the balance sheet. And then that's where I think my, prior experience and my industry experience sort of on the investment side and, uh, you know, specifically looking at, you know, asset heavy companies, uh, really helps. I think we are very, very circumspect about risk. We're very circumspect about how we manage working capital and especially in this environment, right, where there's a lot of macroeconomic volatility, there's, you know, potentially a recession on the horizon. I think being mindful of not just the P and L but also how you're managing cash flow, how you're managing your balance sheet, I think those are all things that, you know, hopefully helps provide us and our customers, right, with a more holistic and comprehensive view, um, of kind of how to navigate the coming cycle.
Daniel Shaffer: Absolutely. I mean, you mentioned seasonality and really the fast pace of volatility, how those different types of geopolitical, uh, economic impacts are putting pressure on businesses, large and small. And you, you mentioned that you have a keen sense of the value of technology for all sides of businesses, and especially those that you're serving now in that, as you describe it, the lower midmarket, this kind of sets us up, alex for our next section called cash crossroads.
And in this section, I really just would love to hear your views, not necessarily for Ramp in particular, happy to bring in Ramp if you'd like, but your experience. I mean, you've really had a deep level of understanding of the finance market. I'd like to know. I think our listeners would like to know what is your technology vision? I mean, how do you really pull together this tech stat for the modern finance team?
Alex Song: You know, one of these days Ramp is gonna be a big enough business in which we'll, we'll probably bring Kyriba, right. To help us manage our cash. Right now we're still pretty small. Uh, our operations are, are not yet, uh, so complicated, but you know, you're absolutely right. Uh, I think with respect to kind of the, um, managing a company, especially one that's growing very quickly with a lot of different accounts, a lot of different entities, uh, finance automation is something that's super, super, super top of mind for me. Right. So right now we have a couple of different legal entities who have a few different bank accounts. One of these days, that number is going to 2X, 5X, right? Whatever that is. And I will need a little bit more operating leverage. Uh, my team is pretty lean right now, and I think the ability for different tech vendors and software vendors to have very robust integrations, that is going to be key for us. And when I say integrations, I mean, everything from different software vendors talking to each other, right? Whether it's NetSuite and Ramp and Kyriba and, and maybe HR software, right. HR and payroll. So maybe Paylocity and TriNet and, ADP. That's one thing, right? You want the different system of records talking to each other, which is extremely important, but then you also need the software to do something, right. So when we do in initiate ACH payments, or wire payments, we're moving money around in between our bank accounts or we're moving money to a vendor, or if we're making collections. Right. All of those things we can either do manually, or we can try to automate. And I think that, you know, not only is it just system of records, it's also just doing stuff. A lot of that stuff, I'll be honest, we're doing manually. Some of it, hopefully soon we will, uh, be able to automate. That's one of the things that, um, I know that you guys are very keen on and even here at Ramp, we do a lot of that and we're spending a lot of time and energy trying to automate that for our customers as well. So the, the automation piece definitely is something that resonates with me. I think technology is going to offer finance teams a lot of operating leverage, uh, going forward.
Daniel Shaffer: That's great. I appreciate you dropping, uh, Kyriba in the conversation, our key sponsor, uh, without which the Invisible Vault wouldn't be possible. But I know you're getting to know Kyriba a little bit. And you're speaking kind of that common language around technology automation or API integration of a composable solution where you have all of your different systems of record talking, the same language or recognizing data points and sharing that data in a straight through process, really giving especially the finance team that end to end vision of where the company sits from all different perspectives. And where every vector of liquidity comes in, it becomes a significant touch point to understand the value and strength of the business. One of the pieces that I'll share with you just briefly is, the opportunity to create cash forecasting and having that confidence in the cash position, um, with a hundred percent visibility into your cash. That complexity, as you said, will grow as you become more international. What do you think is the importance today, given those thinner margins. Increasing interest rate environment of having your data in real time?
Alex Song: It's huge. Uh, it's huge. Um, you know, I think as a financial services company ourselves, right? I mean, I mentioned a little bit earlier, we have a lot of different bank accounts. We have of thousands of customers. We're moving a lot of cash around, uh, any given day. So to us, uh, contemporaneous data and fast access to that data is so key. I'll give you a very specific example, right? So over the course of our, you know, brief history as a company, we've raised roughly, you know, let's say north of a billion dollars of, you know, equity and debt capital, right. It's pretty significant. And we, need to be very careful about managing both the equity and the debt component. Right. As we are funding credit card spend for our customer base, right. We're moving, I would say on the order of, you know, half a billion dollars of cash every single month. And if you just think about that, you know, half billion dollars divided by 30 calendar days in an average month, we're doing tens of millions of dollars of money movement every single calendar day. And there are certain days of the month, as you probably know, where that cash flow gets very chunky and we could be moving hundreds, right? Like north of a hundred million dollars of cash any given day. And what that means is, um, for us, it's very important to know where our cash is sitting, where our receivables are sitting and what the various amounts are on a minute by minute basis or hour by hour basis. Right. And if one of our investors or one of our lenders wants to see a financial report from us, you know, we have to be very careful about, Hey, this is the 8:11 report, versus, Hey, this is the noon report. Right. And oh, this report was, produced on UTC time. And this is on Eastern. Because even in a span of minutes or hours, number could swing by, you know, tens if not hundreds of millions of dollars. And that has a huge impact on us, right? Because again, we're managing very high velocity warehouse funding facilities that we have. And so our lenders need to know almost kind of also in real time, what our financial situation looks like at any given moment. So very, very strong need, uh, for us in particular, to have that very precise, very accurate view in real time.
Daniel Shaffer: So let's dig into that a little bit. Cause I think that's an important piece, and another, uh, one that we'll follow up on, cause I have so many questions there. Especially around payments and really managing that. Uh, having some kind of facility to, to detect or increase or your assurance that there's really no fraudulent activity happening. But before we dive into that, Alex, tell me something about your technology. I mean, how is that unlocking opportunities at your organization? You're saying you're moving huge swaths of money, hundreds of thousands, hundreds of millions in some cases a day. How does technology give your team the power to really create opportunity? Is it more for the investor side? Is it for your stakeholders internally? Tell me a little bit about how technology is working for you.
Alex Song: Yeah, I'll give credit where credit is due. A lot of it, we are building in house. Um, a lot of it, quite frankly, is our risk engineering team, our payment engineering team. And, uh, a lot of it we're building, uh, in house. A lot of it, we're also building in conjunction with our partners, right? So our payment processors, our issuing banks, our collections banks, and whatnot. Um, JP Morgan, for example, Stripe, for example, Marqueta, for example, have real time APIs and we're able to kind of build around and leverage so that we're able to gain, uh, some of those real time kind of contemporaneous views, right? The ability to build both in-house and collaboratively with our partners, uh, has been huge. And that's the thing that lets, you know, finance stakeholders and sales and marketing and go to market and whoever it else, uh, have that, you know, real time view, uh, so that we can measure success. Right. So that we can figure out, um, you know, where we can do better, where are we succeeding? Where are we falling short? We have a very, very significant internal technology and engineering effort, um, that tries to automate all of this for us.
Daniel Shaffer: Excellent. Yeah, I've heard great things about JP Morgan and having history of Kyriba worked with them. In fact, I know they're rolling out a phenomenal, real time payments API. Um, not only is there real time payments kind of reconciliation, um, in terms of reporting so you can see instantly an automatic update to your GL. Uh, but there's also that kind of throughput, um, of understanding where the payment went and then it went out and having that recorded. Um, so you have full transparency. And when you're doing payments upwards of, you know, what is it? Uh, you have a, a million dollars per payment in real time payments. Um, I'm sure that limit's gonna go up as we get more comfortable with making those types of payments, so important technology to have at your fingertips.
Alex Song: Mm-hmm yep.
Daniel Shaffer: Well, that brings us to the next section here, Alex, in our, um, interview. It's been a real interesting one so far. I'm curious. Um, this is called the playbook.
And I'm curious, what does risk management mean to you? You mentioned it, um, earlier that you're very concerned of that around payments around working capital. Um, in a rising risk interest rate environment, how are you looking at payments to ensure that your company is not unnecessarily being hit by FX or other types of risk?
Alex Song: You know, this is one of those things where it's kind of like you, you know, you have the known knowns and they have the known unknowns and you know, the different risk factors. Right. So what I would say is, you know, I think for most folks who are building a business and running a business, there's a lot of things that are in your control, right? I think that you can control your advertising spend, you can control marketing, you can control hiring, right? There's a lot of line items sort of in your P and L within, you know, OPEX, cogs, whatever it is that you can kind of know and forecast with a reasonable level of precision. And I, I, I believe that to be the case for, you know, most, uh, I would say mid-market businesses, with, you know, reasonably sophisticated finance team. Uh, for a company like ours though, there's a few unknowns right in there as well. And risk definitely is one piece of that. Cause sometimes you just can't control that. Like you said, FX, exchange rates, interest rates, macroeconomic conditions, recessions. Right. If people decide that they want to tighten their belts and just not spend money anymore, well, you know, there's not a ton that you can do there, right. For us, um, because we actually are a credit card issuer, and we're actually taking real time sort of credit risk of our customer base, that also means we take a certain amount of credit risk as well. If one of our customers defaults or goes delinquent, or is late in terms of making one of their credit card payments, well, we're out potentially thousands of dollars, right? Or tens of thousands, or, you know, hundreds of thousands of dollars. So that is, uh, one, I would say piece of the puzzle that we are very humble. And we are very kind of deliberate about managing that. So we spend a lot of time agonizing over, how do we manage portfolio credit risk? What segments, uh, or what industries or what geographies are we exposed to? And let's track that. Right. And how economically sensitive are those segments? Um, we spend a lot of time agonizing over that decision, which by the way, is another area, which strangely enough, because of my prior life sort of as a hedge fund investor, I spent a lot of time thinking about that. Where, you know, it's almost funny is, you can kind of make money, you know, in whatever way, but like to lose money, that's a risk management problem. Right? So for us, I think, you know, there are areas of the P and L that we know pretty well. And then there are areas of the P and L we know is kind of uncertain, And could be volatile. And that's an area that we spend a lot of time on.
Daniel Shaffer: That's fantastic. And I, and I think, you know, when smaller groups, um, and it seems like every, um, head of finance, we get a chance to speak with here on the Invisible Vault, uh, continues to share the kind of small, uh, nimble team that they have. Um, so similar to some of us in marketing, we're, we're well aware of how nimble and small teams can be. Um, so when you think about technology given you that hand up, um, in minimizing risk, especially as we mentioned before, um, with the volume of payments that you're doing, is fraud an issue? Is that a type of risk that you're conscious of and how are you prepared to avoid it?
Alex Song: Definitely fraud is rampant, and it's an arms race, right? As a payments business, any time where you're moving funds back and forth, there is the prospect of fraudsters, right? Trying to impersonate something or impersonate someone or someone is trying to act maliciously. And so it's no different. I mean, Ramp is no different than a PayPal or, you know, a Venmo or visa, right? I mean, you're gonna have fraudulent transactions. And fraudsters are, you know, getting smarter and smarter and more sophisticated by the day. And so for us as well, we have to keep up with that. So thankfully we have a pretty strong risk management and risk operations team here internally. We also have a number of outside vendors that we work pretty closely with in order to monitor both applications, transactions, website visits, logins, who's stealing, you know, uh, passwords when, where, we also have one vendor that actually will literally scrape the dark web, which is kind of this invisible layer of the internet. Right. They'll literally scrape the dark web and check to see if there are any credit card numbers associated with Ramp credit cards there. And if they see that number, pings us automatically, we shut it down instantaneously. And so it is, uh, a constant arms race between the fraudsters and sort of where we do and, and how we react. And it, it is a cost of doing business, right. I'd be lying. If I said our fraud losses are zero. They're not. So this is a real cost to the business. And so we have to make real investments to contain, uh, this particular risk. Uh, I am thankful though, in the sense that thus far, our numbers have been pretty low, uh, on that front. But it's not an area that we could really ever, uh, rest on our laurels.
Daniel Shaffer: Constant vigilance and no doubt that, uh, requirement will continue to grow, um, alongside of the, uh, ambitious, uh, bad actors that you're well aware of, probably more than most, um, whether it's that perimeter security that you're talking about or that account by account level security. Um, and even having that type of AI and machine learning, uh, in your back pocket gives you a little bit more assurance that there's, uh, never stop. the background check that the payments are going to the right place and that's constantly happen 24/7.
Alex Song: Yeah, our software does a pretty good job you know, we have a risk team, right, that does it. We have an anti fraud team. Uh, our software itself also does a decent job of managing fraud risk because we layer in so much and such sophisticated sort of multi approval step by step. You know, a budgeting and approval matrix, et cetera, such that I think truly malicious and fraudulent spend typically occurs, you know, with such rarity. Um, because if someone, you know, had their card stolen, right, we could shut off that card pretty quickly. And even if the card transaction went through, a manager or someone on the finance team can use a Ramp and use our software to shut it down, catch it early and, uh, essentially try to reverse the transaction. So I would say, uh, cyber security is very, very top of mind for us, both kind of internally, as well as with our product build.
Daniel Shaffer: Absolutely. and it's great that you're kind of differentiating there on that consumer level, uh, cyber security challenge. And then on the corporate level, you also have a payments fraud challenge that is completely separate. In other words, not the kind of payments that your customers are making, which is something that you're protecting, but then there's that other level of corporate payments as well, that when you're making payments to the payment bank, that you're ensuring that JP's getting the money and that it's actually ending up in the right bank account. That kind of, uh, fraud protection is also another level, uh, perhaps that you'll be looking at. Um, can you tell us about something a little related to that in terms of on the corporate side, what do you think is the kind of technology that is really valuable today and speaking specifically about today in today's environment, um, for the CFO finance stack?
Alex Song: Yeah, I think it probably boils down to, uh, two different things. Right. One is kind of real time. the now and one is more focused on kind of the future. I think two things that I spend a lot of time agonizing over is really how do I manage and control, uh, my employee spend and my corporate spend, right? So this is area one. This is the now, right. So if you create a budget for, let's say the marketing department, or for the design department, That's one thing, right. In the sense that you have kind of department level budgets, There's a whole nother dimension as well, which is, you know, if you're a CFO, you create a budget. There's also the use case, right. So you could also create a wellness budget, um, you know, food stipend, education, right. Or you have, uh, work from home budget and, you know, these days, a lot of companies have that. And so I think there's, uh, kind of this interesting kind of multidimensionality aspect of just managing spend. Uh, that's one area that I think Ramp is, you know, doing a decent job of tackling right now, which is making sure that, you know, along both dimensions, we offer some transparency and some control over where the money, you know, is coming from, where it's getting spent and that it's getting spent appropriately. and so it's an area that, I think just being able to react in real time is so key. Oftentimes what you'll find is that finance teams and everyone else at the company, it's very antagonistic, right? You're chasing people for receipts. You're chasing people for, you know, memos and, you know, you're making sure, oh, like you gotta have to like slap someone on the wrist for, you know, being out of policy or in policy and whatnot. It tends to be a somewhat antagonistic relationship. When sort of Ramp comes in, right. Or any other sort of expense management software comes in. Uh, we can almost act as the bad guy, right. Or we can say, well, You know, it is what it is. If you wanna spend this money, you gotta submit a receipt. Right. Or, you know, if you do this, you know, if X, then Y you have to do that. Right. And so it's one of those things where we're kind of almost empowering the finance team to kind of let us be the bad guy. Right. So that we can have, you know, very vigilant, um, and very precise, uh, and very controlled, uh, corporate spend. Right. So that's area one, right. Which is. The now, like, how are we managing things in real time? The second thing I would say with respect to technology is obviously, financial modeling and forecasting now, much more so than ever, Finance teams, I find are spending a ton of time on forecasting and re forecasting. And rebudgeting. And, uh, really going through the nitty gritty of their financial model, just to make sure they have cash, right. They have operating runway. And with the, with the funding environment, like it is today, you don't know when you're gonna be able to raise funding again. So when I speak to our customers, Tons of CFOs, tons of heads of finance and accounting, this is what's top of mind for them right now, is how can I make my dollar stretch, you know, longer, right. And the ability to sort of forecast cash flows and forecast budgets and OPEX and burn is very, very top of mind for a lot of our customers. Um, and a lot of the CFO community today.
Daniel Shaffer: What do you think, alex, about that I'm really curious, I've spent recently an absorbant amount of time on this concept, specifically, uh, cash forecasting. What is your expert opinion on a cash forecast and what makes it valuable? Is it a five year? Is it a one year? Um, is it a three month? Is it a one week? Um, or do all of them matter for different reason?
Alex Song: They definitely all matter for different reasons. Right? I think the operating cadence of the company is very important, If you are a very FA you know, high growth, fast growth startup, and, let's say your operating metrics are still kind of lumpy. Well, it probably doesn't make a ton of sense to make a five year plan because you don't even know what the company will look like in three months. So you're probably going to have slightly shorter metrics. For more mature companies, right, um, with more established market share and customer base, and, you know, you're much more concerned with net retention and churn and whatnot. Then you're probably looking at a multi quarter multi-year sort of planning. and I think that that, is sort of the operating timeframe of the company over time should increase in length. Uh, the other thing I would say though, is going back to just the concept of balance sheets of working capital is regardless of what timeframe you're looking at, whether it's one month or one quarter, or, you know, 10 years, at any given moment in time, if you run out of cash, it's over. So that's the other thing, which is, you know, there is some amount of just longevity planning. But if you're thinking about a concept like cash management, liquidity management, asset liability mismatch, right? Duration mismatch on your balance sheet, that's something where any time you kind of run into the red zone and that, you know, will differ depending on business model, depending on who you are, anytime you're in the red zone, that's it. Right. So you have to be very, very careful about managing kind of instant in time, spot in time, kind of point in time, uh, balance sheet and liquidity as well. I mean, when I went to business school, right? One of the things that we spent hours upon hours learning about is just the concept of working capital. So many companies will literally grow themselves out of business, which is almost a funny concept, right. They grow so fast, they run outta money and they go under. And, uh, so that's something that, I, I think that I have a very healthy, you know, amount of, you know, humility and, and respect for, uh, which is just managing around liquidity.
Daniel Shaffer: How critical is that capacity to have that technology or, or that intelligence instead of having, uh, a system of record, as you were saying, to be more of a system of intelligence to give you that guidance. How important is that data right now?
Alex Song: Cash positioning and, uh, and yield management and yield enhancement, is probably 10 or, or, you know, at least five times more important than it was six months or 12 months ago, um, because the interest rate environment looks so different and the funding environment looks way different, uh, than it did before.
Daniel Shaffer: Well, when you're talking about five, 10 X, I mean, that's a game changer and definitely can put a company even growing fast with a lot of access to money out of business real quick, um, if they're not clear about it. But on the other side of that, I think the opportunity to streamline business that Ramp is delivering even three X. Um, as you've shared with me or three points, um, on margin is also a significant number. So hats off to Ramp for that kind of efficiency companies should be looking for ways to take advantage. I have a couple quick questions for you here on a report from the future.
Daniel Shaffer: And in this section, what we really get into is like the next generation of finance leaders. You talked about the future. Let's get into that a little bit. So where do you think things are going? Um, what is needed to be the next generation of a CFO or a finance leader?
Alex Song: Um, I think it's gonna involve a, a little bit more technology and a little bit more automation, that's for sure. Right. And, uh, how much more, uh, who knows? I think that, you know, we're certainly trying to be a part of that discussion. Right. We're trying to do our part in terms of providing some of that automation and some of that operating leverage. But I think the idea is that, finance automation, finance software has generally been an underserved, uh, segment for lower kind of middle market companies. And that's an area that I think we could tap into significantly, uh, more in the future than, than today. And so what that means is that you're going to have in the future much more, potentially, much more well run smaller and medium sized businesses that are run almost like they're, you know, an Instagram or a Facebook or a Google, with the same amount of sophistication, the same amount of metrics and reporting and real time, uh, knowledge and, I'd love it, you know, if we could empower every single, you know, U.S. small business, uh, and have them be as well run and as well informed, as the next Google out there, right. I think that's gonna be huge.
Daniel Shaffer: Well, the mid-market has that opportunity as technology becomes a little bit more democratized and affordable, accessible that even in technologies today, that those great fintechs are building in the kind of policy and programmatic thinking that only the large enterprise with huge finance teams have had the access to. And now, as this becomes baked into the coat, um, even that smaller business will be able to take advantage of it. So I think you're right. I couldn't disagree with you. And that's a, sounds like a great place to be for the future finance leader. Um, what is that gonna mean for companies who are running so effectively? How do you think that's gonna change the dimension of being a CFO?
Alex Song: Yeah, I think we can be a little bit more impactful. the sort of less time we spent on, you know, reconciliation or month end close and more of the operational tasks of doing finance, the less time we spent doing that, the more time we can spend being strategic, right? Thinking about risk reward, thinking about return on investment and really providing that strategic guidance and support to, uh, the rest of the company, At the end of the day, you know, we are allocators of capital. We being, you know, management teams, right. Management teams are allocators of capital. It could be financial capital and it can also be human capital. And what you'll find is that historically all of the best, generational businesses have historically been good capital allocators, right. And so taking that sort of financial KPI based and financial metrics based view of ROI on, invested capital is something that is going to make folks a lot more efficient and make finance teams a lot more strategic than before.
Daniel Shaffer: Let's get into quick hits.
This really wraps up our podcast. And in these few three or four questions, maybe we just have a, a short kind of a knee-jerk response. I think I already know you've been telegraphing your response on this first question, but tell me a little bit about the future of digital currencies for treasury and finance.
Alex Song: The crypto markets have had a pretty, pretty good and pretty drastic run up. and lately there was actually also a pretty drastic drawdown as well. So it's a volatile market. I don't think we necessarily have a strong view here, except that we're always very eager to learn more. And to be an active participant in areas of, you know, digital currencies that, make sense. So with respect to stable coins, for example, um, and the USDC ecosystem, I think it, this is public and this is already out there, but, uh, Ramp is a participant sort of in the broader USDC ecosystem. We have been working with folks like Circle and Genesis and a few other folks, uh, with actually integrating USDC into our corporate treasury. So it's an area that we are monitoring quite closely and that we, you know, generally feel pretty good about.
Daniel Shaffer: Great. We might have to come back to you on that, cuz I'm sure we'll be seeing more news to come. It doesn't seem like, as you said, there was a huge ramp and then there was a big drop recently, but at the same time, digital currencies does seem to have a real foothold. In the economy and creating new opportunities. And with that, I'm wondering as CFOs and finance leaders like yourself become more impactful and empowered by technology, do you think there's gonna be a reshaping of the financial suite and, uh, for example, would there be someone who really focuses purely on liquidity, like a chief liquidity officer? What are your thoughts on that?
Alex Song: Could be right. Could be, especially with rising interest rates. Um, I think the relative value of money, And the relative value of liquidity, uh, definitely is higher now than it was a year ago, or even any point over the last five years. Right. Um, and this is interesting, At least in recent history, we haven't really lived through a period of rising interest rates before. So liquidity is much more meaningful. It moves the P and L a lot more. And so it's a function that I think traditionally has been ignored maybe, but now it's, it's definitely more impactful.
Daniel Shaffer: That's really insightful. Quick question on artificial intelligence. I read the other day, something that was shocking. Um, someone in the labs of artificial intelligence are claiming sentience, it's hard to imagine. But do you think that our AI will replace people? How's it being leveraged?
Alex Song: It's hard to say, um, probably not in the near future. But again, that's more of a personal take. I think that for us automation is super important, right? So the, the better and the faster, and the more intuitive that automation is, the better the AI is. Obviously it makes our software and our work a lot easier. That being said, who's building it all? Right. It's all the human engineers that, that we've been fortunate enough to be able to hire right over the last few years. So, um, Yeah. I think we, you know, probably have a, a slightly mixed view on that.
Daniel Shaffer: Well, Alex, it has been an absolute pleasure to talk with you today. And I, I look forward to opportunities in the future to reconnect and hear about how things are going with you and, and with Ramp.
Alex Song: Absolutely. Thanks for having me.