“Without the UK we can’t operate,” says the UK head of Danish expense management unicorn Pleo.
Ben Swales, general manager for the UK, Ireland and Nordics at Pleo, spoke to Tech.eu as the company released its 2023 financial figures.
Looking at the top-line figures, Pleo’s overall revenue will be £64m in 2023, up from £42m the previous year.
The loss for 2023 was £44 million and for 2022 it was £61 million.
The loss was attributed to product and platform investments, as well as “growth plans and budgets.”
Like other fintech companies, Pleo wants to turn a profit, but that’s unlikely to happen until 2024.
According to its financial statements, in 2024 Pleo expects losses in the range of £37m to £45m.
Swales – an American who spoke to Tech.eu from Kentucky but is in the UK “quite often” – says the UK, where Pleo employs around 120 staff, is “without a doubt” Pleo’s largest market.
The UK is Pleo’s main market
The company has an office in London, with the UK accounting for approximately 40% of its revenue and 43% of its business spend on the Pleo platform.
Swales says:
“We’ve seen significant growth in the UK and we see continued opportunities going forward.”
Co-founded by Jeppe Lindom and Nicolò Pela, who met at Danish supply chain fintech Tradeshift, Preo is something of a fintech darling in Denmark.
It was certified as Denmark’s eighth unicorn in 2021, raising $150 million at a valuation of $1.7 million, and six months later it raised a further $200 million at a valuation of $4.7 billion, making it one of Europe’s most valuable fintech startups.
Since those heady days, Pleo’s valuation has shrunk amid a market correction, according to one investor.
In the first quarter of 2024, Kinnevik, which owns a 14% stake in Pleo, valued Pleo at approximately $2.3 billion.
Today, spend management platforms continue to be a big hit with FDs and CFOs, expanding their reach both geographically and into new revenue streams.
Facing the Challenge
But the UK faces particular challenges, with Swales pointing to figures showing one in four UK businesses are considering cutting spending, while rising interest rates across Europe are impacting business spending.
Pleo employs around 1,000 people, with Denmark, the UK and Germany being its seven main European markets.
New European markets recently entered include France and Austria.
Speaking about performance in the news market, Swales said “things are going well”, but added: “I think it’s important to recognise the fact that the macroeconomic situation is quite challenging”.
Pleo, which has raised about $470 million in debt and equity funding and counts investors including Coatue Management, Archeon and Bain Capital Ventures, also recently gained a foothold in the U.S. market.
Pleo is an expense management platform and next-generation technology that helps small businesses better manage employee spending through automated expense submission.
This is a quicker alternative for businesses to traditional, tedious expense reporting, where individuals spend hours inputting expenses each month.
Pleo’s sweet spot
It is best suited for small businesses with just a few employees up to 5,000.
According to the company’s annual report, it has more than 33,000 corporate clients, somewhat short of its ambition of reaching 1 million users by 2025.
Aside from expense management, the app also offers invoice payments and vendor cards, allowing businesses to categorize recurring payments, aiming to ease the cash management process.
Preo, which has 10 offices across Europe, Canada and India, has also expanded into credit, bolstering its credit offering with a €40 million facility from HSBC Innovation Banking last year.
Swales said:
“I think it’s almost a necessity that our customers expect.
“Customers don’t want to worry about whether their cash flow is going to be tight in a given month, and they don’t want to worry about whether their Pleo digital wallet is going to be empty.”
As for a soft launch in the U.S., where Pleo has card partners, Swales stressed that Pleo’s focus remains on Europe, not the U.S., and that there are no plans for a formal U.S. launch at this time.
He said:
“The reality is we are a global economy, and many of these customers have employees in the United States.
“There’s really no point in offering a really great solution in Europe if you can’t extend that feature set to your U.S.-based employees.”
On the one hand, Pleo has new markets to attack, and on the other hand, it is looking to sell new products in more mature markets such as the UK.
Pleo reorganization
Like other fintech companies, Preo has restructured in the wake of the worsening economic situation, cutting about 10% of its workforce to between 900 and 1,000 employees by 2022.
Meanwhile, under the direction of new CFO Soren West Ronning, the fintech company is restructuring parts of its operations in an effort to reduce business costs.
He says.
“Our CFOs are coming in and saying, ‘No, we need to spend responsibly, we need to see a clear ROI on everything, and we need to be better managed.’
He added:
“Realistically, if you want to be a profitable business, you can’t spend money as if it’s going to become obsolete.
“We’ve really done a lot of cleaning internally. We need to be a little more responsible.”
One example of cost-savings is a review of travel expenses (although Swales jokes that “I probably have the largest travel budget in the company because I fly across the ocean the most”).
Pleo also evaluated business subscriptions, for example, whether its sales team needed to use a range of sales tools like a forecasting assistant, commission tracker, and other SaaS technology.
Swales added that the austerity measures would not extend to hiring freezes.
When it comes to AI, like any other company, we are evaluating and vetting how we can effectively leverage it at Pleo.
“Are we going to be an AI-first company?” he asks. “Probably not.”
Economic optimism
While Preo faces the same economic challenges as its rivals, the general manager noted there are some signs of optimism in the economy.
Swales highlighted that recent figures show an increase in business travel, which is a benefit of Preo’s partnership with travel management company Travel Park, whereby the two companies offer users a simplified travel expense management experience.
Entering new markets and upselling in existing markets will provide further opportunities for Pleo and will also be strengthened by its brand equity in the market.
