Here in the US, the corporate spending space is becoming increasingly competitive, with several startups clamoring for market share.
But in the Middle East, the market is much less crowded. And a new startup, Pluto, hopes to gain traction in the region in the same way its counterparts here in the US in their home country. In fact, Pluto’s self-proclaimed mission statement is that it is “building disaster for the Middle East”. For the unknowns, driveway is an expense management startup that raised funds last August $300 million at a valuation of $3.9 billion.
Other prominent players in the space include Brex, which last month announced a $300 million raise against a $12.3 billion valuation; Airbase, which raised $60 million last July and; more recently, TripActions, which grew from a primarily “business travel” startup after the COVID-19 pandemic to also, more broadly, is an expense management company, valued at $7.25 billion in October.
Pluto’s first product, launched in October 2021, is a card designed to help businesses digitize their out-of-pocket expenses. It is particularly aimed at meet the needs of underserved SMEs in the region, according to Pluto CEO and Y Combinator alum Mo Aziz, who started the company with CPO Mohammed Ridwan and CTO Nayeem Zen. Ridwan and Zen previously worked at companies such as Square, CashApp, Shopify and Uber.
And today, the company announces that it has just closed a $6 million starting round led by Global Founders Capital, which includes companies such as Soma Capital, Graph Ventures, Adapt Ventures and OldSlip group. In particular, angel investors from large corporations in the US are also circulating money, including: Disaster’s founders Eric Glyman and Karim Atiyeh and Airbase founder Thejo kote. Additional angel investors, among many others, included Plaid co-founder William Hockey, Not Boring’s Packy McCormick and MFM’s Shaan Puri.
You might wonder why companies in the corporate spend space would repay a new player in the corporate spend space? The answer is fairly simple. According to Aziz, Ramp, Brex and Airbase are not currently active in the Middle East.
“Companies like Brex have been trying to take over Middle Eastern companies and issue them corporate cards from the US,” Aziz told TechCrunch. “However, this only works for companies in the Middle East that also have a US branch. Second, most US corporate cards don’t work perfectly in this region because merchants block US card boxes to prevent potential fraud.”
Obviously, Disaster doesn’t see Pluto as a threat. Via email, co-founder and CTO Karim Atiyeh told TechCrunch: “At Ramp, we are passionate about empowering talented and driven founders who have an outrageous impact. What attracted us to Pluto was the team’s first-class caliber and the founders’ track record of building fantastic and complex products from the ground up. We are excited to be part of their journey as they realize their vision in the Middle East.”
The COVID-19 pandemic played a role in Pluto’s formation by forcing businesses in the region to accept cards and contactless payment methods such as tappay, Aziz believes. That has accelerated card adoption — with 90% card acceptance rates in the UAE and Saudi Arabia by some estimates — in the region.
“It has taken all this time, as in the past banks have been very reluctant to partner with fintech companies to create financial products and services together,” Aziz said. “This has also precluded the existence of publisher players and publishers, or Marqeta-like companies, which are the main underlying infrastructure.”
But more recently, the region has seen a “rapid” shift that has led to “a strong push for fintech enablement from regulators, openness of banks to partner with fintech companies and the emergence of the region’s first issuer processors and BaaS platforms are now the golden moment to build a company like Pluto in MENA,” Aziz added.
It’s still early days and Pluto is still in its pre-launch phase, but Aziz said the startup already has 35 customers in the pipeline with no marketing efforts in just a few months since its inception. It is gearing up for its formal launch in the UAE and Saudi Arabia in the coming weeks.
The need certainly appears to be there. In MENA, the UAE native Aziz, most companies hand out cash or personal cards from a manager or a business owner to employees for making business expenses.
“This is because banks in the region only issue business debit or credit cards with no control over spending,” he told TechCrunch. But with Pluto, the company claims, companies can streamline their spending by issuing unlimited virtual or physical expense-control cards to employees, while gaining real-time visibility into their spending through its expense management software.
To prevent possible fraud, those companies often keep those cards with one or two people, usually a financial controller and/or the business owner. Employees who incur business expenses will then receive either compensation, a personal card from the manager or in most cases cash.
“This results in serious inefficiencies, including money leaks, lack of visibility into transactions that take place and a lot of work for finance teams to track down receipts so they can reconcile business spending,” Aziz said.
Pluto, he said, allows companies to control spending before it even happens by creating an unlimited number of virtual and physical cards with spending controls that linkable to existing business bank accounts and category restrictions. The software then automates the process of collecting and reconciling receipts.
In addition to the three co-founders, Pluto has two other employees with a fully remote team working between Canada, the US and the UAE. The company’s business team mainly operates from the UAE while technology and engineering is based in Canada with a few engineers working remotely from the US
“We did this to leverage North American tech talent, with whom many of my co-founders have worked in their past roles,” Aziz said. “Recruiting tech talent in MENA is a lot harder and we want to leverage our two hubs in Toronto and the UAE to attract top talent from both parts of the world.”
Speaking of which, investor Packy McKormick, founder of Not Boring Capital, describes Pluto as “a rare combination of top global talent with deep local knowledge working on a problem whose time has come.”
McKormick told TechCrunch that when he first spoke with Aziz, he was most impressed that Pluto focused on tackling local challenges — particularly around digitizing out-of-pocket expenses — “rather than purely applying something that had worked elsewhere.”
“At first glance, it looks like Middle East Disaster – that’s why I was happy to see [founders] Eric and Karim in the round, but a layer deeper, the product is tailor-made for the traditional SMEs that are making the region’s economy abuzz. It reminds me of the story of Careem who beat Uber in the region: the local player valued and built for the primacy of cash. Pluto begins the same way. “
The startup plans to use its new capital to, of course, hire more staff and secure banking partnerships and licenses as it works towards the near-term launch of Pluto in the UAE and Saudi Arabia and in Egypt. Pakistan and Bangladesh in the longer term.
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