Ramp announced a $750 million funding round at a $44 billion valuation on Thursday, led by ICONIQ, GIC and Ontario Teachers' Pension Plan. The round marks a roughly 38% increase in the New York-based spend-management company's valuation. The growth is driven by corporate clients grappling with artificial intelligence spending that is consuming larger portions of budgets, according to CEO Eric Glyman.
Ramp Crosses $1 Billion Revenue Milestone
The company crossed $1 billion in annualized revenue with positive free cash flow, according to Glyman. The payment software company now serves 70,000 businesses.
CFOs Face Unplanned AI Token Costs
"What we're finding is tokens cost quite a bit of money and most CFOs not only didn't plan for this in their annual plans --- the steep growth --- but don't have great tools to manage this," Glyman told CNBC in an interview Thursday. "Suddenly you have this third pillar that has showed up, which is spending through tokens and intelligence. It's not a clean area of spend."
Glyman said CFOs are often surprised at how much they're actually spending. "People saying this is the greatest opportunity we've had to grow our business in our careers, and yet it is the fastest growing line item," he said.
Ramp Product Routes Tasks to Cost-Effective AI Models
Ramp now has a product to help clients manage AI spending. It helps companies route tasks to AI models that can be done at a fraction of the cost. That price for CFOs often comes in the form of paying for "tokens," the units that AI companies use to measure usage.
"The problem is most companies are using the frontier models, this most advanced intelligence for everything," Glyman said. "Don't get me wrong, you might want a super advanced intelligence to run your most critical analysis, but you may not need it to edit your email."
Glyman said frontier model companies like OpenAI and Anthropic have no incentive to steer people to a cheaper option. "They have no incentive to tell people you know that task you wanted to do. It's possible to do at 100th of a cost," he said.
Highest AI Spenders Show 12% Revenue Growth
Glyman said those spending the most on AI are seeing the largest boost to revenue, and some are seeing "extraordinary ROI." But the returns are often for the companies spending on AI efficiently.
Among the 70,000 businesses using Ramp, the ones spending the most of their revenue on AI grew their revenue by 12%. Those spending the least saw flat growth.
For now, that spending isn't coming at the expense of software budgets. "Despite the movement that's happened in the stock market, we have not yet seen that software spend," Glyman said. "It does continue to grow, but I do think the bill will come due."
Glyman also addressed "tokenmaxxing," an approach where developers use as many tokens as possible. Some companies have used it as a proxy for productivity, but the problem is that more tokens don't necessarily mean more value. "I think it's the twilight moment of tokenmaxxing," he said, adding that companies are wising up to that metric.
FAQ
What is Ramp's new valuation after its latest funding round?
Ramp announced a $44 billion valuation following a $750 million funding round on Thursday. The round was led by ICONIQ, GIC and Ontario Teachers' Pension Plan, marking a roughly 38% increase in the company's valuation.
How does Ramp help companies manage AI spending?
Ramp has a product that helps companies route tasks to AI models that can be done at a fraction of the cost. The product addresses the challenge CFOs face with AI token costs, which Glyman said most CFOs didn't plan for in their annual budgets and don't have great tools to manage.
What revenue growth did Ramp's highest AI-spending clients see?
Among the 70,000 businesses using Ramp, the ones spending the most of their revenue on AI grew their revenue by 12%, according to CEO Eric Glyman. Those spending the least on AI saw flat growth.
