Some companies might go on a shopping spree after a big windfall, but subscription billing firm Recharge is taking a more measured approach to spending the $277 million Series B growth funding round it closed in April.
“The company was bootstrapped from the beginning so this isn’t a culture of spending aggressively,” said CFO Stephanie Lemmerman, who joined Recharge in 2020 from guided meditation app company Headspace Inc., where she was executive vice president of finance. “Our intention is to continue to build a very, very healthy long-term business and to not have unhealthy levels of burn.”
Recharge will be flexible and patient as it considers the pace and details of the spend — and she expects to use only a portion of it in 2022. Lemmerman says the company considers “what are we trying to execute against from a strategic perspective, how much will we invest in that area and what type of payoff and long-term benefit will we see,” she said. “It’s not something where we raised $277 million and it’s gone two years later,” she said.
At the same time, there's no shortage of plans for the funding raised by the company's investors, Summit Partners, ICONIQ Growth and Bain Capital Ventures. The proceeds are earmarked to be invested in a range of initiatives that include expanding the business into Europe, strategic merger and acquisitions and accelerating the firm’s already red-hot hiring pace to tap more talent in such areas as research and development, sales and marketing, she said.
Recharge is hewing to its steady strategy as threats around rising inflation, which can erode the value of cash, is already clouding business planning at some companies. But Lemmerman said in an email that Recharge feels "like we are in a really great position to execute against our plan with the capital we have on the balance sheet, even with the levels of inflation we are seeing."
A pandemic boost
Founded in 2014 by Oisin O’Connor and Mike Flynn, Recharge is a subscription payment solution provider for companies selling physical products. It serves about 15,000 merchants selling beverages like Oatly and Fiji Water and personal products like Billie razors.
Recharge’s business and e-commerce was boosted in the pandemic as consumers and merchants turned to online shopping and sales models. “You saw a lot of merchants who needed to be online in order to survive and a lot of consumers who were concerned about the predictability of getting what they needed,” Lemmerman said. In 2020 Recharge processed 2.9 billion subscription orders, up from 1.4 billion in 2019, and by year-end 2021 the company was on pace to process more than the previous two years combined.
Usage-based subscription pricing models are becoming more common for some software-as-a-service (SaaS) companies, but Lemmerman said the merchants that Recharge works with have long incentivized consumers to subscribe to buy razors or other products they once bought periodically in stores by offering discounts in what she calls the “subscribe and save” business model. For example, the merchant can configure their offerings with two tiers of options in which a customer could choose a 5% discount for monthly orders or a 15% discount for annual subscriptions paid in advance. Separately, Recharge also uses a so-called take rate model through which it gets a percentage of what the merchant charges.
Looking back at 2021, Lemmerman is proud of the more than 300 hires that the company brought on, more than doubling its employee count to over 500 people in 42 states and 15 countries even as the competitive labor market has heated up. The company has also built a 20-person finance department, which did not exist prior to Lemmerman's arrival. A good benefits package and the fact that the company is fully remote have helped draw the new hires but the competition remains stiff, she said.
“The honest truth is there is just a certain point where you have to compete with what’s happening in the market,” she said.