We rely on the seamless flow of transportation and logistics to access numerous services and products embedded in our everyday lives. They are delivered to us through fleets of various sizes and types of vehicles, and it is all powered by a commercial fuel card industry that processes $120B of transactions each year in the United States. Employed by fleets to purchase fuel and track expenses, these cards have richer controls, more detailed reporting, and better security features than general purpose corporate cards. For decades, the fuel card market has been dominated by a handful of large incumbents who have leveraged their closed loop networks to effectively maintain share through scale and proprietary integrations at fuel retailers. However, this dominance has also stifled innovation during a time when customers are increasingly demanding better user experiences with modern payments and software solutions.
With the growth of sophisticated fintech infrastructure and availability of more granular data through card networks, historical advantages of legacy players have eroded and created opportunities for innovation. We are excited to lead a Series B investment in Coast, a company building a modern financial operating system for fleets.
Our relationship with Coast began in 2022 when we first met CEO and founder Daniel Simon. As we continued to get to know Daniel and his team, we were very impressed by their ability to deliver on an ambitious vision while also taking on existing multi-billion-dollar behemoths. Successfully executing against a market as large as this requires a tremendous amount of tenacity, a deep understanding of the complexities of building a fintech business, an obsession with solving customer problems, and an innovative approach to unlocking distribution. We see all these characteristics and more in Daniel and his team at Coast.
Daniel also previously co-founded and served as COO/CTO of Bread, one of the very first “buy now pay later” startups, which was later sold to Alliance Data Systems for over $500 million. He has deep fintech experience matched with a persistent drive to build a consequential vertical software and payments business. This track record of success and passion for a specific industry drove us to pursue a partnership with Daniel and his team, even when they did not have an immediate need for capital. Beyond funding, we also look forward to supporting Coast by integrating them with the global ICONIQ Growth community of entrepreneurs, investors, and operators.
In the US, there are approximately 40 million commercial vehicles that can benefit from using a specialized fuel card. Fleet operators need a vertical-specific solution that provides the security, controls, and telematics integrations to prevent unauthorized usage and optimize spend. To date, many startups have focused on serving the 4 million vehicles in American over-the-road (OTR) trucking companies, which tend to be price-sensitive to discounts and are exposed to market cyclicality. As a result, these companies need to work through volatility and win deals on price, putting pressure on their unit economics. The team at Coast has instead chosen to focus on more effectively addressing companies with the many more vehicles in light and medium-duty fleets that deeply value quality of product, ease-of-use, and clear ROI from better visibility and management. There are many examples of customers saving on meaningful costs by using Coast.
You might wonder how big the market is for non-OTR fleets, but these fleets are all around us, operating 35 million heavy pickups, box trucks, Ford Transit and Mercedes Sprinter vans, and other vehicles. Coast customers include those managing vehicles for plumbers, HVAC professionals, and landscapers, as well as operators of school buses, rental cars, ambulances, and last-mile delivery vehicles. By creating a delightful software experience, we believe Coast is opening up a historically difficult-to-address part of the market; many of the company’s customers, especially small businesses, had previously never adopted a fleet payments solution before. We also believe Coast is making it compelling for larger companies to move away from their incumbent fleet card provider and onto a more modern platform.
We believe the current core business itself represents a massive opportunity, but we are even more excited about the potential to expand well beyond it. By delivering exceptional software, Coast has been able to leverage fuel payments as a low friction wedge to build deep and trusted relationships with customers. In doing so, Coast has been able to command more wallet share from their customers. Many customers want to manage everything from a single pane of glass, which has driven increased adoption of its cards to pay for non-fuel expenses. With customer obsession and product leadership at the cornerstone of the company, we believe Coast has a unique opportunity to own the entire financial operating system for its customers in the future.
We are thrilled to work with Daniel and the entire team at Coast to further their mission to simplify the day-to-day management of thousands of fleets. We believe Coast’s commitment to excellent products and customer experience will reshape the fleet management landscape and provide companies with the solutions they need to be even better operators.
Published:
July 18, 2024
