Brex - the startup card
How 2 founders at 22-years-old made a $2B company in 2 years
Welcome to the second entry to Next to Disrupt! Quick note - this will be the second fintech company I’ve covered (out of two posts), but I won’t only be covering fintech. I chose Brex because they have young founders, an interesting origin story, and truly wild growth - they just so happen to also be in the fintech space. Enjoy!
Introducing Brex. Founded just two years ago in 2017, Brex graduated from Y Combinator with the goal of making a better corporate card for startups. At first, this meant offering cards based on money in the bank - no personal guarantees, no proof of cash flows, no personal credit scores. Since then, they’ve expanded to new markets with corresponding bespoke feature sets. Earlier this year, they closed a Series C-2 round at an unbelievable $2.6B valuation - just two years after its founding.
Brex was founded by a pair of Brazilian 22-year-olds, Pedro Franceschi (left) and Henrique Dubugras (right). Before meeting each other at 16-years-old, Dubugras had a lucrative online game and an education company under his belt. After meeting, the pair launched Pagar.me, a payments company they built to 100 employees, raised $30M, and processed $1.5B annually before selling it. Ready for a new challenge, they moved to the USA to attend Stanford. They dropped out one semester later, after being accepted into Y Combinator to build an augmented reality company. Even with $120K in the bank, they couldn’t get a corporate card - and neither could the other companies in Y Combinator. Knowing their expertise in fintech, they pivoted, and Brex was born.
The original Brex card changed the game. No longer did a startup need proof of cash flows, credit scores, and security deposits to get a corporate card. Instead, Brex just wants to know how much money you have, how you spend it, and who invested. It seems obvious now, but never before had a corporate card been tailored so specifically to a market segment.
Today, Brex offers three corporate cards, all with no fees and no interest. Startups get no personal guarantee, easy expense tracking, higher credit limits, and extra rewards for rideshare, travel, and SaaS subscriptions. Ecommerce was the first industry specific card, sporting features like net-60 day payments and limits based on percentages of projected sales. And finally comes Life Sciences, with features like receipt-matching to ensure audit-compliance and extra rewards for conference tickets and lab purchases.
Without charging fees or interest, how do they make money? Up until recently, there’s a pretty simple answer. First, they charge merchants a small fee when Brex cards are used for purchases. Second, they charge $5/user/month for additional cards, with the first five cards included free. They haven’t published any revenue numbers, but it’s clear their top priority is customer experience, not profitability.
However, they recently announced Brex Cash - a bank account replacement with 1.39% yield and no transfer fees. There’s a saying that the goal of every fintech company is to become a bank, and this certainly lends itself to that. My guess is that through Brex Cash, they will have enough capital to lend/invest to generate significant revenue without introducing fees or interest.
Brex has been a rocket-ship since day one. In the few years since it’s founding, it’s raised almost $300M and now boasts a $2.6B valuation. What’s even crazier is that when they raised their Series C-2 round, they still hadn’t spent the money from their Series C - in their own words, it was more of a “repricing event”. Nobody, not even Brex, was expecting such massive success in markets outside of startups. But with Ecommerce and Life Sciences serving as proof, their total addressable market has blown up, hence the increasing valuation. They started by asking if a card tailored to startups would work, and now the question is: what industry wouldn’t it work?