Brex’s two twenty-something founders are now billionaires, thanks to a lofty new funding round announced this week that nearly doubled the valuation of their five-year-old fintech firm.
The San Francisco-based startup—which is aiming to overhaul the corporate credit card—confirmed on Tuesday that it has raised $300 million in a funding round led by investment firms Greenoaks Capital and Technology Crossover Ventures (TCV), giving it a $12.3 billion valuation—a sizable jump from the $7.4 billion valuation it fetched just nine months ago.
Cofounders (and co-CEOs) Henrique Dubugras, 26, and Pedro Franceschi, 25, each hold a 14% stake in Brex, Forbes estimates, worth about $1.5 billion apiece. (Forbes discounts the value of privately held companies.) The pair declined to comment on Forbes’ estimates but Dubugras did speak with Forbes about his startup’s path to success.
The young fintech has made a name for itself with a corporate credit card tailored to the needs of startups. It remains Brex’s marquee product, and the interchange fees merchants pay when employees swipe Brex’s cards constitute nearly all of the company’s revenue.
In recent years, Brex has also launched new software offerings like an expense management product and a business bill pay feature: “If you get an invoice in your email, you can just forward it to us and boom, it gets paid,” Dubugras tells Forbes on a Zoom call from his home office in Los Angeles. In May, the company rolled out one of the first crypto rewards programs for corporations.
Brex is not the only business attempting to disrupt the stodgy, spreadsheet-centric world of B2B payments. Today, its rivals include startup Ramp (founded in 2019 and valued at almost $4 billion after an August funding round) and publicly traded Bill.com (valued at some $21 billion), which bought expense reporting software fintech Divvy for $2.5 billion last spring.
But Brex has been able to attract a deluge of venture capital by offering a suite of products that extend beyond the corporate credit card. Dubugras maintains that he’s not too worried about competition. “The market is pretty big, and I think that there’s space for a lot of people,” he says. “Most B2B payments are still paper- and check-based.”
The 1,000-person startup can credit its existence to a lively Twitter exchange in December 2012 between Dubugras and Franceschi about the nuances of coding tools. At the time, they were high school seniors living in Sao Paulo and Rio de Janeiro, Brazil, respectively. The 140-character tweet cap hindered the debate, so the two teens hopped on Skype to discuss further.
“On Skype, we couldn’t fight that much and became best friends,” says Dubugras.
In 2013, the pals launched a startup called Pagar.me that allowed Brazilian merchants to accept online payments. It was a 150-person outfit by the time they sold it three years later to a larger Brazil-based payments fintech called Stone. Dubugras won’t share the pair’s take, but says it was enough to pay for college—he and Franceschi are both Stanford computer science dropouts—and stow away some savings.
For their next act, the pair initially wanted to build bank accounts for U.S.-based startups, but settled on corporate credit cards as a more attainable route. (“What business would trust their money to these random 22-year-old Brazilians?” chuckles Dubugras. “With corporate cards…
We were giving them money instead of asking for their own money.”) Dubugras and Franceschi founded Brex in 2017 after quitting Stanford in the spring of their freshman year and, two years later, both earned spots on Forbes’ 30 Under 30 Finance list. By then, Brex had raised $213 million and was valued at $1.1 billion. In 2019, Brex also rolled out its take on the business bank accounts that had enthralled its founders from the start.
(Brex is not a chartered bank itself, so it partners with LendingClub or JPMorgan Chase for the accounts.) All told, the duo has secured more than $1.1 billion in venture money from the likes of Tiger Global Management, Peter Thiel and Affirm founder Max Levchin.
The company says its revenue more than doubled over the past 12 months, though it won’t share specifics or comment on profitability; private markets data provider PitchBook estimates Brex generated about $320 million in revenue for 2021. Dubugras says that Brex counts “tens of thousands” of corporate customers today, including the likes of Carta and Classpass.
The startup wants to keep the ball rolling in the new year. With $300 million in fresh funding, Brex aims to increase its headcount by at least 50% while also keeping cash in the coffers in case there’s a market downturn. Brex originally set out to serve startups, but Dubugras says mid-market firms account for more than 60% of its customer base today. In 2022, he hopes to reel in large corporations as well.
“I think it’s easy for people to think that we’re already successful,” he says. “We are, and we aren’t. We’re obviously happy about what we’ve achieved, but there’s so much more to come.”
Critics on BREX:
Brex is a financial technology company that primarily offers a corporate credit card to early-stage companies. Furthermore, business owners can also create a bank account (called Brex Cash) and utilize the company’s various expense management tools for their business.
Brex makes money through a monthly account subscription, interchange fees, referral fees from cashback rewards, interest on loans, as well as interest on cash held in its customer accounts.
When you think of the most rewarding small-business credit cards, you might assume that you’ll need to shell out a sizable fee each year for the ability to rack up bonus points. The Brex Card, however, proves that assumption incorrect.
The Brex Card doesn’t charge an annual fee, and no personal guarantees or credit checks are required to be approved. Plus, new cardholders can earn 50,000 signup bonus points after spending $9,000+ in the first 30 days.
The Brex Card still packs a generous reward structure, which can be tailored to pay out more based on the type of business you run. Here’s a look at a standard rundown of earning potential:
- 8x on ride-sharing spending
- 5x on travel booked through the Brex portal
- 4x at restaurants
- 3x on eligible Apple purchases made through the Brex portal
- 1.5x on advertising
- 1x on all other purchases
There are a few key caveats to the rewards structure. Let’s start with the most important piece of the puzzle: You have to use the Brex Card exclusively to get in on all those bonus opportunities. After two months, you have to “ensure card exclusivity,” which I assume you do by linking your other bank accounts.
If you’re using other small-business credit cards, your rewards dip to a measly 1 point per dollar, plus 3x for eligible Apple purchases — a rewards structure not worth celebrating. So, this credit card is only for business owners who aren’t afraid of a serious commitment and who are willing to break up with their other cards.
Read more: The best small-business crypto cards in 2021
Now, if you can make it your exclusive card, Brex offers some additional options to make the card more rewarding based on your spending routine. For example, if your company calls itself a tech company, you’ll earn 3x on recurring software purchases. If your company works in the life sciences, your highest payout — 8x — comes on conference tickets. So, if five of your employees are registering for that big annual meeting on biomedicine with a fee of $2,000 per ticket, that payout can come in handy. You’ll also learn 2x on lab supplies.
Another big differentiator is that Brex rewards you more if you pay your bill on a daily basis, similar to a debit card. To do that, you deposit money into a Brex cash account, and each day, your bill is automatically paid from those funds. If you pay your bill on a monthly basis, your rewards are a bit less: The highest payout is 7x.
And finally, Brex can claim a first in the business credit card space: You can redeem your rewards in cryptocurrency. The company recently announced that cardholders can enjoy redemption conversions in Bitcoin and Ethereum, which sets it apart from every other business credit card offer you’ll find right now. If you’re looking to dabble in crypto (and you aren’t afraid of Elon Musk’s Twitter account impacting the value of your points), this is a low-risk way to do it.
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