Business

Brex drops small business customers as Silicon Valley adjusts to new reality


Brex Co-Founder & CEO Henrique Dubugras speaks on stage during the TechCrunch Disrupt San Francisco 2019 event at the Moscone Convention Center on October 2, 2019 in San Francisco, California.

Steve Jennings | beautiful pictures

BrexHenrique Dubugras, co-founder of Henrique Dubugras, a Silicon Valley lender, is shedding tens of thousands of small business customers to focus on larger clients backed by ventures.

The company started Notice to customers This week, they have until August 15 to withdraw funds from online accounts and find new providers, Dubugras told CNBC Friday in an interview with Zoom. Axios reported the change on Thursday.

This move is the latest sign of a sea ​​change occurs among startups when abrupt change in market conditions is forcing a new discipline on companies that previously focused exclusively on growth. The change began late last year, when shares of publicly traded fintech players were as high as PayPal started to collapse.

Dubugras said he and co-founder Pedro Franceschi made the decision in December as their newfound clients grew increasingly demanding. Valuations of public companies quickly spilled over into the private sector, accelerating pre-IPO valuations and forcing companies to focus on profits.

That means some of Brex’s biggest customers are starting to demand solutions that help them control costs and hire international workers cheaper, Dubugras said.

At the same time, the traditional small businesses (including retailers and restaurants) that Brex began adding to its expanded support lines in 2019, resulted in worse service for startups. careers they value more highly, he said.

“We got to a situation where we realized that if we didn’t choose either, we would be doing a bad job for both groups of customers,” he said. “So we decided to focus on our core customers, which are growing startups.”

Initial news of the announcement caused mass confusion among Brex customers, prompting Franceschi to tweet about the move, Dubugras said.

Brex is holding clients with institutional backing of any kind, including from accelerators, angel investors or Web 3.0 tokens, he said. They are also holding on to traditional companies that Brex considers to be mid-market sizes that have “more financial history so we can underwrite them on our credit cards,” Dubugras said.

Change is the latest learning time for the two young cofounders, Stanford University dropouts, who took Silicon Valley by storm when they created Brex in 2017. The company was one of those to achieve. fastest unicorn position and was last valued at $12.3 billion.

The pair mistakenly thought that expanding the service to more traditional small businesses would be a simple move. Instead, the needs of the two groups are different, requiring a different set of products, he said.

“We built Brex with 20 people, so we thought, why can’t we build another Brex with 20 other people?” Dubugras said. “I’ve learned that focus is incredibly important, which is definitely a lesson I’ll carry with me forever.”

While business leaders have warning of an impending recession in recent weeks, the decision was not based on concerns that small businesses would default on corporate cards, the co-founder said. That’s because most small businesses have to return their cards on a daily basis, there’s very little risk Brex won’t be refunded, he said.

“It was terrible, it was also the worst outcome for us,” Dubugras said. “We’ve invested a lot of money to get these customers, serve them, build the brand, all of these things.”

Brex 2nd on this year’s CNBC 50 Disruptor list. Register for our original, weekly newsletter, which goes beyond the annual Disruptor 50 listing, providing an in-depth look at the listing companies and their innovative founders.



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