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How Brex more than doubled its valuation in a year

An interview with CEO Henrique Dubugras

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Image Credits: TechCrunch

Brex, a fintech company that provides corporate cards and spend-management software to businesses, announced earlier today that it closed a $425 million Series D round of capital at a valuation of around $7.4 billion. The new capital came less than a year after Brex raised $150 million at a $2.9 billion pre-money valuation.

So, how did the company manage to so rapidly boost its valuation and raise its largest round to date? TechCrunch spoke with Brex CEO Henrique Dubugras after his company’s news broke. We dug into the how and why of its new investment and riffed on what going remote-first has done for the company, as well as its ability to attract culture-aligned and more diverse talent.

More customers, more product

Undergirding the company’s financial news today was its announcement of Brex Premium, a software suite that the unicorn intends to charge for. As TechCrunch has written ad nauseam, there has been an interesting rift between corporate spend-management companies regarding whether they charge for the software that they layer around their proffered business plastic. Brex has now crossed this particular Rubicon and joined those that do, at least in some cases.

Brex Premium will run customers $49 per month, which Dubugras described in a call as less expensive than the systems it may replace. For companies looking for integrated bill pay, expense management and the like, it could be a good fit. And the service could bolster Brex’s aggregate revenue run rate with high-margin, recurring software fees that public market investors have long coveted.

On the topic of investors, let’s circle back to Brex’s round. Here’s what we need to know: How quickly has Brex grown in recent months, why did the company choose Tiger as its lead investor (from over $1 billion in demand for the round), and what’s ahead for the company itself?

In order:

Growth

Per Dubugras, from March 2020 to March 2021, Brex grew its revenues and TPV, or total payment volume, by more than 100%. As Brex reached $1 billion in TPV during its first seven months of its existence, again according to its CEO, the company’s aggregate TPV add during that 12-month period was in excess of that figure. Multiples higher, by our reckoning.

That growth explains how Brex was able to double its valuation. It grew quickly. How it did so is worth exploring.

According to its CEO, Brex greatly expanded the sort of company that could sign up for its service in January, albeit with a minimum of public-facing noise. So, from venture-backed startups to e-commerce companies, Brex made it possible for any company to sign up for its cards.

However, while its previous customer base could qualify for a 30-day charge card, the broader pool of customers that it began to accrete after the update to its rules is more tied to single-day credit. But by restricting offered credit to effectively a zero time horizon, Brex has been able to onboard more customers without changing its credit risk, Dubugras explained.

Requiring its newly broadened customer base to pay off spend the next day did not hamper Brex’s growth; the company said in an email that customer growth jumped 80% in Q1 2021 from the final quarter of 2020. Today some 45% of Brex customers are small and medium-sized businesses, implying that the category has been a beneficial addition to the company’s growth curve.

Why Tiger?

Seeing Tiger Global lead the Brex round was roughly as surprising as discovering that your local diner serves eggs. But there’s a bit more to the story than just the fact that Tiger is currently on something of a late-stage rampage.

Dubugras told TechCrunch that a multiyear relationship with the investing group allowed both to move quickly. Given that the new round was priced at a level that Brex was sure to appreciate, it’s not a surprise that it was able to close in rapid fashion. The CEO also told TechCrunch that his company was looking for a crossover investor, one that could hold shares even after Brex goes public and perhaps buy some in its eventual IPO.

Brex doesn’t have near-term IPO plans, he added.

What’s next?

This was the second call in a row that TechCrunch has had with Dubugras with the CEO located in Los Angeles; Brex went remote-first in September 2020. We raise that point not merely to note that not every company is gearing up for a return to the old normal, but to bring our conversation to hiring.

Per Brex’s CEO, the move to remote greatly boosted the “TAM,” or number of people it can hire. By fishing for staff outside of the Silicon Valley bubble, Brex has been able to hire more rapidly, more diversely and with a tighter culture fit, its CEO said. Remote-first companies, by fishing in a larger lake that also features fewer corporate anglers, could find a long-term staffing advantage over centralized rivals if they can retain their cultural core.

The company is going to need the staff, given that its leadership is bullish concerning what’s ahead. Dubugras told TechCrunch that he’s very optimistic about what’s to come, that per-customer TPV is rising, among other positive signals. And with the $425 million in new capital giving Brex several years of runway in his view, he can probably get to an S-1 without raising again. Let’s see.

After going public, once-hot startups are riding a valuation roller coaster

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