Since its founding in 2017, fintech startup Brex has been run by co-founders Enrique Dubouglas and Pedro Franceschi, who serve as co-CEOs.
But starting today, the San Francisco-based corporate credit card and expense management company is moving to a more traditional, single-CEO model that they say should be more agile, the two said in an exclusive interview with TechCrunch. Franceschi will become sole CEO, and Dubouglas will become chairman of Brex's board of directors.
In an in-depth conversation, the two co-founders shared a bit about what the new structure will look like, the company's current financial situation, and how they've been reducing their cash burn.
The two best friends began working together as co-founders of Pagar.me, a Brazilian payment processing startup, at just 16 years old in 2012 (the company was acquired by Stone Pagamentos for “tens of millions of dollars” before they both went to college). Though both founders could code, they quickly realized that Franceschi was “better at it.” Rather than one managing parts of the organization like product and engineering and the other managing sales and marketing, they decided to split the responsibilities as an external co-CEO and an internal co-CEO (a decision we covered in this episode of the Found podcast from last year).
They say that model worked so well for that company that they decided to employ the same strategy when they founded Brex after dropping out of Stanford to join the YC Winter 2017 cohort.
“The good thing is, I had twice as much time as other CEOs,” Dubglass said.
But now the co-founders believe that having two CEOs could limit management's ability to make decisions quickly and create a bottleneck for the company's growth, and they feel that if they eventually go public (not expected until after 2025), investors will be more attracted to a more traditional model with one CEO running the company.
“We think at this scale we're starting to see the flaws in the co-CEO model,” Dubougras told TechCrunch in an exclusive interview. “We talked about it and we thought this was going to be a win-win for the business. We thought it would allow us to make decisions much faster and better.”
Image credit: Brex
During his time at Brex, Franceschi oversaw the development of the company's core financial infrastructure from the ground up, which the pair claim enabled Brex to “become significantly more profitable and scale faster globally.” The company says Franceschi “led the entire organization over the past six years,” helping to grow the company to more than 30,000 customers (ranging from startups to more than 130 publicly traded companies) and a product suite that spans corporate cards, banking, expense management, travel, bill payments and more. The company's larger customers include DoorDash, Flexport, Roblox, Compass and Shein, but the majority of revenue still comes from startups, the co-founders say.
Meanwhile, Dubouglas focused on fundraising and other operations — the startup has raised more than $1.5 billion in both primary and secondary deals and is backed by GreenOaks Capital, TCV, Tiger Global Management, Kleiner Perkins, Y Combinator and Global Founders Capital, among others — as well as managing relationships with banking partners and regulators and being the face of Brex, “personally selling” to its largest clients “at any one time.”
He added: “Each of us had our own responsibility…” [and] We made a lot of decisions together, which worked well when we were small, but of course became more difficult as we got bigger.”
Dubouglas maintains he remains committed to the Brex.
“As long as the team wants and needs me to be involved I will remain involved. The Brex will remain my primary and only job,” he said.
Ups and downs
The once-successful company has had a rollercoaster ride in recent years: Two years ago, it raised $300 million and poached former Meta executives at a $12.3 billion valuation. Karandeep Anand He will lead Meta's business products group before becoming chief product officer (and was subsequently named the company's first president in November 2023).
Brex laid off 282 employees, or about 20% of its workforce, in January. This comes after it laid off 136 employees, or 11%, across all divisions as part of a reorganization in October 2022. It currently has 1,000 employees.
Brex has also undergone significant leadership changes. Sam Blond will leave his role as chief revenue officer in 2022 to join Founders Fund (he left that role in March). Earlier this year, Brex announced that COO Michael Tannenbaum would move from his current role to become a director. Camila Morais, who was then senior vice president of global operations, has been promoted to COO. And this summer it was announced that Cosmin Nicolaescu would move from chief technology officer to an advisory role.
In a memo sent to employees at the time of the firings, Franceschi wrote that the company's compensation structure now “emphasizes long-term thinking and ownership over short-term profits.”
And then there's the financial issue.
The co-founder told TechCrunch that the cash runway is now four years. This contradicts a January story from The Information around the time of the most recent layoffs, in which Brex reportedly told employees that it was burning through $17 million per month in Q4 2023 and “only lasting until March 2026.” Asked about its financial standing at the time of the layoffs, a company spokesperson told TechCrunch that the data was “inaccurate” and directed them to the memo announcing the layoffs, writing, “Today's changes are driven by our desire to make Brex more agile and build on our growth in 2023 to accelerate our path to profitability. We grew revenue by more than 35% and gross profit by 75% in 2023. This reduction in headcount gives us a clear path to profitability.”
Of course, firing employees is a tried-and-true way to cut expenses and free up cash.
Franceschi told TechCrunch today that Brex has cut its cash burn in half over the past year, and while he declined to share revenue figures, he said the company's goal is to be cash-flow positive by 2025.
Asked how the fintech startup was able to reduce its cash burn, he said a confluence of factors came into play, including that Brex saw revenue growth “without increasing fixed costs,” he said.
Job cuts earlier this year “resulted in significant savings” (and he said he doesn't expect any further cuts). And finally, the company has made greater efforts to move faster.
“The biggest benefit after we downsized is not just the cost savings. It's also changed the way the company operates,” he said.
Franceschi said most of the revenue comes from interchange, although the company's software business is growing as startups grow and new mid-market and large enterprise customers join, and it also makes money from interest and foreign exchange fees.
Franceschi said offering cash back and rewards will encourage more customers to use Brex's card products, resulting in increased interchange revenue.
Brex, meanwhile, doesn't plan to raise a primary capital anytime soon, but Dubouglas said the company could potentially do a secondary sale at some point to allow shareholders who want to capitalize before the company goes public to do so without lowering the stock price.
“We don't want to be a volatile public company…” [T]”It's a real distraction from the execution of the company and the core mission,” he added. “I think one of the key components to being a low-volatility public company is being cash flow positive and profitable, which is what we've historically planned for 2025. So if that happens in 2025, [an IPO] It will be soon. But first we need to get there.”
Brex operates in an expense management space that is admittedly competitive, with startups like Ramp, Mercury and Airbase competing with it. But the company also competes with companies like American Express, Concur and Citi.
Franceschi argues that while some competitors have built their businesses on other platforms like Stripe and Marketa, Brex's strength lies in the fact that it has built a tech stack that is “vertically integrated all the way from MasterCard rails to ACH rails to funds transfer rails.”
That works for simpler use cases, he says, but for more complex scenarios like global coverage, deeper integration is useful.
Still, the competitive landscape remains fierce: In April, Lamp said it had raised another $150 million at a post-funding valuation of $7.65 billion, while digital-banking startup Mercury said in May it was layering software onto bank accounts to let corporate clients pay bills, issue invoices to customers and reimburse employees.
The Brex remain undeterred.
“A lot of the momentum we're seeing right now is coming from an influx of new customers on the enterprise side, rather than the larger accounts that we have a natural connection to,” Franceschi said.
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