Start expense management Brexwhich was valued at $12.3 billion two years ago, has laid off 282 people, or about 20% of its staff today.
The once high-profile fintech startup sent a memo to employees (also posted on Website) today, announcing the news.
In addition, Brex announced that its COO, Michael Tannenbaum, is transitioning from his role to join the board of directors. Camilla Morais, who was SVP of global operations, is promoted to COO. And Cosmin Nicolaescu is transitioning from his role as CTO to a consulting role this summer.
In the memo to employees, co-founder and co-CEO Pedro Franceschi wrote that the company was now “emphasizing long-term thinking and ownership over short-term profits” in its corporate structure.
“The opportunity ahead of Brex is huge and we want everyone to remain bullish on our equity and financial upside,” he added.
Franceschi also said the company is changing its operating model, expecting leaders to “operate at all levels by moving forward, promoting from within, increasing personal collaboration in our hubs and focusing on the time zones in which we operate.”
It’s not his first rodeo
In October 2022, Brex laid off 136 people, or 11% of its staff, across all divisions as part of a restructuring. After those layoffs, Brex had just over 1,150 employees.
It’s unclear how many employees Brex currently has, although its layoffs put the number at about 1,400 before its latest cuts.
The latest news of layoffs comes amid a report from The Information that the company reportedly told employees it was burning through $17 million a month in the fourth quarter of 2023 and only had “enough cash to last through March 2026.” A Brex spokesman told this publication on Monday that the company’s cash runway is now four years.
When asked about the financials, a company spokesperson told TechCrunch that the data was “inaccurate,” directed me to the memo announcing the layoffs, and wrote, “Changes today are driven by a desire to make Brex more flexible and accelerate our path to profitability. supporting the growth we had in 2023. We grew our revenue by 35%+ in 2023 while gross profit grew by 75%. This downsizing puts us on a clear path to profitability.”
He added: “Brex’s financial plan is to be well above cash flow positive with the current cash we have, which requires approximately 4 years of runway. Plus, cherry-picking certain months for financial burn is not the right way to look at the burn.”
Brex had a short-term boost to its business after the collapse of Silicon Valley Bank last year. But that growth has since slowed, largely due to rising interest rates and a slowdown in VC funding. With more startups failing and not growing, many of Brex’s clients started spending less overall.
The company’s annual net income was $279 million in the fourth quarter. Although it was up 32%, most of that growth occurred in the first quarter of the year.
Employees affected by the restructuring will receive eight weeks of severance pay, with two additional weeks of pay for each additional year of service. The company is also offering a one-year stock cliff waiver for those who haven’t reached theirs yet.
Things at Brex have been on the ups and downs since June 2022, when the company said it was “less suited to serve the needs of smaller customers” in an announcement that shocked the startup community.
While Brex soon clarified that by smaller customers it meant SMEs and unfunded startups, the move still seemed like a surprising turnaround given that the company had started life as a credit card company for startups. The announcement came about two months after Brex announced a “big software push” and that it was putting more emphasis on going to market to serve larger, enterprise customers.
Last June, the company appeared to have an about-face, tapping Jason Mok, a former partner at Andreessen Horowitz (a16z) and a Silicon Valley Bank veteran of more than 16 years, as its new head of startups. Brex co-founder and co-CEO Henrique Dubugras told TechCrunch at the time that “founders and startups have always been at the core of Brex.”
The expense management space has become increasingly competitive with players such as Ramp, Navan, Mesh Payments and Airbase (among others) vying for market share. In December, Navan, an expense management startup once known as TripActions, laid off 5% of its staff, or 145 people.
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