Since the launch of fintech startup Brex in 2017, its two co-founders Henrique Dubugras and Pedro Franceschi have been running the company as co-CEOs.
But starting today, the pair told TechCrunch in an exclusive interview, the San Francisco-based enterprise credit card and expense management company is shifting to a more traditional — and what they say should be more flexible — model of a single CEO at the helm. . Franceschi will become sole CEO while Dubugras will become chairman of Brex’s board of directors.
In an in-depth chat, the two co-founders gave us a look at what the new structure will look like, the current state of the company’s finances, and how it managed to reduce its cash burn.
The close friends started working together as co-founders of another company, Brazilian payment processing startup Pagar.me, in 2012 when they were just 16 years old. (That company ended up being acquired by Stone Pagamentos for “tens of millions of dollars” — before the two had even been to college.) While both founders could code, they quickly realized that Franceschi was the “better coder.” Instead of having one person run one part of the organization like product and engineering and the other run sales and marketing, they decided to split their duties as external and internal co-CEOs (a decision they touched on in this episode of the Found podcast last year).
The model worked so well for that company, they said, that they decided to implement the same strategy when they founded Brex after dropping out of Stanford to join the YC Winter 2017 team.
“The upside is that we had twice as much time as other CEOs,” Dubugras said.
But now the co-founders believe that having two CEOs could be a hindrance to the company’s growth, preventing its leadership from making faster decisions. They also feel that when they do eventually go public — which they don’t anticipate until 2025 or later — that investors will be more attracted to a traditional model of a single CEO running the company.
“I think we’re at a scale where we’re starting to see some of the cracks in the co-CEO model,” Dubugras told TechCrunch in an exclusive interview. “After we talked, we thought this would help the business succeed. We believed this would allow for much faster and better decision-making.”
During his years at Brex, Franceschi led the development of the company’s core financial infrastructure from the ground up, which the pair claim has allowed Brex to “have high margins and scale faster globally.” According to the company, he “led the entire organization over the last six years,” helping it grow to more than 30,000 customers (from startups to more than 130 publicly traded companies) and a product suite that spans corporate cards, banking, expense management, traveling and paying bills. Some of its biggest customers include DoorDash, Flexport, Roblox, Compass and SHEIN, but most of its revenue still comes from startups, the co-founders say.
Dubugras, meanwhile, has focused more on tasks like fundraising — the startup has raised over $1.5 billion in both primary and secondary transactions. Its backers include Greenoaks Capital, TCV, Tiger Global Management, Kleiner Perkins, Y Combinator and Global Founders Capital, among others. He also managed relationships with banking partners and regulators and served as Brex’s face to “personally sell” to its largest customer “at any time.”
He added: “Each of us had our own responsibilities…[and] we made many decisions together. That worked extremely well when we were younger, but of course it got harder as we got older.”
Dubugras insists he is still committed to Brex.
“I will continue to participate to the extent that the team wants and needs my participation. Brex remains my main and only thing,” he said.
Ups and downs
The once-flying company has been on a roller-coaster ride in recent years. Two years ago, it was valued at $12.3 billion after raising $300 million, and had poached a former Meta executive Karandeep Anand to serve as its Chief Product Officer after leading Meta’s business products group. (He was then named the company’s first president in November 2023.)
In January, Brex laid off 282 people, or about 20% of its staff. This follows a layoff of 136 people in October 2022, or 11% of its staff, across all departments as part of a restructuring. Today it has 1,000 employees.
There have also been many reshuffles among the Brex management. Sam Blond left his position as chief revenue officer in 2022 to join Founders Fund (a position he left in March). Earlier this year, Brex announced that its COO, Michael Tannenbaum, was transitioning from his role to join the board of directors. At that time, Camilla Morais, who was SVP of global operations, was promoted to COO. And it was announced that Cosmin Nicolaescu was transitioning from his role as CTO to an advisory role this summer.
In the memo to employees at the time of her layoffs, Franceschi wrote that the company “emphasized long-term thinking and ownership over short-term profits” in its corporate structure.
And then there’s the matter of her finances.
The co-founders told TechCrunch that its cash runway is now four years. This makes up for a January article from The Information around the time of its most recent layoffs, where Brex 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.” When asked about the financials at the time of these layoffs, a company spokesperson told TechCrunch that the data was “inaccurate” and directed me to the memo announcing the layoffs, which wrote: “Changes today are driven by a desire to make Brex more flexible and to accelerate our path to profitability, building on 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.”
Of course, laying off employees is a tried and true way to cut costs and improve your cash flow.
Today, Franceschi told TechCrunch that Brex has cut its cash in half over the past year. And while he declined to disclose revenue figures, he said the company’s goal is to be cash-flow positive by 2025.
When asked how the fintech startup managed to reduce its cash burn, he said there was a combination of factors. First, Brex saw increased revenue growth “without an increase in fixed costs,” he said.
Layoffs since the beginning of this year “have contributed to a lot of savings” (and he says he doesn’t expect any more layoffs). And finally, the company has worked harder to move faster.
“The biggest benefit after the layoff wasn’t just the cost savings. It was the way the company operates,” he said.
As for revenue, Franceschi said it comes mostly from exchange, though its software business is growing as startups grow and new mid-market and enterprise companies sign up as customers. And there is also the income that comes from interest and foreign exchange charges.
Franceschi said that by offering cash back and rewards, more of her customers are using Brex’s card product, which in turn generates more interchange revenue.
Meanwhile, Brex has no plans to raise primary funds anytime soon. But it may offer a secondary sale at some point so that before the company goes public, those shareholders who want to cash out can do so without pulling the stock, Dubugras said.
“We don’t want to be a high-volatility public company … that really distracts from the execution of the company and the core mission,” he added. “I think an important element of being a lower-volatility public company is cash flow positive and generating money, which historically we’ve projected for 2025. So if that happens in 2025, [an IPO] it will be soon after. But we have to get there first.”
There’s no doubt that the spend management space Brex operates in is increasingly crowded — as it competes with startups like Ramp, Mercury, and Airbase, among others. But it also competes with the likes of American Express, Concur and Citi.
Franceschi claims Brex’s advantage is that it built its technology stack “vertically integrated into the Mastercard rails and the ACH rails and the money movement rails,” while some competitors built their business on top of other platforms like Stripe or Marqeta.
This works for simpler use cases, he said. But for more complex scenarios like global coverage, the depth of integration helps.
However, the competitive landscape remains hot. In April, Ramp announced it had raised another $150 million at a post-money valuation of $7.65 billion. And, digital banking startup Mercury in May announced that it is putting software into its bank accounts, enabling its business customers to pay bills, bill customers and reimburse workers.
Brex remains undaunted.
“A lot of the momentum we’re seeing now is pure new customers coming in from the enterprise side, versus customers at scale with us of course,” said Franceschi.
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