Since the founding of fintech startup Brex in 2017, its two co-founders, Henrique Dubugras and Pedro Franceschi, have led the company as co-CEOs.
But starting today, the two told TechCrunch in an exclusive interview, the San Francisco-based corporate bank card and expense management company is transitioning to a more traditional — and they say needs to be more flexible — model with just one CEO at the helm. Franceschi will develop into sole CEO and Dubugras will develop into Brex’s chairman of the board.
During an in-depth conversation, each co-founders gave us a sneak peek at what the recent structure will appear like, the current state of the company’s funds and the way it has managed to scale back its cash burn.
The close friends began working together as co-founders of one other company, Brazilian payment processing startup Pagar.me, in 2012, at the age of 16. (That company was eventually acquired by Stone Pagamentos for “tens of millions of dollars” – before they each went to school). Although each founders knew how one can program, they quickly realized that Franceschi was the “better programmer”. Instead of getting one person run parts of the organization like product and engineering and one other running sales and marketing, they decided to separate their responsibilities as external and internal co-managers (a decision they mentioned in this episode of the Found podcast last yr).
They say the model worked so well for this company that they decided to make use of the same strategy when founding Brex after she dropped out of Stanford University to participate in the YC Winter 2017 cohort.
“The positive is that we had twice as much time as other CEOs,” Dubugras said.
But now the co-founders imagine that having two CEOs might be a bottleneck to the company’s growth, stopping management from making faster decisions. They also imagine that when they do eventually go public – which they do not expect until 2025 or later – investors shall be more interested in the traditional model in which the company is run by just one CEO.
“I think we’ve reached a scale where we’re starting to see some cracks in the co-CEO model,” Dubugras said in an exclusive interview with TechCrunch. “After discussions, we thought it would help the company succeed. We thought it would enable 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 said allowed Brex to “achieve great margins and grow faster around the world.” According to the company, he has “led the entire organization for the past six years,” helping it grow to over 30,000 customers (from startups to over 130 publicly traded corporations) and provide a suite of products including corporate cards, banking, expense management, travel and bill pay . The company’s larger clients include DoorDash, Flexport, Roblox, Compass and Shein, but most of its revenue still comes from startups, the co-founders say.
Meanwhile, Dubugras focused more on tasks like fundraising — the startup earned over $1.5 billion in each primary and secondary deals; its backers include Greenoaks Capital, TCV, Tiger Global Management, Kleiner Perkins, Y Combinator and Global Founders Capital. He also managed relationships with banking partners and regulators and was the face of Brex “personally selling” to its largest customer “at any time.”
He added: “Each of us had our responsibilities… [and] we made many decisions together. This worked extremely well when we were younger, but naturally became more difficult as we got older.”
Dubugras insists he is still a Brexit supporter.
“I will continue to be involved to the extent that the team wants and needs my involvement. “Brex remains my main and only thing,” he said.
Ups and downs
This once dynamically developing company has experienced periods of ups and downs in recent years. Two years ago it was valued at $12.3 billion after raising $300 million and being poached by a former Meta executive Karandeep Anand served as 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 followed the dismissal in October 2022 of 136 people, or 11% of the staff, across all departments as a part of the restructuring. Today it employs 1,000 people.
There were also many reshuffles in the Brex management board. Sam Blond left his role as chief revenue officer in 2022 to affix Founders Fund (he left the position in March). Earlier this yr, Brex announced that its chief operating officer, Michael Tannenbaum, was transitioning from his position to a member of the board of directors. During this time, Camilla Morais, who was vp of worldwide operations, was promoted to COO. It was also announced that Cosmin Nicolaescu will move from CTO to an advisory role this summer.
In a memo to employees at the time of the layoffs, Franceschi wrote that the company’s structure now “emphasizes long-term thinking and responsibility over short-term profits.”
There is also the issue of his funds.
The co-founders told TechCrunch that the cash runway has been 4 years. This counteracts January article from The Information during the latest layoffs, in which Brex reportedly told employees that it was burning through $17 million a month in the fourth quarter of 2023 and that it had “just enough cash to last through March 2026.” When asked about funds at the time of the layoffs, a company spokesperson told TechCrunch the data was “inaccurate,” directed me to the memo announcing the layoffs, and wrote: “Today’s changes are driven by a desire to make Brex more agile and speed up our path to profitability by building on growth, we recorded in 2023. In 2023, we increased our revenues by over 35%, while gross profit increased by 75%. This reduction in workforce puts us on a clear path to profitability.”
Of course, shedding employees is a proven approach to reduce expenses and improve cash flow.
Franceschi told TechCrunch today that Brex has cut its cash burn by half over the past yr. And while he declined to disclose any revenue numbers, he said the company’s goal is to be cash flow positive by 2025.
When asked how the fintech startup managed to scale back cash consumption, he replied that it was because of a combination of things. First, Brex saw increased revenue growth “without increasing fixed costs,” he said.
Layoffs earlier this yr “contributed to significant savings” (and he says he doesn’t anticipate any more layoffs). And finally, the company worked harder to maneuver faster.
“The biggest profit after being laid off wasn’t just the savings. This is the way the company operates,” he said.
In terms of revenue, Franceschi said it comes mainly from alternative, although its software business is growing as startups get greater and acquire recent mid-market and enterprise customers. There is also income from interest and currency exchange fees.
Franceschi found that by offering cash back and rewards, more customers use the Brex card product, which in turn generates more revenue from exchange services.
Meanwhile, Brex has no plans to conduct any core collections anytime soon. But it might propose a secondary sale at some point so that before the company goes public, shareholders who need to profit from it will probably do so without reducing the value of the stock, Dubugras said.
“We don’t need to be a highly volatile public company… [T]It really distracts from the company and its core mission,” he added. “I think an vital element of getting a lower volatility public company is positive cash flow and creating wealth, which is what we have historically planned for 2025. So if that happens in 2025, [an IPO] shall be soon after. But first we have to get there.
There is little question that the expense management space in which Brex operates is increasingly crowded – it competes with, among others, with startups akin to Ramp, Mercury and Airbase. But it also competes with corporations like American Express, Concur and Citi.
Franceschi says Brex’s advantage is that it has built its technology stack “vertically integrated with Mastercard rails, ACH rails and money flow rails,” while some competitors have built their businesses on other platforms like Stripe or Marqeta.
It works for simpler use cases, he said. However, for more complex scenarios, akin to global scope, depth of integration helps.
Despite this, the competitive atmosphere stays hot. In April, Ramp announced it had raised one other $150 million, at a post-money valuation of $7.65 billion. In May, digital banking startup Mercury announced it was installing software on its bank accounts, giving its business customers the ability to pay bills, issue invoices and reimburse employees.
Brex stays fearless.
“We are currently seeing a lot of momentum driven by net new customer inflow on the enterprise side versus our large-scale customers,” Franceschi said.