I studied how Brex went from zero to $12.3 billion company in 6 years. Here is what I found:

Brex has become the default financial services partner for startups coming out of Silicon Valley. In just 6 years, 80% of Y Combinator companies use Brex, while 33% of the top 50 venture firms ' portfolios & 25% of all US startups use Brex. It has raised $1B+ in equity, serves 20,000+ clients and has done $40B + in overall transaction volume since its launch in 2018. Here is how Brex became a $12.3B company in just 6 years.

The problem

Brex was founded by two Brazilians from Rio - Henrique Dubugras and Pedro Franceschi. Together, in their teens, they launched and sold a fintech company called Pagar. They then moved to SF and applied to YC with their idea Veyond - a VR product.

But as they got deep in the weed, they figured they didn't have what it takes to be a successful VR company. At YC, Michael Siebel asked the founders - if you could build anything, what would you build? The founders replied - A business bank.

The problem was something they faced first hand. Despite receiving investment, startups struggled to get a corporate credit card. Traditional banks were slow, manual, with archaic digital interfaces. Worst of all, they didn’t know how to underwrite early-stage businesses with no credit history.

MVP & Early Traction

The founders scoped out their MVP - Build a corporate credit card for startups. They chose to build the full credit card processing stack from scratch instead of relying on third party processors. This gave them flexibility & prepared them for scale from day one. For the MVP, they focused on just a few features like fast sign up, higher limits without personal guarantees, and automated receipt capture.

Franceschi constructed Brex’s backend from scratch, coding the core card processor, KYC functionality, underwriting engine, and connective tissue to Visa and Mastercard.

The founders focused on friends and family that were either founders or finance people at small companies. They also scraped LinkedIn for contacts of thousands of foreign founders (who typically lack FICO scores and struggle to get credit cards) & emailed them if they would be interested in the product. They had 85 pilot customers doing this.

The founders engaged directly with these pilot customers & interviewed them about their biggest pain points to refine the features. When talking to users, the founders discovered that not having a personal guarantee was something people cared about. Having higher limits was something people cared about. So was fast onboarding - users wanted to get a card in 5 minutes.

They iterated based on feedback from these users & Brex delivered its first cards to the pilot customers in four months. Customers were approved for a corporate credit card in just 24 hours with no manual paperwork or in-person visits needed.

In early 2017, weeks before YC’s Demo Day, Ribbit Capital led a $7 million Series A into the company. The same year, Brex made their first hire, their Chief Revenue Officer - Michael Tannenbaum.

One of the things Henrique did to raise funds was to keep meeting & building relationships with VCs. They updated them on developments and were always kept in the loop. They didnt stop or start any stage. It was a continuous process.

In March 2018, Anu Hariharan of the Continuity Fund led Brex’s Series B, investing $30 million of a $60 million round. It was a bet on the founders and their vision and execution seen thus far. And in June 2018, Brex launched to the public.

Optimizing for user acquisition & retention.

Brex used a combination of outbound sales, billboard advertisements, referrals & brand awareness to get the all rolling on the customer acquisition side.

They bought billboards across San Francisco spending $300k. They then cold emailed founders in the area.

Almost everyone replied back because they saw the billboard already. They also sent champagnes to founders offices & cold emailed them a few days after. This campaign got them 75% demo bookings.

They also did podcasts. Their online content strategy was to create a “loop” by targeting what their demographic is searching for, serving them content to bring them to the site and then retargeting them with paid ads.

Within 3 months of closing its Series B, Brex went from 85 customers to more than 2000.

Brex also partnered with other press publications like TechCrunch for joint marketing activities. These partnerships generated exposure to Brex's target users. Brex also hosted events and trade shows.

Brex also took a sales-led approach where Account Executives and SDR compensation was tied to revenue & quotas.

The founders also realized that they needed to focus on retention from day one. Their rationale was that a customer churning today is bad for the business because the value of that customer in the future is greater than their value in the present-day.

To optimize for retention, Brex improved conversions by building feedback workflows around critical product flows like onboarding & checkout. Brex focused heavily on NPS (Net promoter score). Customers having subpar onboarding experience got white-glove service from the customer success team.

They also added inputs in their CRM for AEs that signaled when customers were churning, sent automated surveys when a customer’s spending slowed on Brex, and they tasked a team with manually auditing a client to learn the reasons for the churn. Each quarter, the relationship management team at Brex wrote a memo citing the reasons for churn in detail and provided action plans for every department to help counteract churn.

Based on this data, they discovered actions that prompted churn, like if a credit limit dropped, if a bank integration failed, a certain volume of support tickets per customer, etc.

The retention & churn data also showed that customers more likely to churn were using other products instead of relying entirely on Brex. That’s when revenue expansion came to the picture. It contributed to the company’s expansion revenue and reduced churn.

Brex made the product more sticky optimizing for user engagement. This reduced churn and increased expansion revenue from the customer. This strategy worked successfully, as 50% of the company’s revenue was from upsells and cross-sells from existing customers.

Existential Angst

Throughout 2021, Brex expanded its focus from startups to targeting SMBs across all of North America. Its efforts paid off when, in January 2022, Brex managed to raise another $300 million in Series D funding (after having raised $300 million back in October 2021).

At the same time that SMBs joined Brex, many of its startup customers began to ask for new features. Early customers like Retool and Scale had grown rapidly & their needs changed along with their size. Brex needed to mature as a product to retain these high-potential businesses.

In early 2022, Brex was being pulled in two different directions & the leadership was faced with an existential question - Would they be mediocre for everyone? Or be the best quality service for venture-backed startups and enterprises? They chose the latter & went all in on startups and Venture-backed businesses & offloaded SMBs from their customer base.

Shortly after the SMB offboard, Brex created an official “startup” division. Via this division, Brex offered every client a dedicated support person to reach over email or text.

In 2022, Brex released “Empower,” to its product suite in its product evolution from a one-touch solution to a platform. Empower was a software platform to help larger companies better manage their finances. By focusing on this platform and the startup user base, Brex grew it to $100 million in ARR in little more than a year, with Doordash, and Scale as its customers.

Just a week after the announcement, Brex disclosed that it just acquired Y Combinator-backed Pry Financials for $90 million. They integrated the tool to offer financial planning to its customers.

Brex - the product:

From starting out as a corporate credit card company, they added other features to their product & became a full-fledged platform. The Brex cards & credit limits are issued based on a company’s cash flows and not on an individual’s credit history and score.

They gave startups 10x -20x higher credit limits after looking at the companyś financial backing, sales volume, spending patterns, and many other data points. The Brex Card is a charge card, therefore it must be paid off in full every 30 days.

Brex generates revenue from its corporate cards through its 2.7% interchange fees charged on transactions. Via this interchange fee, Brex ended up with about 55% gross margins.

The cash management account provides businesses with a place to store and manage their cash balances. This account offered higher interest rates than traditional bank accounts and came with a range of features designed to help businesses manage their cash flow more effectively.

The company earns interest income on cash held in its cash management accounts. Brex uses the cash residing on user accounts to lend it out to other institutions. They then collect interest from these institutions.

Their expense management tools allowed businesses to track and categorize their expenses, automate their accounting processes, and generate reports to help with budgeting and financial planning.

Brex also created the Bill Pay product - a payment software for non-payroll, non-employee spend where companies can process invoices and pay their vendors digitally instead of manually processing invoices. Brex makes money via interchange fees charged on transactions.

The expense management & Bill Pay products were bundled into Brex Empower, a SaaS which customers paid a monthly fee to access. Brex Empower also includes an integrated travel solution that provides comprehensive booking and management capabilities.

Brex also provides venture debt to startups at a 6% to 10% interest rate via its Brex Venture Debt program it launched in 2021.

Via Brex, users could also earn bonus rewards for spending money with their card. Brex partnered with Uber, Lyft, American Airlines, Starbucks and many others. The points earned can then be redeemed in exchange for goods and services, such as AWS or Slack discounts.

As with any cashback program, Brex makes money via referral fees on every transaction it facilitates through its partners.

13 key takeaways from Brex:

1. Build a business in which you have experience in.
2. Fintech is hard af.
3. Clearly scope out your first MVP.
4. Co-build your MVP with 70-80 pilot customers.
5. Try non-traditional marketing/growth channels.
6. Cold emails work.
7. Focus on user acquisition & retention 50-50.
8. Give your sales reps comp that is tied to revenue.
9. Study your product analytics & discuss KPIs for each quarter.
10. Building a platform (not tool) creates a moat.
11. Set up referrals and CS teams from day one.
12. Take time when making big irreversible decisions.
13. Create multiple revenue streams for your product.

You can read the entire story (along with some cool graphs & images) here