Brex, the business credit card startup, raised $100 million in a fresh round of funding, propelling the company’s valuation to $2.6 billion.
It was only in October, that San Francisco-based Brex became the latest fintech unicorn with a $125 million capital raise led by Greenoaks Capital and DST Global at a valuation of $1.1 billion. This time around Kleiner Perkins Digital Growth Fund was the lead investor with participation coming from existing backers including Y Combinator Continuity, Ribbit Capital, DST Global, Greenoaks Capital and IVP.
Brex is among a crop of fintechs that are going after the business credit card market. With small and medium-sized businesses largely ignored by the big financial players, fintechs have stepped up with a slew of digital offerings aimed at disrupting the industry. These fintechs are rolling out virtual cards, digital expense management tools and services geared toward transforming how credit is issued and used within a company. Competition is fierce with Marqeta, Stripe and Extend all going after the market. At the same time credit card issuers are paying more attention to their smaller business customers. Brex, however, has stood out in terms of its valuation and growth.
Henrique Dubugras, co-founder and co-CEO of Brex said what makes Brex different is its underwriting process. Traditional banks look at the financial history of a company to determine if the business is creditworthy. Brex underwrites the borrower in real time based on current data. It also built its underwriting platform from scratch, not having to rely on an old legacy system like so many traditional banks do. That, said Dubugras, prevents the banks from doing things like customizing rewards programs based on an industry or looking at real-time data to determine a credit limit. “Everyday we’re reevaluating it and that allows us to give higher limits, no personal guarantees and underwrite much faster,” said Dubugras. “Applying that to these verticals has been a hugely successful value proposition.” The latest funding will be used to enhance the corporate spend management features and reward offerings within the cards. Brex will also use proceeds to enter new markets including credit cards geared toward life sciences companies.
Brex was born out of the frustration Dubugras and cofounder Pedro Franceschi faced when trying to get a corporate credit card for their startup. Brex extends credit to startups based on the amount of money in their corporate bank accounts. Early-stage startups have long had difficulty obtaining credit cards because they don’t have revenue. Traditional credit card issuers often reject their applications, forcing principals and founders to use their personal credit cards to fund operations.
“The business is growing incredibly fast since we announced our last round,” said Dubugras. He pointed to the launch of the eCommerce credit card in February as one example. That card has seen fast-paced growth and counts brands Malin + Goetz, Outdoor Voices and Boxed.com as customers. Brex offers 60-day payment terms, interest-free financing and rewards that meet the needs of that industry. Its an area that Brex said has long been ignored by the traditional financial players. Brex underwrites the eCommerce credit card based on the business’s sales. For startups, the credit is based on their cash balance. With life sciences, Brex will look at any funding the company has be it venture capital, university funding or grants. “Banks have a hard time underwriting and understanding life sciences,” said Dubugras. “It’s different than a traditional startup. Some don’t have VCs.”
Brex has raised $315 million to date and in April secured $100 million of debt capital with Barclays in the form of a warehouse line of credit. Dubugras said an initial public offering isn’t on the horizon just yet. ”We started the company a little over two years ago. We’re in no rush to go public. Now is more about raising private capital.”