Brex brings on $150M in new cash in case of an ‘extended recession’

via TechCrunch

Fast-growing fintech behemoth Brex is raising big money as its customer base itself — high-growth and spendy startups — is struggling.

The company, which sells a credit card tailored for startups, today announced that it has raised $150 million in a Series C extension from a group of existing investors, including DST Global and Lone Pine Capital.

With the new raise, Brex,  which was co-founded by Henrique Dubugras and Pedro Franceschi, has now amassed $465 million in venture capital funding to-date.

Brex plans to use its new capital to invest across engineering, product, and design functions to improve its customer experience. It also plans to make small acquisitions to help with hiring and product goals. In late March, the startup announced that it had acquired three companies, Neji, Compose Labs and Landria, for an undisclosed amount.

Layoffs are impacting a number of businesses, and where upstart companies aren’t cutting staff, they are often reducing spend. That’s not good news for Brex, which makes money on purchases made through its corporate card.

Brex has already cut some customer credit limits to mitigate some of the exposure risk, The Informationreported and Dubugras confirmed. Brex, once known for its flashy billboards, has lessened its spend on travel and restaurants to “almost zero” since COVID-19 started.

However, Dubugras seems largely unbothered on how the pandemic impacts Brex’s future. The new fundraise was opportunistic, and he noted how Stripe  and Robinhood recently raised as well.

“I’m glad this round came together, but if it hadn’t, we would’ve been fine,” he said. “The capital is so we can play offensive while everyone else plays defensive.”

Its clients have always had a high risk for failure, since they are startups after all, so Brex built a model that accounts for this. “Us lowering credit limits has been happening since the existence of Brex,” Dubugras said. “It’s not something that is new to COVID.”

The new capital, according to Dubugras, is all “general purpose cash” and will go directly to the company’s balance sheet, which now has $450 million. The round was closed a few days ago.

Brex’s rise has largely come during an upmarket. The startup, which launched in Brazil, has long enjoyed time in the spotlight as a Silicon Valley success story. A New York Times headline about the startup captured its allure well: “bad times in tech? Not if you’re a startup serving other startups.”