Kleiner Perkins

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

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 Information reported 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.

Today’s financing news, while it is an extension of a preexisting Series C round, is Brex’s largest single raise to date. The Y Combinator graduate last raised venture capital money in June 2019, in a $100 million round from Kleiner Perkins valuing the company at $2.6 billion.

In the past, each successive Brex raise came along with a flagship product update. Months after its Series C in October, the company launched its second product: a credit card for ecommerce companies In just a few months time, the new product “multiplied Brex’s TAM and became responsible for one-third of the business’s revenue.” After its June 2019 raise, Brex launched a credit card for life sciences companies, and then a few months later, it announced Brex Cash, a product that acts like a checking account replacement for startups.

Image Credits: brex

In 2020, however, its strategy appears more conservative. Dubugras compared Brex’s business similar to venture capital, in that they get the most value for themselves, and shareholders, with customers that stay and grow with the company for a longer time.

“Going to any new verticals or any kind of growth projects are not necessarily priorities for the year,” he said. “Most of the funds will go toward building the product; the investment in growth is probably done post COVID-19.

It’s up to the company, which has grown comfortably on the shoulders of an upmarket up until this point, to prove that it can retain its venture-ready growth profile. “I’m optimistic about tech, so I’m optimistic about Brex,” Dubugras said.

How SaaS startups should plan for a turbulent Q2

Hello and welcome back to our regular morning look at private companies, public markets and the gray space in between.

We’ve dug into churn twice in the last week from an expert and data-based perspective. We’ve also spent a good amount of time talking to venture capitalists about how they are approaching today’s turbulent market.

This morning we’re adding to both conversations by bringing Menlo VenturesMatt Murphy into the discussion. Murphy spent 16 years at Kleiner Perkins before joining Menlo Ventures in 2015. TechCrunch spoke with Murphy late last week, working to understand how startups should plan for what could prove a difficult Q2 and how churn expectations should adapt as the economy changes.

In Murphy’s view, Q1 startup results are likely to come in a bit better than some expect considering the how the quarter finished from a macroeconomic perspective. Q2, however, is a different beast. Murphy expects B2B startup growth to slow, which could make the world much harder for the cohort of startups with less than 18 months of cash; fundraising off slowing growth as valuations broadly dip is not a recipe for an enjoyable capital cycle.

So let’s talk about how Q2 is going to impact startups and how young companies might respond. After we get through the nitty-gritty stuff, I pulled a bit more from our interview as a treat, exploring what the Menlo Ventures investor thinks about the recent Notion deal, and how the firm’s portfolio is set up heading into a possible recession.

Planning for a turbulent Q2

Leading VCs discuss how COVID-19 has impacted the world of digital health

In December 2019, Extra Crunch spoke to a group of investors leading the charge in health tech to discuss where they saw the most opportunity in the space leading into 2020.

At the time, respondents highlighted startups in digital therapeutics, telehealth and mental health that were improving medical practitioner efficiency or streamlining the distribution of care, amongst a variety of other digital health markets that were garnering the most attention.

In the months since, the COVID-19 crisis has debilitated national healthcare systems and the global economy. Weaknesses in healthcare systems have become clearer than ever, while startups and capital providers have struggled to operate while wide swaths of the market effectively shut down.

Given significant volatility and the rapid changes seen in the worlds of healthcare, venture and startups broadly, we wanted to understand which inefficiencies might have been brought to light, what new opportunities might exist for founders looking to reduce friction in healthcare systems, how digital health startups have been impacted and how health tech investing as a whole has changed.

We asked several of the VCs who participated in our last digital health survey to update us on how COVID-19 is impacting digital health startups and broader healthcare systems around the world:

Annie Case, Kleiner Perkins

Our current unprecedented global crisis has put a spotlight on digital health. In the last few weeks alone, we have seen what feels like a decade’s worth of societal and regulatory changes that require digital health companies to step up and embrace new challenges and opportunities.