By Chris Morris
Brex, the fintech startup that made a splash with corporate credit cards and moved into cash management accounts for tech companies, has cut its staff by 20%. Some 282 people were laid off Tuesday amid reports of heavy cash burns in the final three months of last year.
It was just under a year ago that Brex saw a huge influx of customers and deposits, as Silicon Valley Bank collapsed. As the panic over that bank’s implosion spread, Brex saw billions of dollars pour in and over 4,000 new customers sign up, thanks to its digitized process, which makes opening a business account a much faster affair. However, since that time, growth has slowed.
“Seeing so many talented folks go through this experience is never what you hope for as a founder,” said Pedro Franceschi, Brex cofounder and co-CEO in a note to employees. He founded the company with Henrique Dubugras in 2017. “It’s incredibly hard to say goodbye, and we feel so grateful for their contributions building Brex into what it is now. We’re doing what we can do to ease the transition.”
Affected workers will receive eight weeks of severance, as well as two additional weeks for each year they’ve been with the company; subsidized health coverage for six months, along with mental health support; and allowing employees who have been with the company for less than a year to potentially receive some form of equity in the company.
Franceschi said Brex grew too quickly and created too many layers of management. Along with the layoffs, the company is flattening its organizational structure, he wrote.
In addition, chief operating officer Michael Tannenbaum will transition to a board member, while CTO Cosmin Nicolaescu will move into an advisory role later this year.
The cuts come after a report in The Information earlier Tuesday that Brex had an average monthly cash burn of nearly $17 million in the fourth quarter of 2023. That burn is lower than 4Q 2022’s $22 million average, the story noted, but still significant. The Information also reported Brex still has a current cash runway of four years.
Brex spokesperson Danielle Bereznak says the numbers, aside from the runway figure in The Information piece, are inaccurate, however.
“Brex’s financial plan is to be well above cash flow positive with the current cash we have, which calls for around four years of runway,” she told Fast Company. “Plus, only looking at certain months for financial burn is not the correct way to look at burn.”
Just two years ago, Brex was valued at $12.3 billion. Since then, the company has had two significant rounds of layoffs: Today’s and in October 2022, when 136 people, or 11% of the company, were let go. (In June 2020, Brex laid off 62 workers, which was 17% of its staff at the time.)
“This won’t be an easy change, but it’s a worthy one,” Franceschi wrote on Tuesday. “While we’ve grown to hundreds of millions of dollars in revenue in a short span of time, Brex still serves less than 1% of the U.S. market; and over the next few years, the opportunity ahead of us remains massive. . . . We have a unique opportunity over the next 5-10 years, and these changes will increase the intensity and quality of our execution, connecting us more deeply to customers needs and putting us on a clear path toward profitability and independence.”
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