There’s a sense of schadenfreude in Silicon Valley when a unicorn stumbles. So when the WSJ broke the information Thursday afternoon that Capital One will purchase Brex for $5.15 billion in money and inventory (Capital One issued an official launch confirming the particulars half-hour later), you could possibly virtually hear the collective snickering from Sand Hill Road to San Francisco’s South Park. That determine represents lower than half of Brex’s final private-market valuation of $12.3 billion from its 2022 Series D-2 spherical.
Before everybody sharpens their knives, contemplate that for the VCs who backed Brex at its outset, the sale is a triumph.
Micky Malka’s Ribbit Capital, which led Brex’s $7 million Series A quickly after its 2017 founding, is probably going gazing a really good-looking return. Reached by cellphone this afternoon, Malka declined to provide specifics, but as a Brex board member from the outset and the firm’s greatest shareholder, he was unsurprisingly keen about the deal: “We’re excited for the team, which was one of the youngest YC teams at the time. I’ve known [the founders] since they were 16. Capital One will be a great partner, and their ability to scale [as part of the bank] is good for America.”
Indeed, that early wager — Ribbit was joined by Y Combinator, Kleiner Perkins, DST Global, and particular person traders together with Peter Thiel and Max Levchin — has multiplied someplace in the neighborhood of 700-fold. Even accounting for dilution throughout subsequent rounds, early stakeholders are strolling away with the form of good points which have lengthy made enterprise capital seem to be such a sexy asset class to outsiders.
Still, the sting of that valuation haircut is sharper when you think about what occurred to Brex’s chief rival, Ramp, throughout the identical interval. Just as Brex misplaced momentum a number of years in the past, Ramp went on a tear. The competing expense administration fintech has at this level raised $2.3 billion in complete fairness financing and noticed its valuation zoom from $13 billion in March of final 12 months to $32 billion by November throughout successive funding rounds.
You may argue whether or not these sorts of paper good points throughout a dizzying variety of financing occasions implies that a lot (that’s undoubtedly not all the time the case). Still, assuming Ramp is presenting a truthful image to the world, it’s traction in simple. The firm introduced final October that it had surpassed $1 billion in annualized recurring income and secured greater than 50,000 clients. The distinction might be extra painful for Brex’s later-stage traders, who watched a competitor lap them a number of occasions whereas they awaited an exit.
The Capital One deal comes at a little bit of an inflection level for Brex. Just 5 months in the past, the firm introduced it had secured a license to function in the European Union. As CEO Pedro Franceschi wrote in a weblog submit at the time, the transfer enabled Brex to “directly issue credit and debit cards and offer its spend management products to any business in all 30 EU countries with no workarounds required.” Previously, the firm may solely work with EU corporations that maintained a U.S. presence, a big limitation for a would-be world participant.
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For Capital One, the timing is pretty much as good because it will get. The bank, which already swallowed Discover Financial in a $35 billion deal final May, good points Brex’s tech platform and consumer roster — together with, reportedly, TikTook, Robinhood, and Intel — in addition to instant entry to European company banking clients by way of its freshly minted EU license. (TechCrunch has reached out to Brex for extra data.)
The $13 billion in deposits that Brex reportedly oversees at associate banks and money-market funds additionally presumably sweetened the pot.
The founders, Brazilian entrepreneurs Pedro Franceschi and Henrique Dubugras, dropped out of Stanford as freshmen to launched Brex in 2017 after being accepted into YC’s winter 2017 “batch,” initially pitching a digital actuality idea. But they have been certain to circle again to funds having bought — at the tender age of 16 — a funds processor startup in Brazil that had raised $30 million and was later acquired for greater than $1 billion by certainly one of its strategic traders.
Dubugras stepped again from day-to-day operations in 2024 to function board chairman; Franceschi will stay CEO post-acquisition.
As with practically each startup, Brex’s path wasn’t with out its stumbles. There was a questionable detour in 2019, when the then-23-year-old co-CEOs, who had by no means run a restaurant, purchased San Francisco’s beloved South Park Cafe. The pair had envisioned Brex cardmembers eating earlier than heading upstairs to an unique lounge, a timing choice that proved spectacularly awful, when COVID-19 shut down most of San Francisco for over a 12 months.
Then, in 2022, as the macroeconomic image darkened and VCs started demanding precise profitability from their portfolio firms, Brex decided that generated appreciable ailing will; it deserted tens of hundreds of small- and medium-size enterprise clients, informing them their accounts would shut until that they had “professional” funding from VCs, angels, or accelerators.
The transfer, designed to focus assets on higher-margin enterprise purchasers and a nascent SaaS enterprise, struck many as tone-deaf. The firm that had constructed its repute serving underbanked startups and was out of the blue displaying its champions the door (was how the transfer was perceived at the time).
The technique could also be what positioned Brex for this exit. By concentrating on company purchasers with deeper pockets and predictable income streams, the firm stabilized its enterprise mannequin, whilst Ramp ramped up its fundraising. (Mercury, one other competitor, additionally doubled its valuation to $3.5 billion with a $300 million increase final March. To steal a few of the consideration paid in 2025 to Ramp, Mercury extra just lately shared with Fortune that it had hit a fee of $650 million in annual recurring income.)
Capital One stated it expects to shut the deal in the second quarter. For Brex’s later-stage traders, together with TCV, GIC, Baillie Gifford, Madrone Capital Partners, Durable Capital Partners, Valiant Capital Management, and Base10, all of which invested at a $7.4 billion valuation or larger, the exit will not be fairly what they hoped, but they’re nonetheless liquid, which, in at present’s local weather, counts for one thing.
Pictured above: Brex co-founder and CEO Pedro Franceschi
