Watching Silicon Valley Bank melt down from the front row, with Brex CEO Henrique Dubugras

Brex is what you might call a neobank — not a traditional bank but, rather, a financial services provider that helps companies manage how they spend money, corporate cards, travel expenses, and the rest. In the middle of the SVB collapse, Brex was more than just a spending management company. It was also a safe place to park money.

Brex saw billions of deposits in a very short period of time, giving Dubugras a bird’s-eye view of what was happening — and what was happening was not great for the banking system, especially in Silicon Valley. (Our own Liz Lopatto has been covering this in depth.)

I wanted to hear Dubugras’ perspective on SVB both as a fintech CEO and a founder himself, whether he thought the crisis was rational or just a panic caused by group texts and easy-to-use mobile banking interfaces, what he thinks will happen to the startup ecosystem next, and how much of an opportunity all this was for Brex.

Dubugras is a young CEO. He just turned 27. He really surprised me with his depth here, and he will probably surprise some of you as well.

Okay, Henrique Dubugras, CEO of Brex. Here we go.

This transcript was lightly edited for clarity.

Henrique Dubugras is the co-founder and CEO of Brex. Welcome to Decoder.

Thank you very much for having me.

I’m excited to talk to you. You have some news to announce, which is very exciting. I want to talk about Silicon Valley Bank with you, which represents both a challenge and a pretty huge opportunity for a company like Brex. And you’ve been in the mix of it, so I think you’ll have some insight there. Let’s start at the start. Brex is an enterprise company, and there are a lot of people who don’t work in the Valley and have probably never used a Brex card. What is Brex?

We basically do spend. You can think about it as an all-in-one spend platform. 

We started back in 2017, with corporate cards as the first way of spending that we had. After that, we launched our business accounts, which are like bank accounts for businesses, so they can send all other kinds of spending, like ACH, wires, checks, or international. They can also receive payments, so you can actually store money in it. 

Then we launched spend management software. This is expense reimbursements, for example, and all the software around spending. Now, it’s not only spending, it’s, “What can you spend? What are the policies? What are the approvals?” All of that. 

Let’s put it like this: the first one replaced your corporate Amex, the second one replaced a bank account, and the third one, which is Empower, I think about it replacing Concur. We also do bill pay, which replaced bill.com. So think of us as an all-in-one spending platform.

That set of competitors is really interesting. Replacing your corporate Amex means you’re still issuing credit cards. You have a credit card partner, so you’re replacing some platform in the middle that will still issue an Amex or Mastercard. Replacing your travel and expense software means you’re still connected to a bank and you have set policies. Replacing Concur means you’re actually just replacing Concur, which is the travel agent there. It seems like a much bigger project. Is that how you’re thinking about your stack? You have the interface to things like Amex and your bank, and then you have to just replace travel software entirely?

No, that’s not exactly how we think about it. When we started Brex, one of the things we realized is that a lot of the reasons why payments and spending were broken was because you always ended up at the bank. In the end, you’re always trying to work with the banks and use their technology and their software, and you’re always limited by them. 

So, what we did, starting in 2017, is we decided to rebuild all the core banking software from scratch. We don’t use any of the software from the bank. We rebuilt all of the core financial infrastructure. That was, I would say, a big piece of why we built. We use Mastercard for acceptance, so our card is accepted everywhere Mastercard is accepted, but all the technology around the issuing, the approvals, the credit lines, everything is built within Brex.

Then, when we built the spending software, our thesis was, “Look, the reason this is different from Concur and others is because we have the integration between the financial services and the software to make it better.” For example, we can make sure that your card only works for the expected policy you want it to work for. In a lot of our customers, instead of only the top VPs getting corporate cards, there’s a customer that has 10,000 corporate cards around the company. Everyone gets a corporate card because there’s enough security features, controls, and policies built into it, that it’s safe for everyone to use it.

I think travel, again, it’s more on the software side, but there’s a lot of leveraged infrastructure from the expense side. All the approvals are pretty similar, like the integration of your accounting software. We reuse all of that on the travel side, but then we actually have a partner, called Spotnana, that has a lot of the integrations of the airlines and the hotel networks and does all that backend of the travel side, while we do a lot of the front end of the approvals and the payments and all that.

Yeah, that’s what I’m drilling down into here. There’s a set of backend financial services or travel services, and then it seems like Brex is just a much better, more streamlined, more controllable interface to a lot of things that are antiquated in the backend.

I would agree with that a little bit more for travel. For financial services, a lot of it we really built from scratch. We don’t interact. Mastercard is the acceptance network, so I would say that, yes. But other than that, we don’t interact with any other backend thing that’s outdated.

Okay. It empowers the new thing that we should talk about, which is what you’re announcing today.

Travel is actually the new thing, the news, that we’re announcing.

Hold onto that, because I want to come back to it. I just want to get a sense of Brex the company before we go into the news and why you’re building out into travel. You talk about building up the financial system from scratch and writing all your own code. I’m looking at the history of the company. You and your co-founder started this at Y Combinator as a VR startup. How did you pivot into banking and fintech services?

The story actually started a little bit before. My co-founder and I were originally from Brazil, and in our last year of high school — we were teenagers that coded — we started a payments business that was the Stripe of Brazil. Let’s say fintech was our first company that did fairly well. 

We sold that company, and then we got to the US and we were like, “You know what? We’re tired of fintech and all these banks and regulations. We don’t want to do that anymore. We want to do something at the bleeding edge of technology, like Bill Gates and Steve Jobs — you know, all the visionaries that were in Silicon Valley.” VR came to mind as the next computing platform. We got into YC with this VR idea, but we decided to give up a couple of weeks in. We had no idea what we were doing, and we were like, “Okay, with fintech, we actually know what we’re doing. We’ve built this company before, and we know a lot about credit cards.” That seemed like a lot better space for us to execute on.

So you started with credit cards. There was a bit of a consumer focus to start with and then there was this pivot to enterprise. Why the focus on enterprise and now what you’re now calling a “spend platform”?

When we started out, the focus was startups, meaning technology companies and people who were venture-backed and raised from VC money — so the whole innovation economy. We started there because we had this novel underwriting model. We could underwrite companies based on their cash balances instead of their FICOs. That was very innovative in the market, because Amex and others were always looking at either your FICO or your financial history. 

If you didn’t have financial history, then your FICO could only get you a $10,000 limit. If you needed to pay for more stuff, even if you had raised $5 million, you couldn’t get a corporate card. That’s what we came in to solve. We said, “Okay, we’ll underwrite you based on your cash balances instead of your FICO and financial history.” 

That was the first value proposition, and it only worked for venture-backed companies, because the only thing that was different was the fact that we were underwriting that way. Then what happened was that a lot of these companies grew. We acquired a lot of companies in 2017, 2018, and now five years later, they’re bigger. 

Scale AI is a good example. There are hundreds, if not over 1,000 employees now. They were our first customers, and they only had two people when they joined. As they grew, they needed new functionality. The first thing we started getting asked for were these business accounts. Then they were like, “Okay, you can’t give corporate cards like this to everyone. We need controls and we need policies.” That’s how we got into spend management. A lot of it was growing and developing for our customers.

This is going to bring us to Silicon Valley Bank in short order, right? This identification of a market that is venture-backed companies, where you can evaluate them differently, is what got that bank into trouble. Like I said, it’s a challenge and an opportunity for you. Before we get there, I want to ask the classic Decoder questions. Brex makes a few products and you’re entering a new product line. My joke with Decoder is that it is fundamentally a show about org charts. So, how is Brex structured? You’re the co-CEO. What does your org chart look like?

The way Brex is structured is traditionally; we’re functional. We still haven’t moved, I would say, to business units or anything like that. We have product, product engineering, sales, comms, and HR as some of the functions directly reporting to my co-CEO, Pedro [Franceschi]. 

Within the product engineering orgs we have what we call the “global financial services.” We say this is like the fintech backend and all the payments. Across all these products, they have a similar way to move money around the world. That’s one big team that we have. 

Another big team that we have is called Empower, which is basically all these approval flows, our budgeting functionality, integrations, all the software layers that create the platform for all these financial services and ways to purchase. Then we have our travel team, which is its own team that builds a lot of the travel because it’s different enough from everything else we do.

Then we have what we call the “customer journey team,” which is onboarding, KYC, AML, and all the experiences that customers have go beside the core products. That’s the journey you have getting from the website — they own our homepage — all the way to the notifications system that you get, the messages, et cetera. Then we have foundation, which is just a core infrastructure engineering team that works on infrastructure, developer productivity, security, compliance, et cetera. Those are probably our core product teams.

Then, unusually, you have a co-CEO. You mentioned him already; his name is Pedro. How do you divide up the work with your co-CEO? That relationship doesn’t always work.

Look, we’ve been working together for 10 years now, and it works really well. The way we do it is internal versus external. I have zero direct reports, which is amazing.

That’s the dream.

That is the dream. I’m not that great of a manager. I do everything external — fundraising, big customer meetings, partnerships, press, et cetera. A lot of times, people want to meet the CEO of Brex, and that’s a lot of what I do. I think it’s especially relevant that, as we go more into enterprise, there’s just a lot of customer meetings. 

Pedro runs the company. Every exec reports to him. He manages the company and does all the hands-on internal work. Pedro is very different, in that he loves systems and optimizing the incentives, the people, and the org charts. He loves all that. I don’t like any of that. I like meeting new people and creativity, ideas, et cetera. The combination of the both of us works well.

Walk me through a typical scenario here. You go out to meet with a big customer and they say, “Look, we need X, Y, and Z features in the product in order to onboard 10 percent more of our company.” You say, “Great, done. I’m the external person.” Do you go back and tell your co-CEO, “All right, we have to build this feature”? Is that a discussion? He obviously has finite resources, so how does that work?

Yeah. I would say the teams are more involved in these things these days. I’ll give a very current example of the way it works. SVB happened — and I know we’re going to get into that — so we’re discussing how this is going to change the world. What is going to change in relation to how people think about things like banking? I talk to a lot of customers to get some insights, and I tell him, “Hey, I think we should do this differently based on that.” We debate, we discuss, and we get to some sort of agreement. 

Then he gets all the teams aligned on executing on the changes that we decided. In the past, it was a little bit like the features. Right now, the teams talk to customers directly to get the features, scope it out, and prioritize. Product strategy, for example, is one of the main things that we both discuss and debate on a lot to get to conclusions.

This brings me to the classic Decoder question. You’re the co-CEO, you’ve obviously founded a number of companies, and you have a partner that you’ve worked with for a long time. You’ve made a lot of decisions, like you just had to do with SVB. What is your framework for that? How do you make decisions?

I would say we’re very big on three things. One, we thoroughly agree with Jeff Bezos that the metric that matters the most is long-term free cash flow per share. I’d say that’s what we’re always optimizing for financially, and we’re trying to make decisions to optimize that. 

Two, and we’re very selfish in this regard, we really want to build a company that we want to work for over the next 10 years. That’s the thing. “Which company can I keep working for over a long period of time because it’s good, it’s impactful, and I like the culture? What needs to be true for me to be happy working on this company for a long period of time?” For both of us, we optimize around that. 

Three, we really believe in capitalism that is not all about shareholders, but stakeholders. “Hey, it’s not all about making money. You really need to make your customers, your employees, and yourself happy.” I think some balance of these three things is probably how we think about most decisions.

Those things are obviously always in tension. How do you make a decision when free cash flow per share is in tension with stakeholder capitalism?

It’s very hard to say in the abstract. It’s not like a one-size-fits-all. A lot of the time in business, a lot of people want to have a lot of frameworks that fit. The reality is that each situation is its own situation, and it’s hard to create a generalizable rule for everything. Those things, in theory, shouldn’t compete as much, because if you do right by your customers and your employees, you would think it would optimize for the free cash flow per share over a long period of time. Sometimes you can’t beat that long term, and sometimes it needs to be shorter-term to make these optimizations. I think it depends a lot on the situation.

That does now bring us to SVB, which may be the ultimate short-term decision-making moment for a lot of CEOs, especially fintech CEOs in your position. We talked about your market opportunity. There is a pool of customers with strange needs. They are hard to quantify. It’s hard to assess their risk. That’s your market, and that was very much Silicon Valley Bank’s market. This was a challenge for you. You put a bunch of money into the bridge bank that they created in order to show your confidence in that leadership, and you helped a lot of your customers through the bank run, through making payroll, and all of that chaos. I have to say, it was a very strange weekend to be at South by Southwest and hearing everybody talking about it. 

This is also a pretty massive opportunity for you. I just want to start with your experience of a bank run. I think very few people have lived through it the way that you might’ve lived through it, and I want to talk about what that opportunity represents. Walk us through Silicon Valley Bank. We’re hearing reports that regulators actually might have been giving warnings. Did you see it coming?

Honestly, no. I wish I could say I saw it coming, but I didn’t. I would say I was even skeptical. It was interesting. It was Thursday morning, and we realized that on Wednesday we got a weirdly high number of deposits, probably one of the highest we’ve ever gotten.

How much money was it?

At that point, it was in the hundreds of millions of dollars in a day — and this is by Thursday morning.

Do you have a dashboard in your office?

Yeah. Not in my office, but we have a dashboard I pull up every morning. We were like, “Why is this happening? This is kind of weird.” We started getting some texts about SVB from investors. Then I called a couple people that really understood banking, like really, really solid bank people, and they said, “Everything is going to be fine.” 

I’m like, “okay,” because there’s no one that I trust more than these people. I won’t say who it is, but it was like C-level of the biggest banks in the world. I then called a couple people who didn’t really understand banking, but seemed to be in the flow of stuff and they were sending me these messages that they think the world is going to end, SVB is going to go bankrupt, and it was going to be terrible. It was weird because I understood banking, so I pushed the arguments for them. Basically, the argument is, “Look, unless there’s a 50-plus percent bank run, they’re going to be fine.” What’s the probability of a 50-plus percent bank run?

Then I talked to these other people who were like, “Yeah, dude, but everyone I know is taking their money out.” I was like, “Okay, maybe there is a 5 percent chance that there’s a 50 percent plus bank run. Maybe we will move our money out, because we can always wire back on Monday. Why take the risk?” We took our money out at maybe 10:00 AM, after an hour of all this. By 1:00 PM, I was certain there was going to be a bank run. Everyone was talking about it, and we had seen an insane amount of deposits come in.

You were at hundreds of millions before. What’s insane?

It got to the billions in like three hours. We just thought it was super weird. There were so many people pinging me to open accounts — because we can open accounts the same day, versus other banks which take a whole week to open accounts. It was a lot of weird stuff. At that point, I knew something was going on and it was going to be bad. 

Anyway, we worked a lot to mobilize the company to open the accounts, and that was a lot of work. The next day I woke up to FDIC receivership. That was really weird, because it was like, “Oh my God. I didn’t think it was going to get to this point.” They had this capital raid and they had this call. I just thought they were going to not be able to raise the capital, not that they were going to become insolvent and that the FDIC was going to take over the next day. I didn’t think it was going to go that quickly.

That happened, and all these customers. We had gotten billions in deposits the previous day, and the next day we got zero — well, not zero, but maybe low hundreds of millions from other banks. It was because they had basically blocked all the wires and ACHs. This is before the FDIC; I think it was 11:00 AM after the FDIC announced. All these customers started going crazy like, “What am I going to do? I couldn’t get my money out on time. What about my payroll?” 

That’s when we started working on the emergency payroll line. I think we were very uniquely positioned to do that because we talked to a lot of hedge funds, and they wanted to help. They understood the situation. These are good companies. These are solid companies that would get most of their money back, but they just needed a bridge for a few weeks potentially.

The hedge funds can’t operationalize lending to 1,000 different companies. We were pretty unique, because, one, we could operationalize that and, two, even if you could operationalize it, they only had a Silicon Valley Bank account. Who could even open an account for them to get it? We could open an account to actually deposit the money as well. We raised all this money, over $1 billion. We were about to pull the trigger, but then the FDIC announced that people were going to have access to their money the next day. It’s a lot of wasted work, but I’ve never been happier to waste work in my life. 

What’s a normal day of deposits for you? The first tick up is hundreds of million, and you called that weird. Then you were into the billions, and you said that was crazy. What’s a normal day of deposits for you?

I would say a normal day would be in the low hundreds of millions, maybe $100 million to $200 million, of inflows and some outflows. Then it got to $500 million in one day, which is high, but not insanely high. It’s 5X, which is a lot, but it’s not like it was the next day.

Then it went to zero, right? Almost nothing.

Yeah, maybe $200 million — but from other banks, not from SVB.

Sure. One thing that I think about all the time is scale. This is a wild swing in demand that you can’t have foreseen, even in the space of a day. You start the morning and smart people are saying this isn’t going to happen. You end the day and it has extremely happened. How did your site stay up? How did the service stay up? We see other companies in similar situations. When I think about other bank runs and other financial providers in the middle of extremely unpredictable financial events, the first one that comes to mind is Robinhood, and they were not able to stay afloat. The service kept crashing. Why did you stay up?

I think it’s just B2B versus B2C, right? Even though we had a lot of accounts to open, it was 4,000 accounts, not 400,000. I think the scale levels of B2C are just different. For money coming in, there’s not a lot of servers that process that. It’s just a bigger number coming in. It’s not like there’s 5 million people trying to trade.

So it was a smaller number of users doing bigger transactions.

It was larger than average, but it wasn’t hundreds of thousands, where we would have scale issues. It was fine. That piece was fine.

The other question I have, as it relates to SVB. There’s this line out there that this is the first bank run caused by Twitter. Maybe it’s Twitter and maybe it’s a bunch of Signal chats, group chats, or iMessage DMs, but the speed of information coupled with the ease of use of their app, of their service, basically created the opportunity for a bank run. If they had made people wait an hour, a day, or a week, instead of just clicking a button and moving the money, maybe this would have been averted. You obviously run a financial product; you take deposits. Have you had that stare-into-the-ocean moment of, “Maybe my shit is too easy to use, and I need to make sure to put some friction in there to prevent this from happening”?

I think it would even cause more chaos if it was harder. If people feel that their money is trapped, they create even more panic. I don’t think that would’ve been prevented if there were more friction in the process, because if you feel your money is stuck, that’s the worst thing that can happen. 

I think that would’ve been prevented if it was a more diversified deposit base. I think First Republic is a good example, where they have a way more diversified deposit base. They had a lot of people in tech getting out of First Republic, but at the same time, all of the regular, I don’t know, high net worth dentists were not in the flow and they weren’t taking their money out. The thing with SVB is that everyone talked to each other in one day and everyone got all their money out in one day.

Is this something you think about? Do you have to go collect some high net worth dentists to use Brex?

It’s different. This is the difference between a cash management account and a bank. If you think about how a bank works, it’s like this. You deposit your money in a checking account and you’re giving them the right to do whatever their regulators allow them to do with your money. In SVB’s case, besides doing a bunch of loans — which was not the issue by the way, their loans were fine — they bought these 10-year securities that they had to hold to maturity. Therefore, when people tried to take the money out, they couldn’t sell these securities. So they went insolvent because they don’t have enough cash to support all the withdrawals. 

At Brex, I’m not a bank. I’m not allowed to do whatever I want with the money. The only thing I’m allowed to do is allow you to do what you want with your money, and you own the underlying securities. For example, we offer money market funds. You can buy money market funds on Brex, and you own the shares of those money market funds. If you want to sell that immediately or if you want to buy longer-term stuff, that’s on you and you’re taking that risk, not Brex. We’re not deciding that. Because we’re not a bank, we can’t use your money for anything. Does that make sense?

It does. I think this leads to an extremely dumb question, which is how do you then make money?

We charge a very small percentage to buy that money market fund for you as a broker.

Right. There’s a big debate about allowing people to bank with their brokerage agencies. I would say there is a 50-year debate about financial policy, about whether to expose people to this risk and whether you should regulate the banks more tightly. You’re obviously on the farthest end of it. You’re saying, “Actually, you don’t need a bank. Put it in Brex; trade your money in the backend. Money market funds are very safe, so it’ll probably be fine, but we can expose you to a lot of risk. That’ll keep you away from bank runs in case the bank is poorly managed.” Aren’t you just moving the risk to the customer pretty directly in that case?

Yeah, but at least you get to pick your own risk. When you have a company, usually there’s an investment policy that you can only invest in certain categories of things. Our investment policy, for example, is pretty strict. We can only invest in at least AA securities with up to three months of liquidity. There’s a lot of regulation that we have internally, where the board needs to approve anything that’s not this. It’s pretty standard in venture capital that you do this, because they obviously don’t want customers making these mistakes trying to make money, like buying Bitcoin with their cash and having an issue with it.

I think that this is something that you give the customer on your own. The thing is, if you look at SVB or J.P. Morgan, most big companies don’t keep their money in checking accounts. They all keep it in money market funds, because they trust US treasuries — that’s mostly what’s in money market funds — way more than they trust the banks that they’re holding in. That’s already the reality for the majority of large companies.

That’s the reality, but what’s the backstop for you? I mean, these are not necessarily FDIC-insured accounts. There’s some amount of that happening, but if there’s a run on Brex, what keeps the company together, if all of your revenue comes from these transaction fees?

Most of our revenue comes from credit card fees. I would say if there’s a run on Brex, we lose some revenue, but it’s probably less than 20 percent of it and you get all your money out day one. That obviously sucks. Twenty percent of your revenue is a lot. It will screw up our growth numbers, but that’s it. That’s what happens. Everyone can get their money out the same day, no issues.

I’m looking at a story from 2021 in TechCrunch that says you filed to actually become a bank and you hired somebody from Silicon Valley Bank to run that bank. What happened there?

This was at the time when our strategy was a little bit less clear, and we were thinking that we might want to get heavier into the process of issuing loans ourselves. The biggest advantage of being a bank is that you can get deposits and you can issue loans. As our strategy evolved and we realized we didn’t need to issue loans to be successful and that was not part of the strategy, the overhead of being a bank wasn’t worth it for us.

There was a moment of panic, and you said it was a lot of wasted work but that you were happy you did it. The opportunity is that SVB exists as a bridge bank, and we’ll see if it turns into a real bank. The big banks are out there, and they’ve hoovered up a bunch of customers. There’s a lot of uncertainty about the First Republics and other midsize regionals of the world, and there’s certainly no one who understands the startup economy and the venture economy as well as Brex does. Is that your opportunity now? Can you go fill the hole and say, “Look, we’re not a bank, but we’re really close to banking services. We can just do this stuff for you. We’ll take over all of Silicon Valley Bank’s market share”?

I think that the opportunity for us is a little bit different. The big change for customers is that before, people wanted to concentrate all their banking relationships in one bank. So the biggest thing about Silicon Valley Bank was, “Look, you come with us and we can do your checking account, we can do your credit card, and we can do private banking for you and your executives. We can manage all the money if you want to invest in treasuries, we can give you loans, and we can introduce you to VCs.” A customer that only wants to have one banking relationship will go with the bank that can do all those jobs. 

I think that the world, the market, is going to evolve now for people to want to have multiple banking relationships. They don’t necessarily need to have all the jobs done with one specific partner; they can actually split it among different partners. They will want to do that because VCs are pushing them to have multiple relationships and diversify their money. They’re traumatized and they want to have operational redundancy.

Wait, just to be clear, that’s happened in the last two weeks?

Yeah.

Three weeks ago, this was not the case.

Three weeks ago, it was not the case, but it’s the case right now for sure.

Okay.

Especially in this ecosystem, I’m seeing VCs basically say, “I won’t fund you if you don’t have an account at one of the big four banks.” It’s a problem for a lot of people, but it’s also an opportunity because now for Brex or other neobanks, you don’t need to do everything to be able to win that relationship. You can win a piece of the relationship, and that’s okay. You can win more over time. I think that’s an opportunity, because it was really hard for someone to come and say, “Hey, I’m going to do everything that these banks do.” It’s a little bit easier to say, “Hey, I’m going to win a piece of it.”

You called Brex a neobank, which is one of my favorite terms because you’re not a bank, but you’re neobank. How dependent is the neobanking infrastructure, your infrastructure, on the traditional banking infrastructure? It does seem like we’re going to get to a place where there’s the big four banks — they’re going to exist, and that’s what we’re going to have — and then we’ll have a lot of neobanking services in competition to provide services on top of or near those banks.

Yeah. I think they’re pretty dependent, especially on payments. The government doesn’t let anyone access Fedwire, Nacha, or any of the payment rails outside of the banks. I would say that’s probably where we’re most dependent. On the KYC amount, all the custody of the money, we don’t depend on banks to do that, because we’re a regulator broker dealer. It’s all our own license to do that. 

It’s part of the reason why we sent the money to SVB. We think it’s pretty bad if the world is like, “Hey, it’s the big four banks and that’s it.” The reason SVB existed, and the same reason City National Bank exists, is because they really understand the niche for real lending much better than the big banks. Venture debt, just to give an example, is something SVB did better than any other bank in the country.

I think it’s going to be really hard. I think it’s going to be way worse for customers if they’re not around. There’s a lot of stuff like these regional banks that understand specific niches; they, and the small banks, can be a lot more tailored, and they’re an important piece of the American banking system. I come from Brazil, where we only have a few big banks. Guess what? The service sucks. That’s why Nubank in Brazil is doing so well, because the competition is so bad, versus in the US, where the fact that you have so many different banks that are tailored to their different communities and their different verticals is really positive for the customers.

You talked just now about VCs in particular making new demands of their founders, diversifying where they’re doing banking, and the opportunity for you. You’ve mentioned, and I’ve certainly heard, “Look, SVB was the center of this ecosystem.” You didn’t have to think about it, you just did your banking there. You were connected into a financial ecosystem that at least understood what a founder needed or would give you a mortgage to buy a house against the weird, shaky founder finances that many early-stage startups have. What do you think happens to this ecosystem now without this bank? Do you think this bank comes back and survives? Do you think that the VC attitude, the investor attitude, of needing to diversify changes it forever? What happens to this community?

I don’t know. I think it depends a little bit on what happens to the bank in the next week or two. I think that also depends who the buyer is. If they sell the bank to someone who wants to preserve the brand, preserve the franchise, and preserve the customers in the ecosystem, then I think there’s a chance we can get a lot of what we had. I do think people will still want redundancy. 

No one wants to be stuck in that weekend again, because it was pretty terrifying for a lot of people. But I think we can still get a lot of the benefits. But, if they get bought by someone who just wants to integrate them into their brand, to buy the loan book and the assets, like a financial transaction, but doesn’t want the franchise, then I think we lose a lot of it. It will depend on what’s going to happen.

I have to ask this next question mostly because talking to you makes me feel very old. You’re 26.

Twenty-seven now.

Twenty-seven now. All right. I’m not. I have a lot of gray hair in this beard. I vividly remember the financial crash of 2008, with a lot of people confidently getting something very important very wrong. This has echoes of it — and I’m probably wrong about this, who knows? — but it does not feel quite as catastrophic overall as the 2008 situation. Banking and finance is an old industry. It’s a lot of relationships; it’s a lot of older folks. You’re very young and you’re sitting on billions of dollars of inflows. You’re calling the C-suite of major banks for advice. How are you handling that? How are you handling that pressure? Does it feel natural to you, or does it feel like a lot of people are waiting, I don’t know, for you to show up at a rave and be 27 years old?

Yeah, look, I’ve been working since I was 14. Even though I’m 27, I’ve been working for 13 years full-time in tech. Some of it is that it’s the only adult life that I know of. It’s not like I have anything else to compare to. So I think that’s an important point. On the other side, banking is a really old industry. A lot of what people say about startups is that it takes naïveté and it takes ingenuity, because if we knew how hard it was, we wouldn’t have started it. I think that’s true.

Look, a lot of people understand more about banking than we do. I won’t say I’m an expert, but I would say probably very few people understand the customers that we serve in the startup ecosystem. Silicon Valley Bank is probably the only one that did. So I think that old industries are really good at what they did, but they’re really bad at adapting to new markets. You can see that with Gen Z; all these different brands now cater to Gen Z, and the old brands struggle to adapt. That happens with every new generation, and that’s still going to be true. We’re going to be old someday, and there’s going to be some next gen that is going to be understanding the next generation. We’re going to be, “Oh, this makes no sense.” I already feel old. I’m a millennial. I already feel that Gen Z makes no sense to me.

You are the farthest thing from an older millennial. Is that your opportunity? In addition to capturing some share from SVB failing, in addition to taking some points of share from the big banks because people want to diversify, is that your overall opportunity? Do you see Brex growing into a dominant provider of banking services for young companies across the board?

No. Looking at the direction we’re going, I see Brex growing into spend management across every industry. This banking stuff happened and a lot of people are talking to us about it, but we’re doing a lot of our core businesses — corporate cards, spend management, and Concur replacement — for companies across every different segment and providing service. That’s why we compete a little bit with SVB, but we also want them to survive, because it’s honestly just a small part of our business. A lot of our business is not that.

I think a lot of people are thinking that’s your opportunity though. Are you feeling that pressure? When I told people that I was going to talk to you today, a lot of what I got was, “Ask him if he can replace SVB,” which I think is just fascinating. People see that as your opportunity, but you’re pushing back on that pretty hard.

Yeah, again, I think SVB was very unique, but it was built in the generation and with a set of constraints. There’s a lot that made SUV what it was, and hopefully they can still provide that. In my view, our opportunity is much larger than the startup ecosystem. If we look around managing spend in fintech globally, in credit cards and payments for companies all over the world and in all different sectors, I think there’s a lot of places to disrupt. We started with startups because they’re early adopters and they’re great. But I would say that a lot of the issues the startups have, we have traditional companies that have 500 or 1,000 people that have the same issue. People hate their expenses, and they also want a better UX for their banking. It goes across a lot of different industries.

All right. Let’s talk about your news, which is actually in spend management. It’s pretty exciting. I have to say our reporter who covers what we call weird money, Liz Lopatto, hates Concur with a burning passion. I went to Liz and said, “What should I ask the CEO of Brex?” It’s all just about how shitty Concur is, which is amazing. That’s your competitor. You’ve mentioned that Concur by name is a dead-ahead competitor. It has a huge amount of market share.

Eighty percent market share.

Eighty percent market share. It is not a great user experience. 

Terrible.

Now you’re launching a new set of products to take over more of travel, which is a lot of what Concur will do. You go on a trip, you need to book the trip, you need to spend money on the trip, and then you need to file your expenses on the trip. What’s the new product and how does it help you take on Concur?

Absolutely. Before this launch, you could do corporate cards and expenses on Brex, but you still have to book your travel on some OTA, Google Flights, Expedia, et cetera, or you would have some other travel management company like a Navan or TripActions, for example, or even Concur. Now we can replace all of it and have all your trips, your T&E, in one place. 

Let’s say you want to go from New York to San Francisco. You would do a few things. The first thing is that you would go and request a trip. You’d say, “Hey, can I go to San Francisco?” That would go to your manager who has an overall budget for their department. I’m going to call it the podcast department.

The podcast department is notoriously swimming in travel money.

Exactly. They have a $100,000 quarterly T&E budget for the podcast department, so it’s a very well-funded department. The manager would look at your trip and say, “Oh my God, there’s like a $5,000 budget here. I have $100,000. Do I think this is worth my budget?” They would say yes or no. 

Let’s say he says yes, and you get availability for that trip. Now you can go on Brex, you can go on our mobile app, and you can search for your flights and hotels. You can just book them. We would show you if they’re in policy or out of policy, so it’s very easy for you to know what you can or can’t book, and you would book those flights. 

Now you have your Brex card, which is authorized to spend within that budget. Every restaurant that you swipe at, you don’t need to get a receipt. That auto may be there, and you don’t need to put a memo. Everything is there. You can just swipe away and that’s it. Then you would get to your hotel, you would do your trip, you would come back, and we would automatically get the receipt from that hotel, so you don’t have to actually worry. You can just check out and walk out. 

If all your expenses were in budget and in policy, if you didn’t spend anything out of policy, it’s already approved and your manager doesn’t even need to look at it, it just goes through. Because if it’s in budget and in policy, why do you have your manager review everything?

That’s the overall experience. There are really two reasons that it’s important for a company to have that experience be good. The first one is the one I mentioned about the budget. A lot of people want to decrease travel costs, and the best way to decrease travel costs is not by getting your people to travel shittier and saying, “Now you have to take two stops to go.” It’s actually by just doing less trips. By giving managers that visibility to say, “Hey, this is your budget, and you need to decide how you’re going to use this,” we actually see that people say no to trips. “We don’t have enough budget for you to do this trip. I’d rather spend it on that.” If you can give this ability and empower people to make decisions they think are better for the business, it’s the best way to actually manage and reduce travel costs. That’s the number one thing.

The second thing is that a lot of the issues companies have with travel is the adoption. It’s like people go and they just don’t use Concur. They just book it outside and then reimburse it. Then you don’t have visibility. You have no control over what’s happening, and it’s harder to see if it’s in-policy. We see that if it’s so much easier for employees to just do everything in the Brex app, they actually adopt it more. The adoption of these travel products is a lot higher across the organization instead of having them leak to Google Flights, Expedia, or others.

There’s another way to help prevent that leakage, and I don’t know if you ever had the experience of going on Concur, and we actually had a lot of customers from TripActions tell us this. They go to these competitors and they try to find a flight, and then they go to Google Flights and they find something cheaper. They’re like, “Oh my God, what’s happening? How am I always finding cheaper stuff?” The reality is a lot of these companies, the airline and the hotels, know that travel buyers are less price-sensitive. They actually pay these companies to not show the cheapest stuff, because they know that they would buy it anyway. That’s pretty bad. 

So what we do is we are just completely unbiased. We don’t take any of that money; that’s not part of our business model. We have a lot of other ways we make money, so we just show a completely unbiased inventory. We don’t have the question of, “Can I find it cheaper on Google Flights?” You can find everything on Brex that you can find on Google Flights. I think that also helps the adoption of the product, because everyone now can find all the flights.

Lastly, I would say it’s global. Let’s say you’re flying to India and you need to go to some city that needs a low-cost airline that does that route. A lot of these companies don’t have these travel agencies. They don’t have those low-cost local airlines. Our partner is integrated with all of them, so we actually have all these global capabilities. You can travel globally, serve your global employees much better, bill them in different currencies, et cetera. Those are some of the reasons customers choose our travel product.

Put that into practice for me. I’m on a trip and I have a Brex card. I’ve booked the flight using your service, and I’m going out to a restaurant. The policy says I can eat McDonald’s, but I’m going to go swipe it at a steakhouse. Does it see that I’m spending too much money and decline the card? How does that work?

It depends on how the company configures it. Some are stricter than others. I would say though, our recommendation is that you actually let people swipe it. A lot of times they have a good reason for it, but that then goes for approval because it’s out of policy. So when the manager is looking, instead of looking through 300 transactions that they don’t have time for, they only see, “Hey, these ones are out of policy, and this is why they’re out of policy. Do you want to approve it or not?” 

If they don’t want to approve it, we have a very easy way to revert that and actually charge the employee a discount from their payroll or bank account if it’s supposed to be personally paid. We make that flow much easier. Some companies do decide to say, “Hey, I’m not going to approve it.” We don’t usually like that. We think employees in general have good intent and they’re trying to do the right thing, and a lot of times, they have a good reason for it or they don’t know what the right thing is. We prefer to be a little bit more flexible.

Talk to me about going and making that sale. You’re the external CEO, so you’re showing up at a Fortune 500 company. They’ve deployed Concur, it’s got 80 percent market share. There’s literally nothing worse for any large company than an enterprise software change. They all hate doing it. Employees hate it; I hate it. My goal at work is to never use software again. Your product sounds amazing, because it sounds like I actually don’t have to use them very much.

You don’t have to do anything. You just swipe around and it’s done.

Call my CEO and tell him to let me start swiping the company card. You still have to sell it, right? There’s a huge transition cost, and there’s a training cost. You have to send out 50,000 new pieces of plastic or whatever. What’s that sale like? What’s your pitch? Are you going to save money? Are you going to make your employees happier? What’s the ROI on the big investment in switching over?

It depends on the size of the company. I would say for the larger companies, it’s two things. Either saving money, like, “Hey, I have a T&E cost of X, and I want to put it to Y. How does Brex help me take from X to Y?” The budgeting stuff I was telling you about, we really help execute on that. Or it’s like, “Hey, I’m a big company. I’m already having trouble retaining employees, and they hate my app or they hate this. I want to improve the employee experience because I get complaints about this all the time.”

Wait, do big companies really think that they’re going to retain employees if they switch from Concur to Brex?

I would say they don’t think it’s the only thing that’s going to retain employees, but it’s part of the package. It’s less bureaucracy. Some of these big companies you’re talking to have a head of de-bureaucratization. It’s a product out of the head of de-bureaucratization. Look, it helps, man.

That’s the most Soviet thing I’ve ever heard in my entire life. I just want to be clear about that.

I know, I know, but you get these companies where all these finance teams are making the decisions. They go too overboard in the controls, and then it just becomes impossible, and they want to make it better. 

The other thing is finance teams hate being the prevention of new business. They hate being the person who’s like, “Oh, let me put things in so people can focus on my things versus doing their job.” That’s not what they want. They just want to do their job, have the right controls, and make sure money is being spent appropriately. When there’s a tool that can help them add more controls to do their job but still get employee experience, they’re like a hero, versus being the villain or the bad cop. They hate that bad cop feeling, so it works really well in that way.

So as you expand, the new product is travel. You’ve obviously been working on it for a while. You say, “Okay, this is going to help us go get more of these customers, and we’re going to show up in more places. We’ll increase the amount of business we’re doing and the number of transaction fees we’re doing with our existing customers because it’ll be simpler.” Now I can show up and say, “Look, we can take even more of Concur or Egencia, or whatever, out of the mix and make this simpler.” Is that how you think about investing in a new product area? Is this going to solve more problems for more customers?

Yeah, that’s basically it. It’s less about the revenue sources, because we already have a lot of them. It’s not what we’re missing. We can have an end-to-end T&E experience for your employees and we can have everything integrated in one place. You request a trip, and if it’s approved, then you just swipe and it’s done.

I just want to come back to the opportunities in front of you right now. There’s that one, which seems big, and you seem very focused on it. Again, I told people, “I’m going to go talk to Henrique,” and they were like, “See if Brex is going to take over for banks.” That is an opportunity you just don’t seem focused on or interested in. Is it that problem is too hard to solve? Is it that it’s too much of a pivot? Is it that the regulatory environment is not available for you to do that in the way you’d want to do it? Why is the focus on, “All right, we’re going to do end-to-end T&E,” and not, “Boy, a bunch of companies lost faith in a pillar of the Silicon Valley banking system, a pillar of the Silicon Valley venture funding system, and we could replace that too”?

I think there’s a couple of reasons. The first one is that if you look at the Silicon Valley Bank P&L, you’ll see that 80-plus percent of it was what we call net interest income, so this is just loans. If we’re not a regulated bank, we are structurally in a worse place to make loans than banks, so we will always lose. If you look at the market cap of Silicon Valley Bank, a lot of it came from that, and we’re just not in a structural place to win that business. That’s one.

The second piece of it is that if you exclude that, I think that after this, it’s not going to be like, “Let me put all my money in a fintech.” That’s not going to be the flight to safety. People are not going to fly to fintech. It’s going to be a flight to even bigger banks. It’s a very hard battle to win, “Hey, I actually want you to keep all of your money in Brex.” It’s an uphill battle. We then look at, “Okay, so we took out all the loans, and we took out all the management of large pools of money. What are you left with from their P&L?” You’re left with credit cards, FX, accounts, wire fees, and a little bit of payments. That’s all the stuff we do anyway. Does that make sense?

It does make sense. Do you think that your exit is to a big bank? Do you think it’s going public?

Going public, for sure.

You’re going public for sure? Do you feel that it’s a weird market right now? Do you feel pressure from your investors, VCs, or whoever to push that forward, or do you think you can wait?

Look, we’re six years old. Our VCs still have most of their fund left. We don’t feel any pressure. I think if we were pushing 10, 11, 12 years, then maybe, but at six, we have a good amount of time.

I have to end here, but this has been a great conversation. We’ve talked a lot about the banking system. You have a unique perspective on that. You sit on top of it, next to it, and you seem confident that you don’t want to be of it. People’s faith in the overall banking system in the United States right now is a little shaky. It’s shakier than it has been since, I would say, 2008.

It’s pretty shaky, yeah.

Where do you think it’s going? Do you think we’re going to make it through, or do you think we’re going to end up with four big banks and that’s it?

I think it depends on the government, man. This is one of the things the government will have a huge amount of influence on. I think if they really step in to say, “Hey, we’re going to make sure that the regional banks and the small banks of America still have business after this,” they can. It’s going to be expensive, and there are other fights, like inflation, that they’re fighting. If they don’t do anything, then we’re going to get to where you’re saying, which is that they’re going to concentrate an even smaller amount of banks and the big ones are going to get even bigger. I think it’s a lot on the government. We will find out over the next few weeks.

That’s an unusual point of view from Silicon Valley. I’m not saying that’s unusual for you. We have not talked about your politics, for all I know you love government regulation of the financial industry. I doubt it, but…

Probably, depending on what I like. I’m pragmatic. It’s what exists, and banking is a regulated industry, so we’re always dependent on the government for doing stuff.

There is another view out there, which is, “This is all a mess, and the government is bad. We should just put all of our money into Bitcoin.” Most of the other financial CEOs I’ve talked to on the show have been alternative currency CEOs, they’ve been crypto CEOs. It’s unusual for me to talk to someone in your position, a financial services CEO, who is like, “The government needs to step up and fix this so I can continue running my spend management business.” Do you think there’s another opportunity for the crypto industry, the alternative currency industry, to actually replace some of this mess?

Maybe, but not in the short term. I would say over the long term, yeah, but the problem we have is this year, man.

It’s right here, right in front of you. Yeah.

Exactly. I definitely don’t think crypto is ready for this scale and this level of trust. We just had FTX. I don’t think crypto has a lot of trust right now either, and this is a trust issue. Maybe over the long term, but I don’t think it’s a solution for right now.

Last question on this philosophical note. I remember 2008 well. The conventional wisdom is that it was the year the App Store hit the iPhone, there was a platform change, and there were a lot of layoffs. A lot of smart people suddenly needed to build stuff and had the means to build stuff, so they went and built stuff for a new platform. This is where we saw a wave of gigantic companies get built. Do you think that’s this moment again, or do you think that the conditions are just not the same?

I think this AI thing is big, man. I do think that’s real, and I do think the world is going to look very different in five years than it does now because of AI. I was playing with GPT-4 and I was asking it to code, and dude, it was really good. I’m an engineer. I was very impressed with what it built with a very easy prompt. I think that the cost of building software, the cost of building products, and the cost of serving customers is going to massively reduce over the next five years. I can’t even imagine what the world’s going to look like. I think this is just going to change a lot.

Yeah. All right. I ask everybody this question to wrap up the show. What’s next for Brex? What should we be looking out for?

Well, we’re announcing Travel today, so that’s obviously really big. I would say it’s to keep building more spending tools. We want all your spend on Brex. Travel is what we have right now, but we’re going more, we’re going global, and we’re going larger, so just think more spend.

Amazing. Henrique, thank you so much for coming on Decoder. We’ll have to have you back soon.

Thank you so much for having me.