Pedro Franceschi, Brex's co-founder, defends Capital One's $5.15 billion acquisition as a 13x multiple, above public fintech comparables at 8-11x. He says Brex's corporate card and expense tech combined with Capital One's $6 billion R&D budget and distribution will build the largest financial platform for U.S. businesses faster than staying private.
Chapters
Pedro, let's get into it. I mean, the obvious question to many last night was the timing. But $5.15 billion is a pretty steep discount to the valuation you raised money at in 2022, which was $12 billion. What do you think that signals? The timing and also the value you agreed?
Yeah, thanks for having me. We're really excited about this news and You know, this is a really special combination. First, it's, as you mentioned, it's the largest bank fintech deal in history. And really, the way we thought about this is really this unique 1 1 3 scenario. So, of course, at Brex, we build, you know, corporate cards, expense management, banking products, bringing financial services and software together. And then Capital One is really the original fintech. They brought technology and data together. For the first time and have been a huge source of inspiration for us. And as we saw, as we started to think more about this together, we really saw this very unique combination of bringing Brex's technology, product, and platform with Capital One scale, brand distribution, and balance sheet and materially accelerate our go-to-market and our product development to a level that would be, you know, unmatched to a standalone private company. Or even a public company for that matter. So we just saw this massive opportunity to build it together.
Opportunity to build. But why was Capital One able to pay a more than, than 50% discount on your last private valuation?
Yeah. So, so when we look into all the public market comps that, that in the fintech space, they're mostly trading between 8, 9, 10, maybe 11 times. This acquisition is at 13 times. Multiple. So it's a huge premium to where all public market comps are today. And the reason, of course, Capital One believes in this is because there is a massive growth opportunity. We really believe that we're here to build really the most important financial platform for businesses in the US. And, you know, it's a very, you know, two founder-led companies coming in together. And the reason they're so excited and we're so excited about this is because of the obvious upside path. That we have from here.
But Pedro, it's not an upside to that previous valuation. And I hear you on the premium compared to where others trade on the day. But why not just stay private for longer? Why not build? Why not return to a $12 billion valuation in the private markets?
Yeah.
So the thing that we learned is we had— we did a lot of, you know, 2021 valuations were, were a very specific point in time in markets. And one of the things that we believe for Brax is that the teams that see reality the best wins. And we, we like to run the company in a way that mirrors where everything eventually converges to, which is public markets. And when we look from a public market lens into everything that we've done, we made a lot of decisions around the way we accelerated growth over the past few years, went after the enterprise, became a cash flow positive company. And this combination of factors made this be a really special outcome. And we think that private companies that mirror themselves in a point in time valuation, you know, eventually forget that everything converges to public markets eventually. And when we compare where Brex is today with where a lot of peers have IPO'd and where other companies on a private basis have been, we think this is a really exciting and different outcome. But the real reason behind it and the real reason I'm so excited for this next phase of Brex is because this is the beginning of us building the most, the largest, and I think the most important platform for businesses. When you combine the scale, the balance sheet, the distribution, and the tech mindset that Capital One has with the product and the technology that we have at Brex. So really, at the end of the day, it's about building something bigger than what we could ever do as a standalone company.
What— how will it change your trajectory? What will you build? Is it AI that gets infused? What more does this give you power to do?
So just giving you two, two examples. So Capital One has a $6 billion marketing budget. Brex has a fraction of that, less than 1% of that today. Just imagine the distribution and the capability to go in and serve the millions of businesses in the US. Capital One also serves already millions of businesses today, and all these businesses will benefit from the Brex product and technology that really helps them run their business in a much better way. And then when you look at the R&D side and AI, to your point, Capital One has a $6 billion, again, R&D budget as well. And when you combine this with the product roadmap and the vision that we have at Brex, we think we're going to accelerate this momentum tremendously and continue to build in a much steeper trajectory than what we're able to do now. And the benefit for customers will be, you know, a much better product, a much, much more robust roadmap, and just accelerating our path compared to what we could ever do independently.
