How Brex Is Preparing for the Next Phase of Fintech

Earlier this month, the CEO of Brex sent an email out to his employees boldly declaring that the turnaround is over and the company will now return to unconstrained ambition. I want to bring on Pedro Franceschi, the CEO who wrote that memo, to tell us about how he's shifting his thinking to this new phase of growth for Brex. Pedro, welcome to the show. It's great to have you.

Thanks for having me. Excited to be here.

So let's talk about the turnaround being over in this period of unconstrained ambition, I kind of want to segment the discussion to two halves. One is the turnaround, one is the unconstrained ambition. Tell us about what exactly the turnaround is that you're referring to.

Yeah, so maybe let me just start with where we are today. So if you just look at the business over the past, you know, 20 months, we rebuild entirely how we operate as a company. So when you think about, you know, the way we build products, the way we build our go-to-market, the way we operate, the leadership team, and just see the sort of talent density on leadership levels in the company. They are very different from where they were 20 months ago. And I wrote a few, a few memos about this on, you know, having leaders that operate at all levels, changing the way we build a product. And, you know, me as a founder and CEO being much more involved in a product roadmap and the quality of what we ship. And as a result, you know, in August, Brex grew, you know, just shy of 50%. year on year and was operating cash flow positive for the first time since its inception.

Right.

So it's a very different reality from where we were 20 months ago. And, you know, uh, we're very proud of that.

And I, I'm curious that you use the word unconstrained ambition because one of the things that you talked about is the company has been operating cash flow positive for the first time in its history. And my read on it was, okay, we are returning to focusing on growth now and growth at all costs sometimes can, can yield, you know, um, dicey results, you know, as we've seen with many different companies in Silicon Valley. And so my question for you is, how do you plan to spark this new phase of growth, I guess, while growing profitably? I mean, you know, that is the constraint that comes with this ambition, right?

Absolutely. So, so, so when we say unconstrained ambition, really what we mean by that is if we just look at the market that we're in today, and I think folks don't necessarily appreciate that, there's $2 trillion of corporate card spend in the US. And Brex today is like, you know, a little bit over 1% of that. And, and, you know, if you look at all the new players combined, right, we're maybe 2, 2.5% of the market. So this is a market that's very deeply dominated by incumbents. So you have banks that have been around for decades serving customers in a very poor way with no software, with no way of actually improving the way they run their business. And when we look at the way customers run their operation with Brex and you see, you you know, companies like Arm, Cursor, Intel, Anthropic, Palantir, right? All sort of materially changing how their business operates because they partnered with Brex. That is really what we're talking about. How do we bring this spirit and this product that we have working so well for this tiny sliver of the market, this 1% of the market, into the, you know, this 98% that's still dominated by incumbent. That's really what we mean by unconstrained ambition. And we—

So how do you do it? How do you do it?

Is just continuing to execute the same level of rigor, raising the bar every day. Uh, and, and just really when you look at the market and you just realize that most people actually have no idea what Brex is or that there's even a better way to think about how you manage your finances as a company. And, and that's really a, a very big part of the story. And especially now if you see what's happening with AI, you know, we think there's this bigger opportunity to not just build the financial services, which is what we did early on, and the software, But, you know, effectively all the infrastructure that you build to help these companies replace all the labor that you have traditionally doing work that can now be automated. And we're very excited about the opportunity.

And what do you see as the next phase of, of fintech, broadly speaking? Because fintech is— it's, it's had a period where we had the ZIRP era, we sort of had the reckoning era, and now people are sort of trying to figure out, okay, what does the next few years look like? In your mind, let's make some predictions here. What are we going to see?

Yeah, so I have a saying that internally, and I guess externally as well, that fintech in the US hasn't really happened yet. So when you look into the percentage of the market that is using a modern solution like Brex, it's so tiny still. So a lot of the work is just getting customers there. It's just literally going after every single business in America that's using a modern solution and explaining to them, hey, you shouldn't be using American Express, you shouldn't be using your bank card anymore, you shouldn't be using your traditional bill-based solution. And here are the benefits of bringing this all under Brex and how it helps your business move faster, spend smarter, right? And all the benefits that we see customers as they deploy a solution like Brex in their team. So, so, so I think that's one, which is, you know, fintech hasn't really happened when you just look at sort of a very mainstream use case. The second one is when you look into what we build, right? And, you know, we made a few decisions that I think were pretty different in other fintechs. You know, everything that you have on the financial services side was built in-house. So all the card payment rails, you know, capital markets, underwriting, credit, we put the entire sort of bank stack in-house. Then we built this partner ecosystem that surrounds our customers, especially larger ones. Every single solution they need, they have deep integration to Brex. And we did it slowly, right? So when you look into sort of the breadth and the depth that you have to have to serve these very sophisticated use cases, Right. That's something that I think will be more of a trend than having that in fintech as well.

I do want to ask you, Ramp raised a ton of money. You guys must be raising too, right?

So, I mean, it's a, there's a very, very good validation in our space that there's huge companies to be built here and we're very excited about it.

Are you raising? Are you, are you out there fundraising?

We're not raising. Not raising.

Okay. Brex is not raising. So if you're not raising, you know, on the, on the heels of this profit operating flow, uh, can't speak today— operating cash flow positivity that you guys have achieved. What is the strategy here to compete with companies like Ramp?

So first, when you look at the size and sheer scale of the market, right, really the competition is American Express, the big banks. That is where we see, you know, 90% of the deals. That is what we're competing with. And when, when a lot of what we try to do and sort of educate the market is when you go actually look at the deals that we're in and actually the competition, Like who we see is big banks that are treating customers the same way.

Yeah.

And that's really, that's really who we're trying to, to, to win against. That's really the competition for us. And, and we see a lot of the new players in their space actually almost as a forcing function to help the industry change and realize that there's a better way of doing things. Right. So, so for us, that's, that's really the competition. It's just the, the amount of incumbent banks that treat customers with a solution that is so subpar from where they are. From where they were maybe 4 or 5 years ago. And then when you add in AI and just the lack of awareness and understanding of how to build a product that actually fundamentally changes how finance team operates, the, the bar is exceptionally low and that's really like who we compete with.

Right. Great. Well, Pedro, I want to thank you for, for coming on the show. We really appreciate it. I am excited to see what new products you, you have in store for us because one of the things you talked about in your memo was that you've got a lot of stuff under the hood, which means I'm excited to see it rolling out. That is Pedro Franceschi, the CEO of Brex. Thank you so much for joining us here on TITV.