Many of the posters in this thread miss the point, perhaps because they have not tried to get a credit card for their startup or small business.

Even if you have millions in the bank, the process of getting a card is long and tedious. It took me weeks, hours of phone calls, visits to the bank, and affected my personal credit. In the end a well-known card provider gave us a $5000 limit. We sometimes put that much on the card in a few days, and autopay is monthly, so someone had to manually monitor the card balance just to keep the card working.

The experience of being a small business that wants to use a credit card sucks. It's not even a little surprising to me that Brex is doing great.

So where does the revenue come from? A slice of the transaction fees run on the cards or interest on rolling balance? I can’t imagine the balances over 30 days being that high (the targets have VC money to pay their bills right?) and the transaction fees can’t be that much either.

I can see why they’d need a lot of capital but I fail to see the business model for actually generating (big) income.

they're aiming for acquisition. these days you don't need to make money as long as there's a need for something you can often give it away for free using VC money and then get acquired for your exit

1. Start up 2. Cash in 3. Sell out 4. Bro down

Or maybe do the dirty work of acquiring lots and lots of small companies and then sell them back to a bank in one package?

And nobody suggested they change the name?

You have a Brex card, you offer to pay for something: "Sure, I'll just Brex it..."

There's a billboard when you get off the 101 at Octavia for Brex. It says something like "Just Brex-it. The card, not the political fiasco." Maybe they've tested it and I'm in the minority, but I thought it was pretty odd.

That's memorable. Which might be the most important factor.

True, it is memorable. I talked to someone who works at an ad agency and had worked with State Farm in the past yesterday. She had the most articulate explanation of memorability over quality I'd heard. I'm sure I'll mangle it, but essentially, as long as the ad isn't actively bad, memorable is far more important than being good (although the platonic ideal would be memorably good).

I don't understand this, what is their business model exactly? Aren't they just giving out loans like a VC with other VC money? Why can't the VCs invest directly without Brex taking their cut?

They give liquidity and access to the financial system to startups that otherwise will have to go through a lengthy process to get something as trivial as a credit card.

This is not meant to replace access to capital. It's meant to provide the same flexibility that a credit card gives to an employed individual. It allows small startups companies to simplify the way expenses are managed.

I have worked in a lot of startups where you will need to go and ask one of the founders to buy something that you need for work, because there's only one corporate debit card. My understanding is that Brex fixes this.

Brex is a charge card; they're not really making loans, just letting businesses wire up their bank account balances to credit card acceptance infrastructure (which is much widely adopted than debit card infrastructure). Like any other player in the payment card business, they get a cut of the transaction fee charged to merchants.

Don’t they still take the risk for one month? Startups aren’t all stable. Some might get into problems during that month and not be able to pay, no? Or is this just a debit card?

It seems to me it's similar to http://pleo.io but they haven't raised that much money yet. Why is that?

Different markets and products. Pleo is not in US yet. Pleo does not underwrite. Pleo requires balance in account for cards to work, hence it is a prepaid solution. Brex actually underwrites and works like usual corporate cards do.

Exactly - they (paleo) don’t really have a business model. They are just a computerized way of documenting employees use of their cash allowances.

That's impressive.

I always wanted to have an approval-flow for payments for company cards, would be a great addition.

I'd be fine issuing cards to everybody in the company as long as I can prevent the expense before it happens (and revoke credit card numbers when off-boarding employees).

my 0.02 cents

AFAIK, there's a timeout for card transaction (something like a few seconds) approval that's preventing such functionality from existing

It seems kind of crazy to see VC funding for a startup that focuses on selling services to other startups that need VC money to exist...

That's kind of how VC works nowadays. I was reading an article about Softbank's Vision Fund; the article mentioned that Masayoshi Son, the CEO of Softbank advised his companies to give each other discounts and special deals. I guess this is something which YC has also been doing for a while.

It definitely sounds like it's going to create bubbles. If companies help each other too much, then their success becomes increasingly artificial; all these companies become less efficient as a group and it's only a matter of time before companies outside of that cushy ecosystem catch up.

I think that eventually we'll get to a point when we collectively realize that the software development practices that we've adopted over the past decade are actually much less efficient than many other alternative approaches. For the past decade, the most efficient approaches and tools have been overlooked almost completely because they were developed outside of any VC ecosystems; so they didn't get any exposure or chance to prove themselves.

This is actually a deeply engrained practice in Japanese business culture - “keiretsu”, or interlocking companies.

So... "synergy"?

Well yeah Masa is thinking about this as a 300 year project to create what is essentially a new eco-system of companies that are intended to be interconnected.

  tools have been overlooked almost completely

Also even popular people like Guido van Rossum can't get enough funds to improve compilers of such an important language as Python [0]. And current patent system doesn't support developing of software tools because everything is already owned by some patent trolls. For instance, why do they still not use AI agents [1] in machine code optimization? I think, it is not a coincidence. Just read recent news about Chinese hacking the USA hardware. Along with Russians they just dumb you down.

[0] "Dropbox pulls the plug on faster Python project", https://www.infoworld.com/article/3162800/open-source-tools/...

[1] "Simplifier AI", https://drive.google.com/file/d/1GSv89tiQmPDcnFEu4n4CqfaJcUJ...

Your 0 link doesn't actually support your claim.

Dropbox abandoned their incompatible python 2 jit compiler. Pypy remains available and there was really no point in having another around.

And Guido had nothing to do with that decision afaict.

Finally, the reason why they dropped it is absolutely correct. Python isn't meant to be used for performance critical work. Python is however fast enough for most usecases - especially with pypy, but definitely not all.

Why not have single language for all kinds of work? And why not spend some tiny part of those money dedicated to improving hardware by 2x-3x, when there are people [0] claiming Python run-time has potential to 1000x speed-up? I know, I know, it will make manual optimization job nonsense, and everyone needs a job nowadays it seems...

[0] https://spectrum.ieee.org/view-from-the-valley/computing/har...

Did you actually read that link?

Yes, you can have a substantial performance boost for python by rewriting it fully in c... But that's exactly like saying that c performance is substantially better than Python's.

The bright side here is humans need better ways to organize and build quickly. Brex and other process innovations help people do that instantly and without a lot of overhead.

Selling to start-ups is a great way to build these products.

It’s an interesting concept for sure. But one thing that seemed confusing was how exactly do they handle underwriting? Do they credit check the applicants? Employees? Check the business bank accounts?

Granting credit is a sophisticated market, is this just a case where they look for founders that have perfect credit and assume they’re probably OK? Do they even use standard CRA’s at all?

Like what’s the basic underwriting premise?

Not to be confused with Bre-X. https://en.wikipedia.org/wiki/Bre-X

Subject of the film Gold. https://en.wikipedia.org/wiki/Gold_(2016_film)

This isn't a "billion-dollar business"; it's an overhyped company that gives credit cards to startups that raised money at a billion-dollar valuation.

They may have already reached their entire market for their existing business; the billion-dollar valuation only makes sense if they can plan to grow into other credit card markets.

You can’t patent a credit product. As soon as other lenders see this business, their margins will be competed away. That 2BN valuation looks very artificial.

You think this time big financial institutions are going to maneuver quickly enough to become viable competitors in this market before a startup establishes a decent foothold with a comfy moat?

That has literally never happened before to my knowledge. See online payments with Paypal, robo-investing with Betterment, crypto-currency with Coinbase, etc.

The more likely scenario would be other startups rising up to compete with them, but it seems like these guys have a decent head start with 100 million funding and what looks like a compelling product judging from their traction.

I take your point re the ability of banks to innovate. But the Brex product is not technological. They are simply saying, we’ll lend against cash collateral. That’s the type of things banks might be better at.

No, but I’ve worked at big (Australian) banks and they just can’t do this stuff. Their organisational culture just doesn’t fit.

They think they can, and they’ll try, and it’ll be a hot mess, and Brex will be fine.

A financial company is going to extend 10x as much credit as established institutions (without collateral) to random startup execs? And two other selling points being that they're writing a financial platform from scratch and you'll get your card more quickly so your business doesn't fail from waiting on the mailman to deliver a normal business credit card?

The APR would have to be sky-high and would start accruing the day after. There's a reason banks don't give a shitload of money to just anyone who can pay ~$1,000 form a corporation.

Are they going to write fraud detection from the ground-up too? Same with all of the customer support apps that allow reps to deal with issues?

This makes no sense to me. The risk here seems stratospheric unless "Visa Commercial" is already offering all of these, and Brex is just re-branding it.

Edit: Pagar.me would count as financial experience. I missed that sentence in the article.

> is going to extend 10x as much credit as established institutions (without collateral) to random startup execs?

There functionally is collateral. They monitor your bank account, you need min $50K in cash in it, and they only extend credit that's something like a quarter of your cash balance. It's a charge card, so you can't carry a balance.

It makes a lot of sense for cash-rich startups. The model doesn't work (in this form) for many small businesses.

So basically it’s a product for valley startup type companies that just closed rounds of financing, but don’t yet have sophisticated financial controls and cash management and banking relationships?

That makes a lot more sense, but is that really a large addressable market? Is the idea to beat Amex with reporting?

I think the idea is "cash is all the trust we need." It's parallel to Square or Stripe. "Is getting a merchant account really that hard?" Yes, it turns out it is. It's the same thing with credit cards - you shouldn't have to personally guarantee your company's credit.

It also competes directly with the expense market. If everybody can have a controlled company card, why do you need expense software?

Ah I didn’t realize you need $50K minimum in your bank account. That changes things quite a bit, but also makes sense for them.

As a correction, they previously built and sold a company in this space with a large amount of traction.

That's correct, my fault

The perfect card for the UK after March 2019. I will just BrexIT the expenses.

Isn't issuing credit cards to Startups, almost like equivalent to issuing cards to gamblers in Vegas?

Gamblers who were just handed millions of dollars... seems like a recipe for a rich casino.